With the global energy center of gravity shifting to North America from the Middle East — and the Bakken representing a focal point — Canada’s oil and natural gas wealth will continue to diminish unless export pipelines get built, said a new study by the conservative Fraser Institute.
The think tank said that for Canada to “realize the economic benefits of increased energy development, we must be able to access diverse markets. Pipelines like Keystone XL and Northern Gateway are a critical piece of that.”
Kenneth Green, the institute’s senior director, energy and natural resources and co-author of Risks to Canada’s Energy Security, said the U.S. strengths are “seen in its growing production of oil and natural gas, its vast reserves of coal, as well as ongoing reductions in gasoline consumption due to the use of domestic biofuels.”
“It is hard to overemphasize the impact the revolution in shale oil and gas is having on U.S. energy security,” he wrote.
An International Index of Energy Security Risk, IIESR, published by the U.S. Chamber of Commerce noted that the Keystone XL pipeline, while primarily designed to ship oil sands bitumen to U.S. Gulf Coast refineries, would also help boost U.S. production by offering an alternative route for Bakken crude by removing a bottleneck that could limit production.
The Fraser Institute study argued that the energy security of one country is inextricably linked to energy security abroad.
For instance, in the 1990s the growth in oil reserves reported in Iran, Iraq, Saudi Arabia and Venezuela led to sharply rising supply risks.
The large drop in risk reported in 2003 is almost entirely due to the addition of 175 billion barrels of Canadian oil sands reserves.
New infrastructure needed
“Clearly, Canada’s energy potential is enormous,” Green said. “But we need new infrastructure to transport our energy to diverse markets, bringing immeasurable benefits to all Canadians,” he said.
The study noted that Canada’s energy security is about average compared with other Organization for Economic Cooperation and Development nations, but it has the resources to improve its own security and can improve the security of other countries by expanding oil sands growth.
Green said that energy security for Canada equates to “free participation in global energy markets and capturing the economic benefits of increased energy development.”
“Today, the greatest risks to Canadian energy security are a by-product of U.S. policy, which has led to vastly higher U.S. production of oil and natural gas and decreasing gasoline consumption, stifling demand for Canadian petroleum products,” he said.
According to the IIESR, which compared the energy endowments, trade and risk policy factors of 25 large energy-consuming countries from 1980 to 2010, Canada ranks eighth in the world, with a score very close to the OECD average, and comes in one spot below the U.S.
—Gary Park
