With fears of severe oil shortages if Russia's exports are further restricted, world leaders are looking elsewhere for their crude supplies. But with many governments reining in oil and gas exploration in favor of renewable energy projects, these supplies are not so easy to find. Now, Canada is stepping up to the task as it says it can ramp up production to fill the gap as worldwide oil demand remains high.
State powers around the world are gradually imposing stricter sanctions on Russian products, with the EU tightening its sanctions on Russian oil companies. While the EU has not announced an outright ban on Russian energy imports, the U.S. has. Earlier this month, the U.S. banned imports of Russian oil, LNG, and coal, as did Canada.
Some Canadian oil firms have already stated their intention of increasing production as demand rises. The CEO of DeltaStream Energy Corp. in Alberta said he intends to drill more to increase production. Canada's potential for increasing production is significant with the CEO of Suncor Energy Inc. stating that the Canadian oil industry could raise production by more than 200,000 barrels in a short period of time.
The political sphere has also commented on the potential to increase production as Canadian Natural Resources Minister Jonathan Wilkinson stated "In the context of the discussions, not just with the Americans, but the Europeans as well, we have essentially asked each other, those of us that are oil and gas producers, to look at whatever we can do." He suggested that Canada should have a clear plan on how to increase its oil exports to countries facing shortages by 23rd March, in time for an IEA meeting in Paris.
Spending on oil and gas operations in Canada is also expected to grow this year to $26 billion, up 22% from 2021. Revenue is also expected to climb significantly as global shortages force oil prices even further up, showing Canadian companies a strong return on their investments.
And Alberta Premier Jason Kenney is once again putting pressure on the U.S. to revive major pipeline projects, such as Keystone XL to reduce the global reliance on Russian oil supplies longer term. Keystone was canceled when President Biden came into power as he ramped up policies on climate change, restricting new oil projects deemed harmful to the environment. But this is a common stance in the oil-rich Canadian state with David Yager from the Canadian Energy Centre stating "the West has virtue-signaled away its energy security."
The Macdonald-Laurier Institute even when so far as to share a quote from Christian Leuprecht stating "Make no mistake: Canadians who oppose construction of the Coastal Gaslink pipeline… and pipeline capacity to enable liquified natural gas exports from Canada's East Coast to Europe, are aiding, abetting, and condoning #Putin's behaviour." Demonstrating how seriously the oil sector has taken the curbs on its oil and gas operations over the last year, and how willing it is to make a comeback.
Canada is now exploring ways to increase pipeline utilization, with the government currently in talks with Canadian oil major Enbridge Inc. The majority of Canada's oil exports travel through Enbridge's pipeline, which connects to the U.S. Current export levels from Canada to the U.S. stand at 4 million bpd of oil, and energy firms are trying to determine if this figure can be increased using the existing transport infrastructure.
Enbridge stated "Both our liquids and natural gas systems are at or near capacity but we're exploring options that may be taken to provide more energy to the U.S. and Europe. That includes using export facilities on the Gulf Coast for crude and natural gas."
But despite all the talk about ramping up production to increase energy security and move away from reliance on Russian oil, many experts question whether Canada can actually fill the production quota needed to reduce shortages. At least in the short term, the supply that Canada could provide would be far from enough to bridge the gap. President of industry group the Explorers and Producers Association of Canada, Tristan Goodman, stated "There's an immediate ability to add some degree of production, and I do mean immediate - weeks to months. It will be a small amount, but it will be noticeable." He suggested the amount would be 400,000 bpd at best.
After years of underinvestment of Canada's oil and gas infrastructure and curbs on production, Canada is not currently in a position to increase production to the levels required to meet global needs. This is something that could change over time if investment in new exploration and pipeline projects increases, but not as an immediate response to bans on Russian oil.
Ultimately, Canada is offering to step up its game by increasing investment in oil operations and ramping up production immediately. Revisiting canceled oil and gas infrastructure projects could see Canada helping North America to increase its energy security, albeit at the cost of Biden's green policies. However, in the short term, it seems this supply simply isn't enough to meet the global demand required in the face of severe shortages.
By Felicity Bradstock for Oilprice.com
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Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More
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