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Canadian Energy Centre

Why Canada’s proposed oil and gas emissions cap goes against UNDRIP and the rights of Indigenous people

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Indigenous Resource Network executive director John Desjarlais (centre), with Justin Bourque, president of Âsokan Generational Developments, and Shelby Kennedy, community and Indigenous relations advisor with Enbridge. Photo courtesy Indigenous Resource Network

From the Canadian Energy Centre

By Deborah Jaremko

Q&A with John Desjarlais, executive director of the Indigenous Resource Network

The Indigenous Resource Network (IRN) is pushing back on Canada’s proposed framework to cap emissions from the oil and gas sector.  

IRN executive director John Desjarlais says the proposal directly contradicts Canada’s support for the United Nations Declaration on the Rights of Indigenous People (UNDRIP). 

He says the plan would cap opportunity for Indigenous communities as more take on ownership positions in major energy projects from oil and gas pipelines to liquefied natural gas terminals and carbon capture and storage projects. 

Here’s what Desjarlais told CEC.  

CEC: From the perspective of Indigenous communities across Canada who are involved in natural resources development, what’s your take on the federal government’s proposed oil and gas emissions cap?  

John Desjarlais: There’s a lot of confidence that it will curtail production as well, and obvious concern that it’s going to mean less opportunity.  

We’ve heard from communities that are saying we’re involved already in emissions reduction. There are communities that just want to advance their opportunities in that space. And it’s at a time when there’s probably the greatest appetite for Indigenous involvement, not just in ownership, but advanced business development and procurement. [It could] mean less jobs, less procurement, less ownership opportunity, less investment. 

There are concerns that these impacts are not being heavily understood, measured, contemplated or considered in terms of the policy development and implementation. 

CEC: How does being involved in oil and gas development benefit Indigenous communities?  

JD: There’s a suite of benefits that are coming from increased engagement, and it’s much deeper than just jobs. 

Communities are now jumping into revenue generating assets where they’re creating immediate cash flow, which is allowing them to start to self-determine and invest back into their community either through economic development or through infrastructure programming. 

The other side to it is just the capacity that comes from being involved as an owner. Indigenous business and community leaders are being exposed to the requirements and the acumen needed to successfully participate in the ownership of decision making. That’s accelerating the development of the acumen and capacity of different indigenous communities at greater rates 

CEC: How many communities would you estimate are now participating at this level?  

JD: There’s probably upwards directly of at least 100 different communities now. There are double-digit communities that are involved in at least four or five different deals that are directly involved in the ownership and the benefit side, and then there’s cascading involvement of all the surrounding communities through procurement opportunities and employment. It’s growing quite quickly. 

CEC: Why do you say the proposed emissions cap contradicts the United Nations Declaration on the Rights of Indigenous People?  

It’s a policy that’s created to achieve certain goals. Creating those types of targets without Indigenous oversight – not just input, [but] oversight and ownership – is problematic because it contradicts the UNDRIP action plan in terms of stepping out of the way of affording Indigenous peoples and communities the ability to self-determine; to invest where they want to invest, and to grow how they want to grow. 

We hear a lot of community leaders say, ‘we know what’s best for our territories.’ To have policy that limits our ability to make the decisions we want to make in regard to environmental and economic sustainability is a challenge. 

CEC: What would you like to see happen?  

JD: It’s a little hard to roll back and involve communities in a total redesign, but at least if we saw an understanding that there’s certainly going to be an economic impact. If there’s a production cap aspect to it, there’s going to be an economic impact to those Indigenous communities that have established livelihoods and revenue streams.  

There’s the sentiment that if the government truly is advancing this in the direction that they are, then would they consider omission of Indigenous activity so they can continue advancing their economic interests and growth? 

Ideally, [there would be] a policy that’s created in line with UNDRIP that works for communities, industries and governments in their goals. 

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Alberta

Start-up of Trans Mountain expansion ‘going very well’ as global buyers ink deals for Canadian crude

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A worker at Trans Mountain’s Burnaby Terminal. Photo courtesy Trans Mountain Corporation

From the Canadian Energy Centre

By Deborah Jaremko

Chinese refiner pays about US$10 more for oil off TMX compared to sales value in Alberta

Canada’s oil sands producers are “back in the limelight” for investors following completion of the Trans Mountain pipeline expansion, according to a report by Enervus Intelligence Research.

For the first time in the better part of a decade, there is now breathing room on the system to ship all of the oil producers are able to sell off the coast of B.C.

Up until this May, Trans Mountain was regularly overbooked. Not anymore.

The crude carrier Dubai Angel picked up the first shipment from the long-awaited expansion on May 22, setting sail for China and a customer of oil sands producer Suncor Energy.

Analysts estimate Trans Mountain loaded 20 vessels in June, compared to a pre-expansion average of five per month.

“You’re seeing multiple buyers. It’s going very well,” said Phil Skolnick, managing director of research with New York-based Eight Capital.

“You’re seeing the exact buyers that we always thought were going to show up, the U.S. west coast refineries and as well as the Asian refineries, and there was a shipment that went to India as well.”

The “Golden Weld” in April 2024 marked the mechanical completion and end of construction for the Trans Mountain expansion project. Photo courtesy Trans Mountain Corporation

Canadian crude in demand on the global market

Asian markets – particularly China, where refineries can process “substantial quantities” of extra heavy crude and bitumen – are now “opened in earnest” to Canadian oil, the International Energy Agency (IEA) said in its June Oil 2024 report.

“There’s demand for this crude and people are going to make deals,” said Kevin Birn, chief analyst of Canadian oil markets with S&P Global.

The IEA said Canadian crude will increasingly compete with heavy oil from other countries, particularly those in Latin America and the Middle East.

June’s loading of 20 vessels is slightly lower than the 22 vessels Trans Mountain had targeted, but Skolnick said a few bumps in the project’s ramp-up are to be expected.

“About three months ago, the shippers were telling investors on their calls, don’t expect it to be a smooth ramp up, it’s going to be a bit bumpy, but I think they’re expecting by Q4 you should start seeing everyone at peak rates,” Skolnick said.

Delivering higher prices

Trans Mountain’s expanded Westridge Terminal at Burnaby, B.C. now has capacity to load 34 so-called “Aframax” vessels each month.

One of the first deals, with Chinese refiner Rongsheng Petrochemical, indicates the Trans Mountain expansion is delivering on one of its expected benefits – higher prices for Canadian oil.

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

The June deal between Rongsheng and an unnamed oil sands shipper saw a shipment of Access Western Blend (AWB) purchased for approximately US$6 per barrel below the Brent global oil benchmark. That implies an AWB selling price of approximately US$75 per barrel, or about US$10 more than the price received for AWB in Alberta.

Expanded export capacity at the Trans Mountain Westridge Terminal. Photo courtesy Trans Mountain Corporation

More pipeline capacity needed

Oil sands production – currently about 3.4 million barrels per day – is projected to rise to 3.8 million barrels per day by the end of the decade before declining slightly to about 3.6 million barrels per day in 2035, according to the latest outlook by S&P Global.

“Despite the recent completion of the Trans Mountain Expansion project, additional capacity will still be needed, likely via expansion or optimization of the existing pipeline system,” wrote Birn and S&P senior research analyst Celina Hwang in May.

“By 2026, we forecast the need for further export capacity to ensure that the system remains balanced on pipeline economics.”

Uncertainty over the federal government’s proposed oil and gas emissions cap “adds hesitation” to companies considering large-scale production growth, wrote Birn and Hwang.

Global oil demand rising

World oil demand, which according to the IEA reached a record 103 million barrels per day in 2023, is projected to continue rising despite increased investment in renewable and alternative energy.

June outlook by the International Energy Forum (IEF) pegs 2030 oil demand at nearly 110 million barrels per day.

“More investment in new oil and gas supply is needed to meet growing demand and maintain energy market stability, which is the foundation of global economic and social well-being,” said IEF secretary Joseph McMonigle.

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Canadian Energy Centre

What’s next? With major projects wrapping up, what does Canada’s energy future hold

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From the Canadian Energy Centre

By Mario Toneguzzi

‘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.”

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.”

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