Getting government on board: Q&A
NGW: The Canadian Gas Association, which holds Canada’s seat at the International Gas Union (IGU), has been selected by the IGU to host two of its key global conferences, the LNG2023 conference in the summer of 2023 and the International Gas Research Conference in the spring of 2024. What does this say about the state of the Canadian natural gas industry?
Timothy Egan: We have been, for some time, well-positioned to host these kinds of events, and we have wanted to host these kinds of events. Circumstances have unfolded in such a fashion that we were able to stand up for both and we’re very pleased to do so.
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We think it is very timely for Canada, given a couple of things. First of all, over the last decade, our gas production figures have continued to rise and because of developments in new technologies our reserves and resource base have increased dramatically. We have several hundred years of resources available to us so we’re incredibly well-equipped to meet our own needs and to meet the needs of export markets. Our infrastructure is in great shape, our own customer base is growing very quickly, we’re serving roughly 38% of end use in Canada now.
At the same time, we have a public policy environment which is incredibly challenging, because we have governments at the federal level and in several provinces which have made very aggressive commitments to reduce emissions and those commitments inevitably have an impact on the hydrocarbon sector broadly, and a particular impact on us.
So we are in a challenging situation: we have lots of gas, great infrastructure, a customer base that likes our product and wants to use more, but a public policy environment that would seem to say ‘you need to find ways to use less.’
What that forces on us is a need to reflect on how we are innovating to meet market needs and meet public policy needs. We are doing that in a variety of creative ways which we are excited to show the world.
NGW: Can you comment on the apparent disconnect between Canada’s stated desire to meet global natural gas needs and the federal government’s intent to strangle infrastructure developments at home that would allow us to meet those needs?
TE: You point to a real challenge our government has. On the one hand, it wants to be helpful to its allies, on the other hand, it wants to meet the very stringent requirements it has set for itself. One way to reconcile those two competing aspirations is to get the government to acknowledge the reality that gas production and transportation in North America is incredibly low in emissions. If you are exporting natural gas to the world, you are delivering a much cleaner molecule than many markets would otherwise be receiving. The Canadian government needs to get its head around the idea that if we are displacing either a higher-emission gas molecule or coal or wood or dung or whatever alternative hydrocarbon is being burned and producing more emissions, that is a significant positive that Canada should find a way to take credit for.
If we can get the government’s mind around that, I think we can make them enthusiastic supporters of Canada’s LNG export opportunities. The Canadian sentiment is very positively in favour of more exports – some polling we’ve done has demonstrated that – so government just needs to get its head around a slightly different calculation on the emissions story. If addressing emissions is a global phenomenon then the benefits Canada brings should be calculated on a global baseline.
NGW: IGRC, in particular, is focused on innovation. What can you tell us about the role innovation plays in the future success of natural gas as the world evolves to a lower-carbon energy mix?
TE: You have to look at innovation in fuels, innovation in usage technologies and innovation in the capture of emissions.
Innovation in fuels means wherever possible producing a cleaner molecule; it means looking at conversion fuels like hydrogen and ammonia; it means incorporating as much renewable natural gas into the mix as possible.
On the technology side it means not only the existing gas systems – making sure they are as tight as possible – but also end of pipe technologies, higher-efficiency furnaces, heat pump technologies, micro combined heat and power technologies.
And ultimately, innovation in the emission capture technologies like CCUS. The government has announced tax measures to incent CCUS in the latest budget, and industry wants to do more on that front. There are big picture CCUS technologies like large-scale sequestration projects, but there are also smaller scale technologies like end of pipe technologies like CleanO2, which takes emissions from home furnaces and water heaters and makes soap.
NGW: A lot of ESG investors are looking at best practices. How does the gaseous fuel delivery industry meet those demands for best practices?
TE: It’s a matter of continuous improvement in performance, and I think the standards are pretty high in North America in that regard. Our companies are all committed to very high standards of environmental performance, of governance, of social performance and are very transparent about their work in those areas.
We are competing with electricity pretty aggressively right now and that helps drive those standards higher. In fact, I think competition is the single largest driver for continuous improvement in performance. You see that in the way in which our companies are documenting the continued efficiency gains, the continued reductions in emissions per unit of flow through. There is a culture of doing that that is very strong here in Canada and North America and we’re proud of it and continue to build on it.
NGW: The Natural Gas Innovation Fund, which the CGA created in 2016, has become a core focus for generating clean tech investment in Canada. Tell us about how NGIF came to be, and how it has evolved over the last half decade.
TE: It started as a handful of utilities throwing a little money into a hat and saying ‘what more can we do together to trigger more innovation?’ We made a couple of small investments with that and realised there was an opportunity for more investment. We then decided to create the Natural Gas Innovation Fund, first as a granting vehicle.
We grew that granting fund when producers saw what we were doing and wanted to become involved but then we realised that while we’ve granted funding to some of these companies, as they grow and mature, they are going to need equity investments to build their ideas out. So we created the equity fund, which is now at C$55mn. We are making substantial equity investments in start-up companies.
On the granting side, we have invested in more than 50 new technologies; on the equity side, which we just launched last year, we’ve made investments in about a half dozen.
We’ve triggered real interest from governments across the country that are doing innovation work of their own. Working with them, we can now offer public money and private money to entrepreneurs with clean tech ideas. We’ve coordinated our efforts so it’s a single application process. Canada is a small market; we think this needs to be made broader still so now we’re starting to think about what we can do for global markets.
NGW: You are chairing a session related to innovation challenges at WGC2022. Where does the gas industry need to focus its efforts for natural gas to remain a viable solution in the energy transition?
TE: We need to bring a broad message about opportunities right across the value chain, but I don’t think we’ve done a very good job of telling our story. I think we still come across as an industry that’s out of date, that’s out of touch, that isn’t leading edge.
There are an incredible number of really creative entrepreneurs out there who can do great things with natural gas and natural gas technology that can help the world.
The power of a hydrocarbon molecule is the enormous energy that can be unleashed by breaking it and that has delivered phenomenal benefits to the world. There are still a couple billion people who don’t have access to that benefit and we can be delivering it and at the same time improving the environmental conditions of the billions of others who are using it now. That’s what innovation can do. We’ve got to show that very positive story, about addressing energy poverty, about improving air quality, about improving the lives of people the world over.
NGW: With energy security moving to the top of the priority list around the world, but especially in Europe, are you seeing from authorities in Canada a more pragmatic approach to energy?
TE: I’d say that the language of policy makers has clearly been changing. They are acknowledging the energy security reality; whether they are moving off a very aggressive environmental agenda yet it is too early to say. I recognise the firm commitment to that agenda, but that agenda is one priority in the midst of several other priorities and energy security is always an overriding one, so let’s fit the two together. Natural gas can help fit the two together for the world. I think North America has a great story to tell to help address European and global energy security.
If the perfect is the enemy of the good, we are going to be setting back an industry that is delivering enormous value to people the world over, instead of building incrementally on that value to address environmental concerns. If we try to rush forward too fast on that environmental agenda, we’ll end up hurting people, we’ll end up undermining energy security. No one is against the ultimate objectives that have been set out; the question is all about pacing. I think we can move forward pretty darn fast, but it has to be done in a manner that is consistent with the realities of the markets. I’m hoping governments come to realise that.
This feature first appeared in the daily newspaper of the World Gas Conference 2022, which took place in Daegu, South Korea, between May 23 and 27, 2022.