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Canada Needs New Pipeline To Compete Internationally

Pipeline pieces

Canada’s crude oil production is growing, but pipeline capacity is not, and this is eroding the country’s energy industry competitiveness, the Canadian Association of Petroleum Producers said in the latest edition of its annual Crude Oil, Markets, and Transportation report.

By 2035, CAPP expects Canada’s crude oil production rate to rise to 5.6 million bpd, most of this coming from the oil sands. That’s some 1.4 million more than what oil sands producers are extracting now, and there is already a shortage of pipelines.

In 2017, the association noted, Canada had a total oil supply, including crude and diluent, of 4.2 million bpd, and there was already insufficient pipeline capacity to carry it. By 2035, total oil supply will reach 6.2 million bpd.

The debate over oil pipelines is a heated one on both sides of the border, but Canada’s capacity shortage problems seems much worse. Two new pipeline projects were cancelled recently, including the Northern Gateway and Energy East, and another three that will alleviate the constraints are yet to begin construction amid strong environmentalist opposition: Keystone XL, Line 3, and Trans Mountain.

CAPP notes that these challenges are also undermining investors’ confidence in Canada’s energy industry. Judging by Kinder Morgan’s recent decision to sell the Trans Mountain expansion project to the federal government, there is a strong reason to worry.

Related: Venezuela Won’t Have Enough Oil To Export By 2019

In the United States, CAPP said, capital spending in the oil industry grew by 38 percent last year to US$120 billion. In Canada, conversely, capex fell to US$45 billion.

“The competition for capital investment in the global marketplace is fierce and Canada is losing. A lack of regulatory clarity, and the inability to see federally-approved pipelines get built, sends the signal that Canada is closed for business,” CAPP’s chief executive, Tim McMillan, said, adding that while Canadian producers struggle with lack of pipelines that is forcing them to sell their crude at substantial discounts to WTI, U.S. producers are ramping up exports to the same emerging markets that CAPP considers key for Canada’s oil sands producers.

By Irina Slav for Oilprice.com

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  • John S.W. on June 14 2018 said:
    Maybe reducing the amount of oil and increasing clean energy research and implementation would be a better path, rather than spending 4.5 billion dollars of Canadian taxpayers money on a pipeline that even Kinder Morgan didn't want. The issue isn't the lack of pipelines, but the fossil fuel infrastructure it is built on. Oil production shouldn't increase by 2035, it should be almost none existent.
  • NickSJ on June 13 2018 said:
    How about an update on the long delayed Keystone XL pipeline? Since it was approved by the Trump State Department and the state of Nebraska, not much has been heard about further progress.

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