A proposed $35-billion oil pipeline to the West Coast, backed by the federal and Alberta governments, signals Canada's willingness to produce and export more crude, industry insiders say. However, even as the deal reached by Prime Minister Mark Carney and Premier Danielle Smith appeared like an improbable milestone, some insiders and observers worried it may not be enough to get the mega-project across the finish line.
Industry Optimism and Caution
The one million barrel per day line to shipping terminals in British Columbia would give producers more options than selling to the U.S. at “discount” prices, said Paul Colborne, chief executive of Surge Energy Inc. “We’ve opened up a market,” said Colborne. “We now take another million barrels of our oil, and we have negotiating power to take it to China, India, Africa (or) Asia.”
Canada’s pipelines are largely routed southbound to American refineries. Del Mondor, who runs a privately held producer in Weyburn, Sask., said that if this pipeline is anything like Trans Mountain, it could mean that producers can fetch attractive prices. “Optionality is king. The ability for us to chase the highest price for our crude is critical,” said Mondor, chief executive of Aldon Oils Ltd.
Political and Financial Hurdles
Still, Mondor said political factors are stacked up against the project. The same issues that led to other pipeline projects getting shelved could derail this one, he said. “I’m giving this less than 50 per cent chance of happening.”
The federal and provincial governments formed a partnership to build a 1,200 kilometre pipeline to the Pacific Coast, with Calgary’s Pembina Pipeline Corp. controlling a 10 per cent stake and an option to double its position later on. Alberta Premier Danielle Smith said that her government submitted its pipeline proposal to the federal office that fast-tracks nation-building infrastructure projects. The proposed pathway would largely use the same route already carved out by the Trans Mountain pipeline, starting outside of Edmonton at Bruderheim, Alta., with a diversion near the end to a port at Roberts Bank, B.C.
Economic Impact and Uncertainty
Mark Parsons, the chief economist at the Alberta bank ATB Financial, said many questions remain, including who exactly is going to foot the bill for the pipeline. “We’re still not building it into our economic forecast,” said Parsons. “We just want to see a little bit more certainty that this is indeed going ahead.”
Parsons said that Canada grew its oil exports to Asia by $4 billion in 2025, and this pipeline would boost those exports headed across the Pacific Ocean. Capital spending in the oilpatch is half of the record highs reached in 2014, Parsons said. A new pipeline would allow for growth and more spending in an industry that hasn’t seen much greenfield expansion in a decade.
The deal, announced alongside a $4.6-billion data centre project, has been described as a “big day” for Alberta. However, the skepticism remains high, with many awaiting further details on financing and regulatory approvals before committing to the project.
