Alberta Oil: No Place to Go and No Potential for Private Investment without Major Changes to Federal Laws which Appear Remote



 Crude oil exports from Canada have continued to grow, reaching a record high of 4 million barrels per (MMb/d) in 2023. Crude oil exports amounted to 81% of the country's total crude oil production at that time. These exports were valued at $124 billion, representing 16% of Canada's total export value with the (U.S.) being the primary destination for Canadian crude oil, receiving approximately 97% of Canada’s crude oil exports in 2023 (https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2024/market-snapshot-almost-all-canadian-crude-oil-exports-went-to-the-united-states-in-2023.html). 

 

In 2024, approximately 1.29 MMB/d of Canadian refinery crude oil receipts were domestically sourced, equating to 74% of total refinery receipts. Canada’s reliance on crude oil imports to meet refinery needs has declined by roughly 50% to ~0.46 MMB/d in 2024 since peaking at ~0.93 MMB/d in 2004. This is primarily a function of the closures of import-dependent refineries in Eastern Canada, but also due to pipeline changes that have improved connectivity to domestic sources. Canada’s refining complex is predominantly designed to process lighter-grade crude oils and, as such, Canada’s heavy oil sands barrels are mostly exported to complex coking refineries in the US (https://www.capp.ca/wp-content/uploads/2024/03/Canadian-Consumption-of-Domestically-Produced-Crude-Oil-and-Natural-Gas.pdf).

 

However, Federal regulation and policies continue to impede oil and gas extraction and transport to the U.S., let alone refining domestically. On June 9, 2021, TC Energy Corporation announced it was terminating the Keystone XL project. Final costs to the government of Alberta are approximately $1.3 billion (https://www.alberta.ca/keystone-xl-pipeline-project). Alberta is hopeful that the current U.S. administration will renew its interests in pipelines with the province. However, there remains an emissions cap which requires oil and gas operations to reduce their emissions to 35% below where they were in 2019 (https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/oil-gas-emissions-cap.html). 

 

Given that the Quebec and British Columbia provincial governments are opposed to pipelines traversing over their respective jurisdictions, which effectively prohibit any means of conveniently and affordably moving product to overseas markets, the recent expressed interest of Prime Minister Carney in developing a port in Manitoba to use the Hudson's Bay to ship oil may be, in part at least, related to the only available option. However, such an option is a fantasy as such a port would require a massive investment into pipelines, more thqan currently constructed, mass on-site storage, and multiple billions of dollars for many specialized ice-breakers, which travel more slowly than tankers. Once clear of ice, these tankers would need to travel around the planet to reach intended market places at further great cost (https://pipelineonline.ca/brian-zinchuk-lets-get-serious-about-shipping-oil-from-hudson-bay/#/?playlistId=0&videoId=0). 

 

Given the large-scale revcenue of such sales of natural resources, it begs the question of how Canada can be an energy leader in the world if we cannot get product to the market reliably and efficiently. There may be other products on the horizon - but that is not today - and the Canadian economy suffers in the current climate (no pun intended).

 

Nicholas Cartel

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