Constraints on oil pipelines put Carr on hot seat at conference
Investors and analysts have grilled both Canadian politicians and oil executives this week on pipeline projects, and Natural Resources Minister Jim Carr tried to soothe concerns over the issue Wednesday.
“The government of British Columbia doesn’t like the pipeline much,” Natural Resources Minister Jim Carr said Wednesday, adding that “the government of Canada is as committed to the project as it was the day we approved it.”
Pipeline constraints have been a theme for both Canadian and, to a lesser extent, Texan oil producers, at Houston’s CERA Week energy conference this year — a sharp contrast to last year, when Prime Minister Justin Trudeau attended and touted his government’s approval of new pipeline export projects.
In Canada, all of the oil export pipelines are full and producers are increasingly shipping their barrels on railway cars given pipeline operators are rationing space on existing lines. The situation has caused the Canadian oil producers to accept discounts as high as $30 per barrel for their oil.
In that context, Carr said his Liberal government remained committed to the project and other export pipelines. He also tried to soothe investors’ fears over the federal government’s overhaul of the National Energy Board, released last month.
“We think it’s better, it’s more streamlined and it means that good projects will get built,” Carr said.
Still, Canadian oil and gas executives here have spent much of their time fielding questions about how their businesses have been affected by stalled pipeline export projects.
Cenovus Energy Inc. president and CEO Alex Pourbaix said during a panel discussion Tuesday the cost of the large discounts for Western Canada Select to his company was $4 million per day.
Still, Pourbaix told attendees the Canadian energy sector was a stable place to do business relative to other heavy oil-producing regions because “the only issue that needs to get addressed is getting pipelines built.”
The issue was highlighted just as the conference kicked off this week, when the International Energy Agency released its five-year oil outlook on Monday and predicted Canadian oil supply growth would be restrained by full export pipelines leaving Canada.
“Last year, we were here. We were saying, ‘There’s good news for pipelines,’” IEA senior analyst Toril Bosoni said. “Now one year later we’re saying, ‘It’s not so certain.’”
She said the construction timelines of new pipelines — like TransCanada Corp.’s Keystone XL pipeline, Enbridge Inc.’s Line 3 replacement and Kinder Morgan Canada’s Trans Mountain pipeline expansion — were the biggest uncertainties weighing on the report’s outlook for Canada.
Suncor Energy Inc. COO Mark Little countered that view in an interview Tuesday, and said the situation in Canada will improve. “The pipeline isn’t built but we do view that certainty continues to increase with this. We’re seeing it with actions with the Alberta government. We’re seeing the resolve of the federal government,” Little said.
Suncor, he said, has also secured all the pipeline space it currently needs to move its oil out of Western Canada and to the U.S. Gulf Coast.
Still, he has indicated it would not proceed with new growth projects in the oilsands until additional export pipelines are built.