Canada plans to boost oil exports five per cent to ease energy supply crisis - Financial Post

Enbridge, North America's largest pipeline company, confirms it has been in talks with governments

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Mar 24, 2022 • 37 minutes ago • 5 minute read • 246 Comments

Canada's Minister of Natural Resources Jonathan Wilkinson. Photo by REUTERS/Blair Gable/File Photo

Natural Resources Minister Jonathan Wilkinson says his government has assured European allies that Canadian energy producers will be able to boost crude oil exports by around five per cent this year to help ease tight oil markets rocked by Russia’s invasion of Ukraine — but the increase won’t come at the expense of Canada’s climate goals.

Wilkinson made the announcement Thursday afternoon following a second day of meetings at the International Energy Agency’s (IEA) annual ministerial gathering in Paris. He said Canadian industry has the pipeline and production capacity to incrementally increase oil and gas exports this year by 300,000 barrels per day (bpd) — comprising 200,000 bpd of oil and 100,000 barrels of oil equivalent per day in natural gas.

“Canada wants to help our European friends and allies at a time of crisis,” Wilkinson said Thursday. “But of course we are looking to be sensitive to and consistent with the commitments we’ve made with respect to climate change. Climate change is not going away. It is an existential threat to the world.

“We can be part of actually helping them in the short term and we can be part of actually helping them to accelerate the transition to a green future where we all want and need to go.”

The increase in exports will come from a mix of oil sands and conventional crude sources, Wilkinson said. Canada currently exports around four million bpd of oil to the U.S., a portion of which is then re-exported overseas.

The additional volumes will come from producers who already intended to ramp up production, but who have indicated they will accelerate those efforts this year, Wilkinson clarified.

Wilkinson acknowledged the increase in exports represents a relatively small displacement of Russian oil and gas, but said the move in conjunction with efforts in Brazil and the United States would begin to address Europe’s energy requirements. “It will take time to fully move away from Russian oil and gas for some of these countries like Germany that are quite heavily dependent, so any, any additional amounts can help to start that process,” Wilkinson said.

The minister echoed remarks made by Prime Minister Justin Trudeau on Wednesday indicating that a Canada-EU working group will be struck to increase co-operation between governments on energy security and the transition to net-zero.

Wilkinson also announced $8 million for the IEA’s Clean Energy Transition Programme, which helps emerging economies develop clean energy.

Discussions between governments and industry about the security of energy supplies have ramped up in recent weeks as Moscow has faced crippling economic sanctions and global importers have come under increasing pressure to stop trading in Russian oil and gas. The IEA said Wednesday that oil markets could lose three million barrels per day (bpd) of Russian crude and refined products from April.

During a trip to Brussels for an emergency meeting with NATO leaders, Trudeau said Canada will deepen co-operation with its allies to improve the security of energy supplies and to make progress on a net-zero energy transition.

“A dedicated working group on green transition and LNG is being created to develop a concrete action plan on these matters, and our officials will meet this week to further discuss enhancing energy-related cooperation,” Trudeau said in a joint statement with the President of the European Commission.

Canadian energy firms have also been consulted by governments seeking potential solutions to the crisis.

North America’s largest pipeline company, Calgary-based Enbridge Inc., confirmed Wednesday that it has been in talks with governments.

“At the moment, 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 throughout North America and Europe,” the company said in a statement to the Financial Post. “That includes using export facilities on the Gulf Coast for crude and natural gas.”

North American producers have so far been reluctant to increase output after years of pressure from investors to avoid costly expansion projects. A shortage of workers and equipment has also made it difficult for companies to ramp up production. And, in Canada, infrastructure constraints remain a barrier to increasing oil and gas exports.

“There’s not much more we can do right now,” said Peter Tertzakian, managing director of ARC Financial, in an interview this week. “We can’t do very much other than supply more oil to the U.S., and, indirectly, the U.S. can export more to Europe. It’s an indirect contribution.

“Our conventional oil and gas is basically level and is difficult to grow. Oilsands are not building any more facilities. There’s mild increases in production across the board, but not very much.”

Alberta Energy Minister Sonya Savage said Wednesday that energy firms in the province had indicated production could increase in the near term by another 200,000 to 400,000 bpd.

“With optimization programs and other ways they can ramp up production quite quickly,” Savage said in an interview.

“And if we can get infrastructure built, we can significantly increase production in the oilsands and even in the conventional sector, and we can be the solution. But we have to get the energy policy right — and the energy policy can’t only be about climate change, it has to be about energy security, reliability and affordability, too.”

In its statement Wednesday, Enbridge said recent events have been a reminder that Canada has a role to play in improving energy security.

“We produce the most ESG-friendly energy in the world and we are committed to doing what we can to help stabilize the energy supply the world requires,” the company said.

The war in Ukraine has exacerbated existing global problems around limited output capacity.

Top OPEC+ producers Saudi Arabia and United Arab Emirates, which are rare among global producers in having surplus capacity, are not fully opening their taps and the IEA does not expect output rises from Canada, the United States and others to eliminate global undersupply.

The world is set for a supply deficit of 700,000 bpd in the second quarter of 2022, the IEA said.

Storage levels in OECD countries in January stood at their lowest levels since April 2014, it said.

With additional reporting from Reuters

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