That was the assessment given at a recent Council of Forest Industries (COFI) conference by Robert Johnston, special adviser on energy, climate and resources for the Eurasia Group, a political risk consulting firm.
Russia produces about 10 per cent of the world’s crude oil and supplies Europe with about 40 per cent of its natural gas. While spiking oil prices have been stabilized somewhat by the release of strategic oil reserves and by covid-19 lockdowns in China muting demand, high prices for oil, gasoline and diesel will continue for the foreseeable future.
“Get used to $100-a-barrel oil prices,” Johnston said. “That’s not going to go away any time soon.”
Russia has cut natural gas exports to Poland and Bulgaria, and Germany is scrambling to reduce its reliance on Russian gas. U.S. liquefied natural gas (LNG) producers are shifting exports to Europe, and some western Canadian natural gas is already making its way there via the American Gulf Coast.
Renewed LNG interest
Johnston said the energy crisis might lead to renewed interest in B.C. for new LNG projects.
“The way the world is headed now, and because gas prices are so high and because the Russian supply is going to go offline – at least part of it – a lot of countries will go back to burning coal,” he said. “I think there are certain conditions where an LNG project could move forward here, and I think the timing is probably right.
“If you pull that much Russian gas out of the market, not all of it will go to China. So there will be another round of interest here in sustainable net-zero LNG projects in British Columbia potentially. Of course, that does raise the question of ‘Is natural gas part of the long-term climate solution – and if so, how do we make that happen?’
“I would argue the logical solution here is to swing all the U.S. LNG towards Europe from the Gulf Coast, and then have Canada backfill a lot of the supply that the U.S. is currently sending to places like Japan and Korea.”
Johnston said the energy transition that is underway to address climate change may end up taking a back seat to the more immediate problem of energy security.
“In the context of inflation, rising food prices, higher energy prices, it’s going to be challenging for governments to move forward on climate,” Johnston said.
“The balance between moving towards climate action and managing inflation is going to be a challenge in the next few years.
“Now where does Canada fit in? I think we should send as much oil and gas as we can to Europe, whether it’s directly, or more likely indirectly through the U.S. But also we could look at where sectors like mining, agriculture and forestry can provide solutions in bioenergy, in critical materials.
There is likely to be increased opportunity for B.C.’s forestry sector, he said.
“If the world is hungry for energy, I think the forestry sector can provide a lot more bioenergy,” he said.
B.C. is already a major producer of wood pellets, and the demand for pellets as an alternative to coal is likely to spike in Europe. Johnston noted that, when combined with carbon capture and storage, bioenergy becomes carbon negative.
“To get to a net zero goal by 2050 … 17% of the emissions reductions that we need come from bioenergy,” he said. “So there is an opportunity there, for sure.
“We’re way behind our pathway to get to the Paris Agreement. So not only do we need to eliminate emissions today – what we call the flow of new emissions – we also have to start working on net negative emissions. That’s where bioenergy with carbon capture is a great opportunity.
“I can’t imagine a better place to do this than here in B.C.”
(This article first appeared in Business in Vancouver)