HOUSTON — 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 Ottawa’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 — from analysts, investors, Canadian and American reporters — 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 currently 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 to the U.S. Gulf Coast, 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.
Enbridge president and CEO Al Monaco said some progress is being made.
“I would have to say it’s frustrating, however, let’s not forget that we (as an industry) have been successful at putting projects into the ground,” Monaco said of delays to his competitor’s project, the Trans Mountain pipeline expansion.
“We’ve built a lot of new capacity out of Western Canada in the last decade but it’s harder, it takes longer – that’s our job,” Monaco said.
Mark Little, Suncor Energy Inc.’s chief operating officer, said some of the pessimism on Canadian pipelines is overblown and that the situation will improve.
“The pipeline isn’t built but we do view that certainty continues to increase with this (issue),” he said in an interview Tuesday, referring to Kinder Morgan’s Trans Mountain expansion through British Columbia. “We’re seeing it with actions with the Alberta government. We’re seeing the resolve of the federal government.”
Suncor 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, Little said.
Despite Suncor’s optimism, the company has indicated it would not proceed with new growth projects in the oilsands until additional export pipelines are built.
“We want to see the certainty of the pipelines going in before we start sanctioning a bunch of growth,” Little said.
“It’s not in our shareholders’ interest to sanction growth and then find out we have no way to move it except by rail — that’s not going to be good for the economics of it,” Little said, referencing the increase in oil-by-rail shipments out of Western Canada since the end of 2017.