Derrick Digest Nov 25, 2016

Canada's export pipelines crammed to capacity, says CAPP president

The Derrick Digest is a weekly collection of curated content, based on events from across the oil and gas industry, that caught our eye at Pennine Petroleum Corporation. We hope you find it just as intriguing as we do.


NOV. 25, 2016

A city bus on the same route, day after day, crowded to capacity and stranding passengers on a regular basis.

That’s the image Tim McMillan uses to illustrate Canada’s current pipeline predicament.

In a recent Globe and Mail article, the president of the Canadian Association of Petroleum Producers (CAPP) says the situation is only going to worsen for Canada’s oil export industry.

“If this were one of Canada’s public-transit corridors, only three-quarters of the passengers would be able to make their morning commute,” writes McMillan. “Not only is the system unable to handle day-to-day changes in global demand, but supply continues to grow . . . Canada’s economy is suffering and the situation is critical.”

Canada can help to meet the world’s growing demand for energy—but in order to do so, we need to get busy building pipelines, says McMillan.

“Our oil pipeline network can move four million barrels of crude oil a day from Western Canada. This is too close to the average 3.981 million barrels a day in supply, which will continue to grow,” he says.



If the current situation isn’t evidence enough, then there’s the International Energy Agency’s long-term global outlook.

In its recently released World Energy Outlook 2016, the IEA predicts that the United States—Canada’s biggest energy customer, but also Canada’s biggest energy competitor—will no longer be importing crude oil by 2040.

The solution for Canada, remarks one of the WEO-2016 co-authors, is new energy markets . . . which, of course, requires new export pipelines accessing tidewater.

“The good news for Canadian oil producers is that oil demand globally is going to increase,” Laura Cozzi, a high-ranking IEA official, said on Nov. 18 in Ottawa.

“Even if in the U.S. (oil imports are) going to die, there is going to be many other places on the planet that are continue to need Canadian oil. It’s just that the destination may be different,” she added, noting that the critical missing link is “being able to export it to the global markets, to where it’s going to be needed, and it’s mostly Asia.”

In its annual global energy outlook, the IEA also says that:

  • Worldwide energy demand will grow by 30% between now and 2040;

  • Oil trade focus will shift “decisively” to Asia; and

  • The era of fossil fuels is far from over.



Vocal opposition to Canada’s carbon tax scenario is certainly not going away—in fact, opponents may be merely getting warmed up.

National Post columnist Rex Murphy takes note of Saskatchewan Premier Brad Wall’s hard-line stance against a national carbon tax, when the U.S. will not be following suit.

“Could Wall, who is not in Marrakesh (for COP22), be on to something?” asks Murphy. “At a time of economic stress in the Western provinces, the Alberta economy blistered by oil prices, Fort McMurray still reeling from the after-effects of the inferno last spring, Newfoundland wandering into debt hell—why impose artificial and unilateral restraints on our national economy?

“In particular, why impose restraints that will place us at major disadvantage with the one economy that matters most to Canada?”



Meanwhile, Birchcliff Energy CEO Jeffery Tonken tells BNN that Ottawa and Edmonton should focus on making Canada’s energy industry more competitive through innovation, rather than carbon taxes.

“We need to keep our costs low so that we can compete with the U.S. Any form of new taxes, any costs that our businesses have to pay for, makes Canada more uncompetitive. So we need to drive our costs down, and focus on our business,” he says.