Pipeline capacity needed east, west, south: Oliver

Issue will dominate the new year, says Natural Resources minister

Canada risks stranding its resource bounty unless it adds new pipeline capacity to the West Coast, eastern provinces and the U.S., says Natural Resources Minister Joe Oliver, who believes the issue will be one of the biggest items on his plate in 2013.

But there’s strong opposition from citizens, some governments and environmental groups over transporting oilsands crude and other petroleum via pipelines such as the proposed Northern Gateway project to the B.C. coast and Keystone XL in the United States.

A glut of oil and the inability to move it to market due to pipeline bottlenecks is resulting in large discounts for western Canadian crude.

The price spread is costing Alberta $8.5 million a day in royalties — or more than $3 billion a year — and the entire Canadian economy nearly $20 billion annually, say various estimates.

“It’s a real concern. It’s a growing concern,” Oliver said of the price spread, during a 2013 look-ahead interview with Postmedia News.

Oliver said he believes the Obama administration will soon approve the rerouted Keystone XL project. The pipeline would transport oilsands crude from northern Alberta to refineries on the Gulf Coast of Texas. The difficulty in moving North American crude to ports for shipping is causing it to trade at discounted prices compared to imports.

He also stressed the importance of a west-east pipeline system in Canada and for additional export capacity off the West Coast to move Canadian

‘We absolutely must be able to transport the resources to tidewater, and to do that, we need the infrastructure built.’

JOE OLIVER

Natural Resources minister

petroleum to Asian markets.

“The critical issue is to diversify the markets. If there was a game changer in 2012, it was a realization that diversification is utterly crucial,” Oliver added.

“We absolutely must be able to transport the resources to tidewater, and to do that, we need the infrastructure built — build the pipelines — and we’ve got to move not only west, but we’ve got to look at the east as well and hopefully the south also.”

Currently, a barrel of Western Canadian Select, which includes Canadian heavy conventional oil and bitumen crude, is worth slightly more than $60 — a discount of about $30 per barrel compared to the North American benchmark West Texas Intermediate (which is selling for about $92 US per barrel).

The gap is about $50 a barrel compared to the international Brent prices of approximately $112 US per barrel.

Some of the big banks have pegged estimated losses to the Canadian economy due to the price difference at $18 billion or more a year.

The situation comes as a recent report from the International Energy Agency said the United States — Canada’s main energy customer — will become the world’s top oil producer by the end of the decade and eventually be energy self-sufficient over the next few decades.

At the same time, Oliver notes 99 per cent of Canada’s oil exports and all of its natural gas exports are going to the U.S., a trend that must change if Canada is to truly capitalize on its abundant natural resources and capture world prices.

“If that’s going to continue, it means we’ve got resources stranded. There’s an enormous amount at stake. So working on that is crucial,” he added.