Canada’s Energy Outlook: The Reference Case 2006

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Executive Summary

This report provides a reference outlook for Canadian energy supply and demand up to 2020. Natural Resources Canada (NRCan) consulted with other federal departments, and with the Provinces and Territories to reach a general consensus on the principal economic assumptions of the Outlook. The relationships among energy production, consumption and prices, as well as economic, technological and policy factors were then carefully examined to develop the energy projections.

It should be noted that this report, as was the case with its predecessors, is not a prediction of the future, but is only one of many possible energy outcomes for Canada.

The previous long-term projection, Canada’s Emissions Outlook – An Update, was issued in 1999 and modified in early 2002. World oil prices and North American natural gas prices are much higher today than in the previous Outlook. As well, there have been some major changes in federal, provincial and territorial energy and environmental policies and programs. It is timely to provide a new projection of energy supply and demand.

Government initiatives to promote greater energy efficiency or increase the use of alternative energy, that remained active after May 2006, are reflected in the Outlook, providing they were implemented prior to 2005.

The principal assumptions used to develop this Outlook to 2020 are:

• Population will grow at about 0.7 percent annually and Real Gross Domestic Product (GDP) at about 2.4 percent per year to 2020.
• Crude oil prices, in 2003 dollars, will decline to US$45 per barrel by 2010 and will remain constant thereafter. Although lower than today’s high level, this is much higher than the oil prices prevailing through most of the last two decades.
• All but two of Canada’s nuclear power plants will stay in service for at least eight more years, or will be refurbished and returned to service. The two units at Pickering A, which are currently out of service, will remain so indefinitely.

The highlights of the results are:

• Total energy demand is projected to grow by 1.3 percent per year. The fuel mix will not change substantially over this period since the relative prices of different energy sources are not expected to change significantly.
• In the residential sector energy intensity improves by 0.3 percent annually due to a combination of autonomous stock turn over and to appliance regulations, while in the commercial sector, the energy intensity increase by about 0.2 percent annually, primarily due to structural changes.
• Transportation demand is expected to grow at about 1.6 percent per year, despite vehicle efficiency initiatives.
• The intensity of the energy intensive industries is projected to improve by about 0.7 percent per year. However, growth in the industrial GDP will be approximately 1.1 percent per year.
• Conventional oil production will decline, but the oil sands are expected to show a significant rise to 2.9 million barrels per day. This will represent about 80 percent of total crude oil production in 2020, more than offsetting the decline in conventional crude oil.
• Total natural gas production is projected to peak in 2011 at 6.6 trillion cubic feet (Tcf), and then decline. The decline in conventional natural gas will be tempered somewhat by the development of the Mackenzie Delta and by coalbed methane production, both of which will become important supply sources.
• Net exports of natural gas will decline to 1.3 Tcf in 2020, from current levels of 3.7 Tcf.
• Energy intensity in the refining sector is expected to increase by about 20 percent, as the mix of crude oil for Canadian refineries becomes heavier, hence requiring more processing.
• End-use prices, in real terms, are expected to decline compared to their relatively high levels in 2005.
• Growing energy demand and a changing energy production mix lead to growth in GHG emissions from 758 megatonnes (Mt) in 2004 to 828 Mt in 2010 and 897 Mt in 2020. The 2010 figure is 265 Mt above Canada’s Kyoto target (6 percent below 1990 levels).

This Outlook is particularly sensitive to key assumptions about economic growth, oil sands development and the electricity generation mix (especially the refurbishing of nuclear power plants and the development of large hydro projects such as Churchill Falls and Conawapa).

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