Canadian Energy Looks Outside North America

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--The Canadian energy sector is looking at ways to insulate itself from the prospect of sanctions imposed by the U.S., its top trading partner, according to provincial leaders and energy sector executives.

U.S. President Donald Trump had threatened to impose stiff taxes on imports from Canada and Mexico, ostensibly in response to border security issues. Receiving modest assurances, the U.S. president recently said he would suspend the implementation of tariffs for about a month.

In the meantime, provincial and energy leaders continue to look at ways to buffer the Canadian economy against tariffs. Canada already has threatened to pull U.S.-made alcohol from its shelves and respond with tit-for-tat, dollar-for-dollar tariffs on U.S. goods.

Now, Canadian pipeline company Trans Mountain Corporation (Calgary, Alberta) is looking to expand its oil network that runs to the West Coast for exports. Recent expansions to the Trans Mountain crude oil pipeline from Alberta could open new trade arteries to Asia, as do liquefied natural gas (LNG) terminals in British Columbia.

Reuters reported Thursday that Jason Balasch, a vice president at Trans Mountain, said the line could be expanded for at least another 200,000 barrels per day (BBL/d) in oil-carrying capacity to bolster the export potential.

Right now, Canadian midstream networks are largely landlocked to North America. Previous expansions pushed the capacity on the 714-mile pipeline that runs from Alberta to about 880,000 BBL/d, though it accounts for only about 9% of the Canadian crude oil exports.

Over the four-week period ending January 31, Canada delivered 4 million BBL/d of crude oil to the U.S., a 10% increase over the same period last year and representing 60% of total U.S. crude oil imports.

Many U.S. refineries are designed to process the heavier type of crude oil found in Canada, and North American infrastructure is such that the downstream sector has few other alternatives but to continue with those imports.

According to Reuters, the Port of Vancouver also is taking steps to expand exports by installing navigational aids that would permit Aframax vessels to arrive at night, easing some of the bottlenecks from the current daytime-only shipments.

An Aframax vessel can carry up to 800,000 barrels, though port restrictions in Vancouver limit that to 500,000 barrels.

Elsewhere, Rich Kruger, the head of Canadian refiner Suncor Energy Incorporated (NYSE:SU) (Calgary), said his company is largely shielded from the tariff threat because about 65% of its production stays at home or is exported through Trans Mountain.

Suncor in December reported 488,000 BBL/d in refinery throughput and 105% refinery utilization.

Disputes over how to address the tariff threat have cost long-term Canadian Prime Minister Justin Trudeau his job. He announced in January that he would stand down once a new leader was selected, suspending parliament until March 24 for a vetting period.

His deputy, Chrystia Freeland, already had stepped aside by December after a row over how to handle Trump's tariff threats. Kruger at Suncor added that Trump has added a heavy layer of confusion to North American trade.

"I don't think anyone on the planet knows exactly what is going to happen on tariffs," he told Reuters.

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