The Canadian Association of Petroleum Producers estimates the country’s combined conventional and oil sands production will climb from 3 million barrels per day in 2011 to 4.7 million bpd in 2020, 5.6 million bpd in 2025 and 6.2 million bpd in 2030.
That would elevate Canada to one of the world’s top crude suppliers and achieve Prime Minister Stephen Harper’s cherished goal of create a “global energy superpower.”
If ….?
And the biggest factor in the “if” equation is whether the pipeline crunch, resulting partly from acrimonious and protracted battles over plans to start shipping oil sands crude to the Texas Gulf Coast, Eastern Canada and Asia, can be resolved.
A looming showdown has stemmed from various stakeholder groups, many of them ready to take whatever action they can to block means of oil sands production and transportation.
“Simply put, when do the external benefits of collective action outweigh individual interests and concerns and how can one construct the collective action framework in a way that minimizes risks, maximizes public gains and appropriately shares the benefits of invoking the national interest?” asked a new report from a joint task force of the Asia Pacific Foundation of Canada and Canada West Foundation, two independent, not-for-profit research groups.
Asia relationship the focus
With its focus on how to build an energy relationship with Asia, the task force said the “potential benefits to Canadians from diversifying our trade towards Asia are enormous, but they are accompanied by real and perceived risks that may be better addressed through collective action rather than through a series of uncoordinated private sector initiatives.”
To that end, the Canadian government should consider a publicly created, privately run “energy transportation corridor” to the British Columbia coast, opening tanker routes to Asia, to answer what oil producers say is an “urgent need for additional transportation infrastructure,” the task force recommended.
The study said the federal government needs to overcome fierce opposition if it hopes to build markets for oil sands crude in Asia, along with Eastern Canada and the Texas Gulf Coast.
Even the new proposals by Enbridge and Kinder Morgan to add a combined 975,000 barrels per day of pipelines to tanker ports on the Pacific Coast, along with projects for North America, would add only 2 million bpd of capacity, far short of CAPP’s long-term projection.
Call for ‘collective action’
With all of the pipeline additions encountering fierce opposition from environmental and aboriginal interests, it is time to put an end to a “project-by-project approach,” said task force co-author Kevin Lynch, vice chairman of the Bank of Montreal.
If Asia, where “almost all energy growth is going to come from non-OECD countries,” holds the key to the future of Canadian oil production, Canada must decide how it will “increasingly access those markets,” he said.
The task force pressed for “collective action, rather than a series of uncoordinated private sector initiatives” to establish the energy transportation corridor that would be launched by governments, regulated as a public utility and operated by the private sector.
It said the “potential benefits to Canadians from diversifying our trade towards Asia are enormous” and outweigh individual interests and concerns, placing an energy delivery system in the same “national interest” category as the St. Lawrence Seaway, the TransCanada highway system, national ports and airports.
CAPP said the forecast of rising crude oil production in Western Canada “has resulted in increased awareness regarding the potential for pipeline constraints,” and avoiding those barriers “is essential to a well-functioning crude oil market” as producers are forced to look beyond their largest traditional market in the U.S. Midwest.
Short-term use of rail
The industry’s leading lobby group, whose member companies account for 90 percent of Canada’s oil and natural gas production, CAPP said that although pipelines will remain the dominant mode of oil transportation, the use of rail is expected to increase sharply over the short term.
Completing new pipelines from growing conventional, oil shale and oil sands production will take years to complete, while new rail cars can be introduced within about a year and added in small increments, CAPP said.
It said rail cars handled about 5.73 million barrels of fuel oils and crude in March, compared with 3.64 million barrels in March 2011.
CAPP said that based on contractual commitments underpinning pipelines to the Texas Gulf Coast, Western Canada producers could deliver at least 1.1 million bpd into that market by 2020, while demand for Western Canada crude in the U.S. Midwest should grow by 470,000 bpd over the period to 2030.
In addition Western Canadian producers could compete for market opportunities with refineries in California and Washington, it said.
