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TMX Pipeline a Success Story – Despite All the Green Battles Against It

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From Energy Now

By Resource Works

“As we go into winter months, Canada will set new export records”

We remember well the green battles against the “TMX” expansion of the Trans Mountain oil pipeline from Alberta to B.C. The idea was, they said, at best unnecessary and at worst thoroughly dangerous to the world environment.

One group said the expansion “threatens to unleash a massive tar sands spill that would threaten drinking water, salmon, coastal wildlife, and communities.” It would also, others said, impede investment in clean energy and undermine Canada’s efforts to deal with climate change.

Some said the expanded line would be an imposition on First Nations. But a number of First Nations are interested in acquiring an equity stake in the pipeline (and the federal government, which owns the line, is looking to sell a 30-percent stake to them).

Despite the loud opposition, the federal government went ahead and purchased the pipeline and the expansion project in May 2018, completing the pipeline’s expansion this year at a total cost of $31 billion.

Prime Minister Trudeau’s explanation: Ottawa stepped in because owner Kinder Morgan “wanted to throw up their hands and walk away,” and his government wanted to make sure that Canadian oil could reach new markets.

Alberta’s Canadian Energy Centre supported that outlook: “We’re going to be moving into a market where buyers are going to be competing to buy Canadian oil.”

Our Margareta Dovgal wrote: “What matters to us is the benefits to Canada. For one thing, we now will be able to ship more oil by tanker to refineries on the U.S. West Coast at a better price than oil by tanker from Alaska. And . . . we’ll have more oil more readily available for overseas buyers.

“So, all in all, we can expect to see higher returns on our oil, and we can continue to see the immense benefits of high-paying jobs in Canadian energy, and the benefits of revenues to government.”

It has all been happening, in spades.

And the opening of the expanded pipeline on May 1 this year also helped bring down gasoline prices.

In Vancouver, for example, regular gasoline in April ran as high as $2.359 a litre. At the beginning of May, as key refineries returned to normal after seasonal maintenance work, it stood around $2.085. As October opened, the price was as low as $1.579.

Economist G. Kent Fellows said at an event hosted by Resource Works and the Business Council of B.C.: “Our analysis shows that insufficient pipeline capacity was costing B.C. consumers an estimated $1.5 billion per year in higher gasoline prices.

“With TMX now operational, wholesale gasoline prices in Vancouver dropped by about 28 cents per litre compared to earlier this year.”

As for those buyers competing for our oil, some thought the prime export destination would be California. But the summer just past brought exports on tankers from Vancouver to China, Japan, India, Hong Kong, South Korea, and Brunei.

As of now, California is indeed leading as a destination, with Asian buyers having eased off after their initial purchases. Experts say that was expected, with Asian refineries first taking test cargoes to see how their systems handle our oil.

Kevin Birn, chief Canadian oil markets analyst for S&P Global, told Business in Vancouver: “There is always a market for crude oil in the Pacific Basin. We always saw the need for the Trans Mountain pipeline. We saw Canadian production continuing to grow.”

Birn added: “It’s still relatively early. I’d expect volumes to continue to build, cargoes to test different markets all over the place, and over time you’ll start to see patterns.

“As we go into winter months, Canada will set new export records, because as capacity’s been optimized and new product projections and wells are brought online, the winter tends to be the peak period.

“Every year, I think, for the next couple of years, Canada will set new records.”

That would be good news for Canada’s economy — and for Alberta’s.

There are no statistics available yet on the TMX line’s impact on the economy, but in 2019 Trans Mountain estimated that construction and operation would mean $46 billion in revenue to governments over the first 20 years.

Today, as reported by Alberta’s energy minister, Brian Jean, Alberta continues to break records for crude oil production, with global demand continuing to grow.

The latest numbers from the Alberta Energy Regulator show Alberta’s oil production averaged a little over 4 million barrels per day in August — the highest on record for any August.

“The addition of 590,000 barrels per day of heavy oil pipeline capacity from Alberta to the B.C. coast earlier this year with the completion of the Trans Mountain Pipeline expansion project has been instrumental in the recent production increases.”

All this as the International Energy Agency said that while oil demand is decelerating from 2023 levels due to a slowing economy in China, demand is still set to increase by 900,000 barrels per day (bpd) this year. That would push global consumption to a record level of almost 103 million bpd.

And that forecast came as Jonathan Wilkinson, our federal minister of energy and natural resources, declared: “Oil and gas will peak this decade. In fact, oil is probably peaking this year.”

A bevy of market-watchers disagreed with him. Among them, Greg Ebel, CEO of Calgary-based Enbridge, says global oil consumption will be “well north” of 100 million barrels per day by 2050 — and could exceed 110 million barrels.

“You continue to see economic demands, and particularly in the developing world, people continue to say lighter, faster, denser, cheaper energy works for our people. . . And that’s leading to more oil usage.”

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Alberta

“It’s Canada’s Time to Shine” – CNRL’s $6.5 Billion Chevron Deal Extends Oil Sands Buying Spree

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From Energy Now

Canadian Natural Resources Ltd.’s $6.5 billion acquisition from Chevron Corp. marks the latest in a string of deals that has helped make it the country’s largest oil producer and brought Alberta’s massive oil sands deposits almost entirely under local control.

CNRL has feasted on the oil sands assets of foreign energy producers over the past decade, snapping up stakes and operations from Devon Energy Corp. and Shell Plc as they shifted away from the higher-cost, higher-emissions oil sands business. Investors have applauded the strategy, which allows CNRL to boost output and make the operations more efficient.

That trend continued on Monday, with CNRL shares climbing more than 4% after the deal with Chevron raised its stake in a key oil sands mine and a connected upgrading facility, while also adding natural gas assets in the Duvernay formation.

“These assets build on the robustness of Canadian Natural’s assets,” said CNRL President Scott Stauth said on a conference call Monday. The deal boosts CNRL’s stake in the Athabasca oil sands project, which it first bought from Shell in 2017, to 90% from 70%.

The acquisition was largely expected and boosts CNRL’s oil and gas output by roughly 9%, adding the equivalent of 122,500 barrels of oil production per day.

“It’s just been a matter of time,” Eight Capital analyst Phil Skolnick said by phone, noting that CNRL had been seen as the logical buyer for Chevron’s oil sands business.

While CNRL also boosted its dividend by 7% on Monday, Desjardins analyst Chris MacCulloch  cautioned the company’s additional debt to finance the acquisition “may disappoint some investors” given it plans to temporarily slow capital returns.

Still, MacCulloch said the deal is positive overall for CNRL as it further consolidates assets in the region. “There’s no place like home,” he wrote in a note.

Chevron, for its part, is the latest in a long line of US and international oil producers — such as BP Plc, TotalEnergies SE and Equinor ASA — that have shifted away from the oil sands after spending billions to build facilities in the heavy-oil formation. That has left the oil sands largely in the control of Canadian firms including CNRL, Suncor Energy Inc. and Cenovus Energy Inc.

“There’s no remaining, obvious assets available,” Ninepoint Partners partner and senior portfolio manager Eric Nuttall said after Monday’s deal. Ninepoint owns 3.1 million shares in CNRL, data compiled by Bloomberg show.

Many of those oil sands deals have been struck at prices that favor the Canadian buyers, which have consolidated land, reduced costs and boosted returns in recent years.

“It’s Canada’s time to shine,” Nuttall said, adding that he expects foreign investors will return to the country’s oil producers in the future.

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Economy

Canada should not want to lead the world on climate change policy

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From the Fraser Institute

By Ross McKitrick

Some commentators in the media want the the federal Conservatives to take a leadership position on climate, and by extension make Canada a world leader on the journey to the low-carbon uplands of the future. This would be a mistake for three reasons.

First, unlike other areas such as trade, defence or central banking, where diplomats aim for realistic solutions to identifiable problems, in the global climate policy world one’s bona fides are not established by actions but by willingness to recite the words of an increasingly absurd creed. Take, for example, United Nations Secretary General António Guterres’ fanatical rhetoric about the “global boiling crisis” and his call for a “death knell” for fossil fuels “before they destroy our planet.” In that world no credit is given for actually reducing emissions unless you first declare that climate change is an existential crisis, that we are (again, to quote Guterres) at the “tip of a tipping point” of “climate breakdown” and that “humanity has become a weapon of mass extinction.” Any attempt to speak sensibly on the issue is condemned as denialism, whereas any amount of hypocrisy from jet-setting politicians, global bureaucrats and celebrities is readily forgiven as long as they parrot the deranged climate crisis lingo.

The opposite is also true. Unwillingness to state absurdities means actual accomplishments count for nothing. Compare President Donald Trump, who pulled out of the Paris treaty and disparaged climate change as unimportant, to Prime Minister Justin Trudeau who embraced climate emergency rhetoric and dispatched ever-larger Canadian delegations to the annual greenhouse gabfests. In the climate policy world, that made Canada a hero and the United States a villain. Meanwhile, thanks in part to expansion of natural gas supplies under the Trump administration, from 2015 to 2019 U.S. energy-based CO2 emissions fell by 3 per cent even as primary energy consumption grew by 3 per cent. In Canada over the same period, CO2 emissions fell only 1 per cent despite energy consumption not increasing at all. But for the purpose of naming heroes and villains, no one cared about the outcome, only the verbiage. Likewise, climate zealots will not credit Conservatives for anything they achieve on the climate file unless they are first willing to repeat untrue alarmist nonsense, and probably not even then.

On climate change, Conservatives should resolve to speak sensibly and use mainstream science and economic analysis, but that means rejecting climate crisis rhetoric and costly “net zero” aspirations. Which leads to the second problem—climate advocates love to talk about “solutions” but their track record is 40 years of costly failure and massive waste. Here again leadership status is tied to one’s willingness to dump ever-larger amounts of taxpayer money into impractical schemes loaded with all the fashionable buzzwords. The story is always the same. We need to hurry and embrace this exciting economic opportunity, which for some reason the private sector won’t touch.

There are genuine benefits to pursuing practical sensible improvements in the way we make and use fossil fuels. But the current and foreseeable state of energy technology means CO2 mitigation steps will be smaller and much slower than was the case for other energy side-effects such as acid rain and particulates. It has nothing to do with lack of “political will;” it’s an unavoidable consequence of the underlying science, engineering and economics. In this context, leadership means being willing sometimes to do nothing when all the available options yield negative net benefits.

That leads to the third problem—opportunity cost. Aspiring to “climate leadership” means not fixing any of the pressing economic problems we currently face. Climate policy over the past four decades has proven to be very expensive, economically damaging and environmentally futile. The migration of energy-intensive industry to China and India is a very real phenomenon and more than offsets the tiny emission-reduction measures Canada and other western countries pursued under the Kyoto Protocol.

The next government should start by creating a new super-ministry of Energy, Resources and Climate where long-term thinking and planning can occur in a collaborative setting, not the current one where climate policy is positioned at odds with—and antagonistic towards—everything else. The environment ministry can then return its focus to air and water pollution management, species and habitat conservation, meteorological services and other traditional environmental functions. The climate team should prepare another national assessment but this time provide much more historical data to help Canadians understand long-term observed patterns of temperature and precipitation rather than focusing so much on model simulations of the distant future under implausible emission scenarios.

The government should also move to extinguish “climate liability,” a legal hook on which dozens of costly nuisance lawsuits are proliferating here and elsewhere. Canada should also use its influence in the UN Intergovernmental Panel on Climate Change to reverse the mission creep, clean out the policy advocacy crowd and get the focus back on core scientific assessments. And we should lead a push to move the annual “COPs”—Conferences of the Parties to the Rio treaty—to an online format, an initiative that would ground enough jumbo jets each year to delay the melting of the ice caps at least a century.

Finally, the new Ministry of Energy, Resources and Climate should work with the provinces to find one region or municipality willing to be a demonstration project on the feasibility of relying only on renewables for electricity. We keep hearing from enthusiasts that wind and solar are the cheapest and best options, while critics point to their intermittency and hidden costs. Surely there must be one town in Canada where the councillors, fresh from declaring a climate crisis and buying electric buses, would welcome the chance to, as it were, show leadership. We could fit them out with all the windmills and solar panels they want, then disconnect them from the grid and see how it goes. And if upon further reflection no one is willing to try it, that would also be useful information.

In the meantime, the federal Conservatives should aim merely to do some sensible things that yield tangible improvements on greenhouse gas emissions without wrecking the economy. Maybe one day that will be seen as real leadership.

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