Alberta
Start-up of Trans Mountain expansion ‘going very well’ as global buyers ink deals for Canadian crude
A worker at Trans Mountain’s Burnaby Terminal. Photo courtesy Trans Mountain Corporation
From the Canadian Energy Centre
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.
A 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.
Alberta
Free Alberta Strategy trying to force Trudeau to release the pension calculation
Just over a year ago, Alberta Finance Minister Nate Horner unveiled a report exploring the potential risks and benefits of an Alberta Pension Plan.
The report, prepared by pension analytics firm LifeWorks – formerly known as Morneau Shepell, the same firm once headed by former federal Finance Minister Bill Morneau – used the exit formula outlined in the Canada Pension Plan Act to determine that if the province exits, it would be entitled to a large share of CPP assets.
According to LifeWorks, Alberta’s younger, predominantly working-class population, combined with higher-than-average income levels, has resulted in the province contributing disproportionately to the CPP.
The analysis pegged Alberta’s share of the CPP account at $334 billion – 53% of the CPP’s total asset pool.
We’ve explained a few times how, while that number might initially sound farfetched, once you understand that Alberta has contributed more than it’s taken out, almost every single year CPP has existed, while other provinces have consistently taken out more than they put in and technically *owe* money, it starts to make more sense.
But, predictably, the usual suspects were outraged.
Media commentators and policy analysts across the country were quick to dismiss the possibility that Alberta could claim such a significant portion. To them, the idea that Alberta workers had been subsidizing the CPP for decades seemed unthinkable.
The uproar prompted an emergency meeting of Canada’s Finance Ministers, led by now-former federal Finance Minister Chrystia Freeland. Alberta pressed for clarity, with Horner requesting a definitive number from the federal government.
Freeland agreed to have the federal Chief Actuary provide an official calculation.
If you think Trudeau should release the pension calculation, click here.
Four months later, the Chief Actuary announced the formation of a panel to “interpret” the CPP’s asset transfer formula – a formula that remains contentious and could drastically impact Alberta’s entitlement.
(Readers will remember that how this formula is interpreted has been the matter of much debate, and could have a significant impact on the amount Alberta is entitled to.)
Once the panel completed its work, the Chief Actuary promised to deliver Alberta’s calculated share by the fall. With December 20th marking the last day of fall, Alberta has finally received a response – but not the one it was waiting for:
“We received their interpretation of the legislation, but it did not contain a number or even a formula for calculating a number,” said Justin Brattinga, Horner’s press secretary.
In other words, the Chief Actuary did the complete opposite of what they were supposed to do.
The Chief Actuary’s job is to calculate each province’s entitlement, based on the formula outlined in the CPP Act.
It is not the Chief Actuary’s job to start making up new interpretations of the formula to suit the federal government’s agenda.
In fact, the idea that the Chief Actuary spent all this time working on the issue, and didn’t even calculate a number is preposterous.
There’s just no way that that’s what happened.
Far more likely is that the Chief Actuary did run the numbers, using the formula in the CPP Act, only for them – and the federal government – to realize that Alberta’s LifeWorks calculation is actually about right.
Cue panic, a rushed attempt to “reinterpret” the formula, and a refusal to provide the number they committed to providing.
In short, we simply don’t believe that the Chief Actuary didn’t, you know, “actuarialize” anything.
For decades, Alberta has contributed disproportionately to the CPP, given its higher incomes and younger population.
Despite all the bluster in the media, this is actually common sense.
A calculation reflecting this reality would not sit well with other provinces, which have benefited from these contributions.
By withholding the actual number, Ottawa confirms the validity of Alberta’s position.
The refusal to release the calculation only adds fuel to the financial firestorm already underway in Ottawa.
Albertans deserve to know the truth about their contributions and entitlements.
We want to see that number.
If you agree, and want to see the federal government’s calculation on what Alberta is owed, sign our petition – Tell Trudeau To Release The Pension Calculation:
Once you’ve signed, send this petition to your friends, family, and all Albertans.
Thank you for your support!
Regards,
The Free Alberta Strategy Team
Alberta
Ford and Trudeau are playing checkers. Trump and Smith are playing chess
By Dan McTeague
Ford’s calls for national unity – “We need to stand united as Canadians!” – in context feels like an endorsement of fellow Electric Vehicle fanatic Trudeau. And you do wonder if that issue has something to do with it. After all, the two have worked together to pump billions in taxpayer dollars into the EV industry.
There’s no doubt about it: Donald Trump’s threat of a blanket 25% tariff on Canadian goods (to be established if the Canadian government fails to take sufficient action to combat drug trafficking and illegal crossings over our southern border) would be catastrophic for our nation’s economy. More than $3 billion in goods move between the U.S. and Canada on a daily basis. If enacted, the Trump tariff would likely result in a full-blown recession.
It falls upon Canada’s leaders to prevent that from happening. That’s why Justin Trudeau flew to Florida two weeks ago to point out to the president-elect that the trade relationship between our countries is mutually beneficial.
This is true, but Trudeau isn’t the best person to make that case to Trump, since he has been trashing the once and future president, and his supporters, both in public and private, for years. He did so again at an appearance just the other day, in which he implied that American voters were sexist for once again failing to elect the nation’s first female president, and said that Trump’s election amounted to an assault on women’s rights.
Consequently, the meeting with Trump didn’t go well.
But Trudeau isn’t Canada’s only politician, and in recent days we’ve seen some contrasting approaches to this serious matter from our provincial leaders.
First up was Doug Ford, who followed up a phone call with Trudeau earlier this week by saying that Canadians have to prepare for a trade war. “Folks, this is coming, it’s not ‘if,’ it is — it’s coming… and we need to be prepared.”
Ford said that he’s working with Liberal Finance Minister Chrystia Freeland to put together a retaliatory tariff list. Spokesmen for his government floated the idea of banning the LCBO from buying American alcohol, and restricting the export of critical minerals needed for electric vehicle batteries (I’m sure Trump is terrified about that last one).
But Ford’s most dramatic threat was his announcement that Ontario is prepared to shut down energy exports to the U.S., specifically to Michigan, New York, Wisconsin, and Minnesota, if Trump follows through with his plan. “We’re sending a message to the U.S. You come and attack Ontario, you attack the livelihoods of Ontario and Canadians, we’re going to use every tool in our toolbox to defend Ontarians and Canadians across the border,” Ford said.
Now, unfortunately, all of this chest-thumping rings hollow. Ontario does almost $500 billion per year in trade with the U.S., and the province’s supply chains are highly integrated with America’s. The idea of just cutting off the power, as if you could just flip a switch, is actually impossible. It’s a bluff, and Trump has already called him on it. When told about Ford’s threat by a reporter this week, Trump replied “That’s okay if he does that. That’s fine.”
And Ford’s calls for national unity – “We need to stand united as Canadians!” – in context feels like an endorsement of fellow Electric Vehicle fanatic Trudeau. And you do wonder if that issue has something to do with it. After all, the two have worked together to pump billions in taxpayer dollars into the EV industry. Just over the past year Ford and Trudeau have been seen side by side announcing their $5 billion commitment to Honda, or their $28.2 billion in subsidies for new Stellantis and Volkswagen electric vehicle battery plants.
Their assumption was that the U.S. would be a major market for Canadian EVs. Remember that “vehicles are the second largest Canadian export by value, at $51 billion in 2023 of which 93% was exported to the U.S.,”according to the Canadian Vehicle Manufacturers Association, and “Auto is Ontario’s top export at 28.9% of all exports (2023).”
But Trump ran on abolishing the Biden administration’s de facto EV mandate. Now that he’s back in the White House, the market for those EVs that Trudeau and Ford invested in so heavily is going to be much softer. Perhaps they’d like to be able to blame Trump’s tariffs for the coming downturn rather than their own misjudgment.
In any event, Ford’s tactic stands in stark contrast to the response from Alberta, Canada’s true energy superpower. Premier Danielle Smith made it clear that her province “will not support cutting off our Alberta energy exports to the U.S., nor will we support a tariff war with our largest trading partner and closest ally.”
Smith spoke about this topic at length at an event announcing a new $29-million border patrol team charged with combatting drug trafficking, at which said that Trudeau’s criticisms of the president-elect were, “not helpful.” Her deputy premier Mike Ellis was quoted as saying, “The concerns that president-elect Trump has expressed regarding fentanyl are, quite frankly, the same concerns that I and the premier have had.” Smith and Ellis also criticized Ottawa’s progressively lenient approach to drug crimes.
(For what it’s worth, a recent Léger poll found that “Just 29 per cent of [Canadians] believe Trump’s concerns about illegal immigration and drug trafficking from Canada to the U.S. are unwarranted.” Perhaps that’s why some recent polls have found that Trudeau is currently less popular in Canada than Trump at the moment.)
Smith said that Trudeau’s criticisms of the president-elect were, “not helpful.” And on X/Twitter she said, “Now is the time to… reach out to our friends and allies in the U.S. to remind them just how much Americans and Canadians mutually benefit from our trade relationship – and what we can do to grow that partnership further,” adding, “Tariffs just hurt Americans and Canadians on both sides of the border. Let’s make sure they don’t happen.”
This is exactly the right approach. Smith knows there is a lot at stake in this fight, and is not willing to step into the ring in a fight that Canada simply can’t win, and will cause a great deal of hardship for all involved along the way.
While Trudeau indulges in virtue signaling and Ford in sabre rattling, Danielle Smith is engaging in true statesmanship. That’s something that is in short supply in our country these days.
As I’ve written before, Trump is playing chess while Justin Trudeau and Doug Ford are playing checkers. They should take note of Smith’s strategy. Honey will attract more than vinegar, and if the long history of our two countries tell us anything, it’s that diplomacy is more effective than idle threats.
Dan McTeague is President of Canadians for Affordable Energy.
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