Oil and gas investment still necessary for smooth energy transition, IEA executive says

Global investment in oil and gas will remain necessary for the time being, says the deputy executive director of the International Energy Agency, but the rapid shift toward a cleaner energy system can be achieved with careful planning.
The IEA’s most recent energy forecast, released Oct. 16, has global oil demand projected to peak by the end of the decade. Mary Burce Warlick told The Globe and Mail that fossil fuel companies should keep their eye on that projected downward curve, and look at diversifying into areas such as low-emissions fuels, reducing methane emissions “and other ways in which they can remain competitive in the new energy system economy.”
Ms. Warlick was in Calgary Monday to speak at an event hosted by the Pembina Institute, an environmental think tank. She told the audience that it’s important that oil and gas are available to certain sectors of the economy even as nations work to drive investments in renewables and clean energy technologies.
In a wide-ranging interview before the event, she told The Globe that policy signals, regulations and shortened permitting time frames all matter when it comes to stimulating critical investment greener energy.
Interim targets for 2030 and 2040 that identify how to bring greenhouse gas emissions to net-zero by 2050 can also help drive much-needed investments, she said.
“It is a pretty heavy lift to get to that goal,” she said. “There’s a narrow pathway to getting there, but it really will require sustained attention.”
Various IEA forecasts in recent years that project a looming global peak oil demand have landed the agency at the receiving end of increased criticism from various oil-producing nations.
Last year at the World Petroleum Congress in Calgary, for example, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, dismissed the agency, saying it had morphed from “a forecaster and assessor of the market to one practising political advocacy.” The state-owned oil companies of Kuwait, Brazil and Angola also took issue with various IEA forecasts and road maps to net-zero, and Alberta Premier Danielle Smith said last year the agency isn’t credible.
Ms. Warlick said Monday the IEA recognizes how important fossil fuels have been – and are still – for economic growth in many countries, and understands why oil-producing countries such as Canada might have concerns with the shift toward cleaner energy.
“We still have a global economy that is dependent a lot on fossil fuels … and getting the balance there right is going to continue to be a little bit challenging,” she said.
“But we think that, ultimately, accelerating to the greatest extent possible investments in renewables and clean energy technologies is what’s going to be needed if we want to achieve net-zero by 2050 and have any chance of meeting the Paris climate goal” to limit the rise in global temperature this century to 1.5 degrees above preindustrial levels.
The IEA is exceedingly familiar with the challenges of oil disruptions, founded as it was 50 years ago in the wake of the 1973-1974 oil crisis.
As the world now shifts toward a clean-energy economy, the agency is working to identify potential challenges and how to address them, including supply chain snafus and shoring up energy security.
Canada itself is mostly on track to meeting its ambitious energy transition targets, Ms. Warlick said, and next year will get the opportunity to step-up its global leadership when it takes on presidency of the G7.
Chris Severson-Baker, executive director of the Pembina Institute, says the country must take advantage of that role.
“Canada is a very credible player internationally and, when we can back that up with action, we can make a compelling case for why the rest of the world should up its level of ambition and follow through on the commitments that it has made,” he said in an interview Tuesday.
“If we were to say, ‘We can’t do this, we can’t achieve these targets or move this quickly,’ we would very quickly lose our influence globally on the issue of climate change.”
Like Ms. Warlick and the IEA, Mr. Severson-Baker also stressed the importance of careful, pro-active and realistic planning for the fossil fuel sector and communities that rely on oil and gas – particularly because Canada is relatively far from global markets and has higher production costs than other jurisdictions.
“We need to anticipate a future where demand starts to shrink,” he said.
“Let’s drill down and figure out which regions or what sort of supplies of oil and gas that we produce are most likely to be impacted, and what we are going to do about the people that work there and the communities that are reliant on that activity.”