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
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.
Agriculture
P&H Group building $241-million flour milling facility in Red Deer County.
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P&H Milling Group has qualified for the Agri-Processing Investment Tax Credit program
Alberta’s food processing sector is the second-largest manufacturing industry in the province and the flour milling industry plays an important role within the sector, generating millions in annual economic impact and creating thousands of jobs. As Canada’s population continues to increase, demand for high-quality wheat flour products is expected to rise. With Alberta farmers growing about one-third of Canada’s wheat crops, the province is well-positioned to help meet this demand.
Alberta’s Agri-Processing Investment Tax Credit program is supporting this growing sector by helping to attract a new wheat flour milling business to Red Deer County. P&H Milling Group, a division of Parrish & Heimbecker, Limited, is constructing a $241-million facility in the hamlet of Springbrook to mill about 750 metric tonnes of wheat from western Canadian farmers into flour, every single day. The new facility will complement the company’s wheat and durum milling operation in Lethbridge.
“P&H Milling Group’s new flour mill project is proof our Agri-Processing Investment Tax Credit program is doing its job to attract large-scale investments in value-added agricultural manufacturing. With incentives like the ag tax credit, we’re providing the right conditions for processors to invest in Alberta, expand their business and help stimulate our economy.”
P&H Milling Group’s project is expected to create about 27 permanent and 200 temporary jobs. Byproducts from the milling process will be sold to the livestock feed industry across Canada to create products for cattle, poultry, swine, bison, goats and fish. The new facility will also have capacity to add two more flour mills as demand for product increases in the future.
“This new facility not only strengthens our position in the Canadian milling industry, but also boostsAlberta’s baking industry by supplying high-quality flour to a diverse range of customers. We are proud to contribute to the local economy and support the agricultural community by sourcing 230,000 metric tonnes of locally grown wheat each year.”
To be considered for the tax credit program, corporations must invest at least $10 million in a project to build or expand a value-added agri-processing facility in Alberta. The program offers a 12 per cent non-refundable tax credit based on eligible capital expenditures. Through this program, Alberta’s government has granted P&H Milling Group conditional approval for a tax credit estimated at $27.3 million.
“We are grateful P&H Milling Group chose to build here in Red Deer County. This partnership willbolster our local economy and showcase our prime centralized location in Alberta, an advantage that facilitates efficient operations and distribution.”
Quick facts
- In 2023, Alberta’s food processing sector generated $24.3 billion in sales, making it the province’s second-largest manufacturing industry, behind petroleum and coal.
- That same year, just over three million metric tonnes of milled wheat and more than 2.3 million metric tonnes of wheat flour was manufactured in Canada.
- Alberta’s milled wheat and meslin flour exports increased from $8.6 million in 2019 to $19.8 million in 2023, a 130.2 per cent increase.
- Demand for flour products rose in Alberta from 2019 to 2022, with retail sales increasing by 24 per cent during that period.
- Alberta’s flour milling industry generated about $840.7 million in economic impact and created more than 2,200 jobs on average between 2018 and 2021.
- Alberta farmers produced 9.3 million metric tonnes of wheat in 2023, representing 29.2 per cent of total Canadian production.
Related information
Addictions
B.C. addiction centre should not accept drug industry funds
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The British Columbia Centre on Substance Abuse. (Photo credit: Alexandra Keeler)
News release from Break The Needle
By Canadian Affairs Editorial Board
Data released this week brought the welcome news that opioid-related deaths in Alberta have decreased substantially since last year. Opioid-related deaths have also decreased in B.C., although not as dramatically as in Alberta.
While the results are encouraging, more work needs to be done. And both provinces, which have taken very different approaches to the drug crisis, need to understand how their drug policies contribute to these results.
Fortunately, B.C. and Alberta both have research centres devoted to answering this very question. But we are disheartened to see that B.C.’s centre, the British Columbia Centre on Substance Abuse, accepts funding from pharmaceutical and drug companies.
As Canadian Affairs reported this week, the B.C. centre’s funding page lists pharmaceutical company Indivior, pharmacy chain Shoppers Drug Mart and cannabis companies Tilray and Canopy Growth as “past and current funders of activities at BCCSU — including work related to research, community engagement, and clinical training and education.”
This funding structure raises major red flags. Pharmaceutical and drug companies benefit from continued drug use and addiction. And in a context where B.C. has favoured harm-reduction policies such as safe consumption sites and safe supply, the risk of conflicts is especially high.
Indivior is the producer and manufacturer of Suboxone, a drug commonly prescribed to treat opioid-use disorder. Canada’s drug crisis has driven a surge in demand for prescription opioids to treat opioid-use order, with the number of Canadians receiving Suboxone and similar drugs up 44 per cent in 2020 from 2015, according to the Canadian Centre on Substance Use and Addiction.
Indivior is also the subject of at least two class-action lawsuits claiming the company failed to disclose adverse health effects associated with using Suboxone.
In 2021, Shoppers Drug Mart made a $2-million gift to the University of British Columbia to establish a pharmacy fellowship and support the education of pharmacist-focused addiction treatment at the British Columbia Centre on Substance Use. A conflict of interest exists here as well, with pharmacies benefiting financially from continued demand for drugs.
Consider, for example, if B.C.’s centre produced research showing pharmaceutical interventions were not effective or less effective than other policy measures. Would researchers feel pressure to not publish those results or pursue further lines of inquiry? Similarly, would Indivior or Shoppers Drug Mart continue to provide funding if the centre published research in this vein?
These are not the kinds of questions researchers should have to consider when pursuing research in the public interest.
Subscribe for free to get BTN’s latest news and analysis – or donate to our investigative journalism fund.
In response to questions about whether accepting drug industry funding could compromise the objectivity of their research, the British Columbia Centre on Substance Abuse referred Canadian Affairs to their website’s funding page. This page states their research is supported by peer-reviewed grants and independent ethical reviews to ensure objectivity.
We would argue such steps are not sufficient, not least because conflicts of interest are a problem whether they are real or perceived. Even if researchers at the centre are not influenced by who is funding their work, the public could reasonably perceive the objectivity of their research to be compromised.
It is for this reason that ethics laws generally require officeholders to avoid both actual conflicts of interest as well as the appearance of conflicts.
It is also why the government of Alberta, in launching their new addictions research centre, the Canadian Centre of Recovery Excellence (CoRE), has taken steps to safeguard the integrity of its work. The government has imposed legislative safeguards to ensure CoRE cannot receive external funding that could be seen to compromise its research, a spokesperson for the centre told Canadian Affairs.
It would be difficult to overstate the importance of the work done by the B.C. centre, CoRE and other centres like it. It is imperative that governments of all levels and stripes have quality, trusted research to inform decision-making about how best to respond to this tragic crisis.
The B.C. government and British Columbia Centre on Substance Abuse ought to implement their own safeguards to address these conflicts of interest immediately.
This article was produced through the Breaking Needles Fellowship Program, which provided a grant to Canadian Affairs, a digital media outlet, to fund journalism exploring addiction and crime in Canada. Articles produced through the Fellowship are co-published by Break The Needle and Canadian Affairs.
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