Trans Mtn., LNG Canada say projects are on track
Energy projects like an LNG Canada export terminal and the Trans Mountain pipeline expansion may face shortterm setbacks but the pandemic and oil price crash shouldn’t threaten their longterm viability, economists say.
Andrew Leach, an energy economist at the University of Alberta, said the long-term forecast for both natural gas and oil remains steady, even as some companies scale back workforces to meet safety protocols.
“I think the consensus amongst most people is that there isn’t a big impact of what we’re seeing right now beyond the timeline of the pandemic and the recovery,” he said.
Global oil prices recently plunged amid oversupply concerns as storage tanks near capacity while refineries are reducing output as economic activity slows during the pandemic. The low prices have forced some producers to cut production in Canada’s oilpatch.
Werner Antweiler, an energy economist at the University of British Columbia, said the oil industry is facing a “double whammy” of a global decrease in demand coupled with a Saudi Arabia-Russia price war. A recent agreement by OPEC and other countries to reduce production doesn’t go far enough to balance supply with falling demand, he said.
But pipelines face slightly different market forces than the producers who fill them. There may be increased pressure on pipelines as Canadian producers seek to get oil to markets at the best price possible, while the spectre of American protectionism could also increase the pressure to get Canadian oil to Asian refineries if U.S. ones becomes unavailable, Antweiler said.
Trans Mountain said in a statement that construction on the expansion project is progressing well at its terminals and along the right-of-way in B.C. and Alberta with COVID-19 safety measures in place.
Current oil prices don’t have a direct impact on the project, the company said. Its customers have made 15- and 20-year commitments for roughly 80 per cent of the capacity in the expanded pipeline. It’s still due to come into service in late
2022, the statement said.
The existing Trans Mountain pipeline operated at its maximum capacity for the first quarter of 2020, the company said.
LNG Canada has reduced its workforce to manage the risk of spreading COVID-19, director of corporate affairs Susannah Pierce said in a statement. But the company and its engineering procurement and construction contractor, JGC Fluor JV, continue to hit “critical construction milestones,” she said.
Antweiler said liquefied natural gas has a good longterm outlook because of the ongoing switch from coal to gas globally and the increase in demand for energy in Asia.