Energy Consumption and Demand
Is There a Market for BC Oil and Gas?
The market for oil is global, and the price is not driven by what happens locally. Gas, on the other hand, has local, regional and continental markets. Gas prices rise and fall with fluctuations in the North American market. Almost certainly, natural gas extracted from the BC offshore would be exported to the United States, probably to the Chicago hub where there is unsatisfied demand, or to California, depending on delivery costs.
Experts differ over the future rate of growth of world demand for crude oil. A recent forecast by the U.S. Energy Information Administration has envisaged a jump from the current level of 76 million barrels per day to 117.4 million barrels per day by the year 2020. This estimate reflects heightened expectations for oil demand in the United States, the Middle East, the former Soviet Union, China and the Pacific Rim developing countries. World supplies of oil are expected to grow by 2.2% annually, which would leave supplies falling slightly short of demand over the next two decades, according to the same source. Over this period, U.S. oil production is projected to continue to fall at an annual rate of about 1%. Many estimates of future oil demand are influence by expected changes in the Chinese market. Until the 1990’s, China seemed to have plenty of crude oil in domestic reserves, especially in the northeastern region. But in 1993 China became a net importer of oil, taking advantage of low prices in the world market, and today foreign crude oil accounts for one-third of the output of Chinese refineries. Most projections of future Chinese demand for oil over the next 20 years are based on the assumption that Chinese development will result in an enormous increase in the use of vehicles even in the face of sharply rising oil prices. However, environmental concerns associated with the overuse of oil suggest that natural gas rather than oil is more likely to be the preferred fuel of the future.
The potential demand for natural gas is particularly huge in Asia, where a number of industrialised and industrialising countries have been moving away from oil as the primary fuel source for their commercial and public service sectors since the oil crises of the mid-1970’s and early 1980’s. In Asia (excluding China and Japan), natural gas is the least used fuel, but it's growth potentiality is enormous if delivery problems can be overcome. Japan, and to a lesser extent South Korea and Taiwan, already import liquefied natural gas (LNG) by tanker, making Asia the biggest LNG-importing continent, despite the fact that Indonesia, Brunei, Malaysia and Australia export LNG within the Asia-Pacific region. At present the only transnational gas pipeline in Asia is between Malaysia and Thailand, but other cross-border pipelines are being planned as part of the proposed TransASEAN Gas Pipeline for Southeast Asia. On the face of things, there is a big market for the export of Canadian natural gas to China. The share of gas in the PRC’s total energy consumption is very small because the natural gas reserves in that country are modest in size and lie in remote areas. Soft coal, on the other hand, is very abundant and extremely cheap, making it difficult for PRC decision-makers to spurn the bounty of nature despite compelling environmental reasons to reduce the level of industrial pollution. It is still difficult to predict whether international pressures on China to reduce its emissions (which, incidentally, drift over British Columbia) will prove successful.
On the whole, it seems more likely that natural gas from the offshore BC reserve, despite the rising Asian demand, will be piped down to California or otherwise stay within the North American market. Most experts expect world oil prices to remain “high”; that is, around or above $30 U.S. per barrel. Indeed almost all economists deplore the goal of “cheap oil” on economic as well as environmental grounds. Moreover, experience has shown that governments are extremely reluctant to lower the high taxes on gasoline and other oil products given the huge revenues available and the proven fact that demand for these products is not very responsive to price.
(Oil equivalent tons/person)
| USA | 8.1 |
| Canada | 7.7 |
| OECD | 4.6 |
| France | 4.3 |
| Germany | 4.2 |
| Japan | 4.0 |
| UK | 3.9 |
| Italy | 2.9 |
| China | 0.7 |
| World Total | 1.5 |
Source: http://www.eecj.or.jp
Some credit from above text to Review of Offshore Oil and Gas Development by Simon Fraser University, 2004 and Royal Roads University: BC Offshore Oil and Gas Socio-Economic Papers, 2004
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