From the Canadian Energy Centre

‘This is the first time Canada will enter the global marketplace as a global player, so it is an incredibly important change for the industry’

With the recent completions of the Trans Mountain expansion and Coastal GasLink pipelines, and the looming completion of LNG Canada within the next year, there are few major energy projects with the green light for one of the world’s largest and most responsible energy producers.

Which leaves a lingering question: In a world that has put a premium on energy security, what’s next for Canada?

Heather Exner-Pirot, a senior fellow and director of the natural resources, energy and environment program at the Macdonald-Laurier Institute, said Natural Resources Canada’s major projects inventory “has been in a pretty sharp decline since 2015, which is concerning.”

“It’s not just oil and gas but also mining, also electricity . . . It’s the overall context for investment in Canada,” said Exner-Pirot, who is also a special adviser to the Business Council of Canada.

“When we look at BC, we see TMX, Coastal GasLink, very soon LNG Canada will be finishing up. That’s probably in the order of $100 billion of investment that that province will lose.

“So you do start to think about what happens next. But there are some things on the horizon. I think that’s part of it. Other LNG projects where maybe it wasn’t politically popular, it wasn’t a social license, and maybe the labour force was also constrained, and now is opening opportunities.”

A recent analysis conducted by Exner-Pirot found that between 2015 and 2023, the number of energy and natural resource major projects completed in Canada dropped by 37 per cent. And those that managed to be completed often faced significant delays and cost overruns.

One notable project Exner-Pirot expects to fill the void is Ksi Lisims LNG, which is being developed on the northwest coast of Canada to export low-carbon LNG to markets in Asia. The project represents a unique alliance between the Nisga’a Nation, Rockies LNG and Western LNG.

Ksi Lisims LNG is a proposed floating LNG export facility located on a site owned by the Nisga’a Nation near the community of Gingolx in British Columbia.

The project will have capacity to produce 12 million tonnes of LNG per year, destined for markets in the Pacific basin, primarily in Asia where demand for cleaner fuels to replace coal continues to grow.

Rendering of the proposed Ksi Lisims floating LNG project. Image courtesy Ksi Lisims LNG

As well, the second phase of the LNG Canada export terminal in Kitimat, B.C. shows increasing signs of moving forward, which would roughly double its annual production capacity from 14 million tonnes to 26 million tonnes, Exner-Pirot added.

While nearby, Cedar LNG, the world’s first Indigenous-owned LNG export facility, is closing in on the finish line with all permits in place and early construction underway. When completed, the facility will produce up to three million tonnes of LNG annually, which will be able to reach customers in Asia, and beyond.

According to the International Energy Agency, the world is on track to use more oil in 2024 than last year’s record-setting mark. Demand for both oil and natural gas is projected to see gradual growth through 2050, based on the most likely global scenario.

Kevin Birn, chief analyst for Canadian oil markets at S&P Global, said despite the Trans Mountain expansion increasing Canada’s oil export capacity by 590,000 barrels per day, conversations have already begun around the need for more infrastructure to export oil from western Canada.

“The Trans Mountain pipeline, although it’s critical and adds the single largest uplift in oil capacity in one swoop, we see production continue to grow, which puts pressures on that egress system,” he said.

Photo courtesy Trans Mountain Corporation

Birn said Canada remains a major global player on the supply side, being the world’s fourth-largest producer of oil and fifth-largest producer of natural gas.

“This is a really important period for Canada. These megaprojects, they’re generational. These are a once-in-a-generation kind of thing,” Birn said.

“For Canada’s entire history of being an oil and gas producer, it’s been almost solely reliant on one single export market, which is the United States. That’s been beneficial, but it’s also caused problems for Canada in that reliance from time to time.

“This is the first time Canada will enter the global marketplace as a global player, so it is an incredibly important change for the industry.”

Exner-Pirot said Canada has the ability to become a major exporter on the energy front globally, at a time when demand is accelerating.

“We have open water from B.C. to our allies in Asia . . . It’s a straight line from Canada to its allies. This is a tremendous advantage,” she said, noting the growth of data centres and AI is expected to see demand for reliable energy soar.

“We are seeing growing electricity demand after decades of plateauing because our fridges got more energy efficient and our washers and dryers got more energy efficient. Now we’re starting to see for the first time in a long time more electricity demand even in developed countries. These are all drivers.”

Workers complete the “golden weld” of the Trans Mountain pipeline expansion on April 11, 2024 in the Fraser Valley between Hope and Chilliwack, B.C. The project saw mechanical completion on April 30, 2024. Photo courtesy Trans Mountain Corporation

From the Canadian Energy Centre

By Will Gibson

‘We’re going to be moving into a market where buyers are going to be competing to buy Canadian oil’

It is a game changer for Canada that will have ripple effects around the world.  

The Trans Mountain pipeline expansion is now complete. And for the first time, global customers can access large volumes of Canadian oil, with the benefits flowing to Canada’s economy and Indigenous communities.  

“We’re going to be moving into a market where buyers are going to be competing to buy Canadian oil,” BMO Capital Markets director Randy Ollenberger said recently, adding this is expected to result in a better price for Canadian oil relative to other global benchmarks. 

The long-awaited expansion nearly triples capacity on the Trans Mountain system from Edmonton to the West Coast to approximately 890,000 barrels per day. Customers for the first shipments include refiners in China,  California and India, according to media reports.  

Shippers include all six members of the Pathways Alliance, a group of companies representing 95 per cent of oil sands production that together plan to reduce emissions from operations by 22 megatonnes by 2030 on the way to net zero by 2050.  

The first tanker shipment from Trans Mountain’s expanded Westridge Marine Terminal is expected later in May.

Photo courtesy Trans Mountain Corporation

 The new capacity on the Trans Mountain system comes as demand for Canadian oil from markets outside the United States is on the rise.  

According to the Canada Energy Regulator, exports to destinations beyond the U.S. have averaged a record 267,000 barrels per day so far this year, up from about 130,000 barrels per day in 2020 and 33,000 barrels per day in 2017. 

“Oil demand globally continues to go up,” said Phil Skolnick, New York-based oil market analyst with Eight Capital.  

“Both India and China are looking to add millions of barrels a day of refining capacity through 2030.” 

In India, refining demand will increase mainly for so-called medium and heavy oil like what is produced in Canada, he said. 

“That’s where TMX is the opportunity for Canada, because that’s the route to get to India.”  

Led by India and China, oil demand in the Asia-Pacific region is projected to increase from 36 million barrels per day in 2022 to 52 million barrels per day in 2050, according to the U.S. Energy Information Administration. 

More oil coming from Canada will shake up markets for similar world oil streams including from Russia, Ecuador, and Iraq, according to analysts with Rystad Energy and Argus Media. 

Expanded exports are expected to improve pricing for Canadian heavy oil, which “have been depressed for many years” in part due to pipeline shortages, according to TD Economics.  

Photo courtesy Trans Mountain Corporation

 In recent years, the price for oil benchmark Western Canadian Select (WCS) has hovered between $18-$20 lower than West Texas Intermediate (WTI) “to reflect these hurdles,” analyst Marc Ercolao wrote in March.  

“That spread should narrow as a result of the Trans Mountain completion,” he wrote. 

“Looking forward, WCS prices could conservatively close the spread by $3–4/barrel later this year, which will incentivize production and support industry profitability.”  

Canada’s Parliamentary Budget Office has said that an increase of US$5 per barrel for Canadian heavy oil would add $6 billion to Canada’s economy over the course of one year. 

The Trans Mountain Expansion will leave a lasting economic legacy, according to an impact assessment conducted by Ernst & Young in March 2023.  

In addition to $4.9 billion in contracts with Indigenous businesses during construction, the project leaves behind more than $650 million in benefit agreements and $1.2 billion in skills training with Indigenous communities.   

Ernst & Young found that between 2024 and 2043, the expanded Trans Mountain system will pay $3.7 billion in wages, generate $9.2 billion in GDP, and pay $2.8 billion in government taxes.