U.S., Canada Embrace Over Energy Security

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Researched by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--With nearly $30 billion more going to upstream production in Canada, Alberta's provincial government pleaded for closer ties to the U.S. for the sake of regional energy security.

U.S. President Joe Biden is returning home after his first visit to Canada since taking the oath of office in 2021. For Canadian Prime Minister Justin Trudeau, the visit was an opportunity to do more work on clean energy and clean technology.

"This will include securing and strengthening electric-vehicle and critical-mineral supply chains, and other areas to advance our collective energy security," he said. "Of course, an integrated approach means creating good middle-class jobs for workers on both sides of the border, and it will make our collective economic growth stronger and more resilient."

That plays to incentives outlined in the U.S. Inflation Reduction Act (IRA), which pegs parts of the energy transition to a made-at-home manufacturing base for electric vehicles (EVs) and their components.

For the Biden administration, the IRA represents "the single largest investment" ever in the energy transition, with $13 billion alone going to initiatives that support EVs.

"As a matter of fact, the single largest investment in all of human history," Biden told the Canadian Parliament. "And it's going to spur clean energy investments all over the world and explicitly include tax credits for electric vehicles assembled in Canada."

North America is lacking many of the minerals and materials necessary for the energy transition, leaving the bilateral relationship for now resting in large part on fossil fuels. That matters for Canada, which remains landlocked to North American trading partners.

"In 2022, Alberta surpassed Ontario and Quebec as the largest provincial exporter of goods to the U.S. at $182.5 billion (US$132.7 billion), with energy making up 85% of exports to the United States," Premier Danielle Smith said. "Alberta, by far, remains the single largest source of U.S. energy imports."

Alberta is home to the giant Athabasca heavy oil deposit, among the largest in the world. Total oil exports from Canada typically account for about 65% of the U.S. total, delivering far more supplies than OPEC leader Saudi Arabia.

According to the Canadian Association of Petroleum Producers (CAPP), upstream investments in oil and gas this year should reach $29 billion, an 11% increase over year-ago levels and the third straight year for an increase, should forecasts prove accurate.

"The year 2023 may be one of the most pivotal moments in time for Canada's oil and natural gas industry," said Lisa Baiton, the chief executive officer of CAPP. "With an emerging liquefied natural gas export industry, the expected completion of the Trans Mountain pipeline expansion, and billions of dollars in emissions reduction investments waiting to be unlocked, Canada is positioned to play a much larger role in providing responsibly produced energy resources to the world."

What's more, Alberta's government estimates that oil sand operators plan to spend $17.5 billion by 2030 to lower their emissions. As of 2020, methane emissions from the region have declined by about 44% from a 2014 baseline, putting Western Canadian producers well within reach of hitting their goal of 45% by 2025.

"Canada and the U.S. are each making significant investments to build our clean economies and grow the middle class," a statement from Trudeau's office read.

Biden, meanwhile, carried additional baggage to Canada in the form of the Willow oil project. The White House made a controversial decision to allow ConocoPhillips (NYSE:COP) (Houston, Texas) to drill two new wells at its 68,000-barrel-per-day (BBL/d) parcel in the National Petroleum Reserve-Alaska, which it acquired in the 1990s.

"This was the right decision for Alaska and our nation," said Ryan Lance, ConocoPhillips chairman and CEO.

Some reporters, however, pressed Biden on why he would cancel the Keystone XL oil pipeline and delay an environmental assessment of Line 5, part of the broader Lakehead oil pipeline system from Canada that runs through the Upper Midwest, while at the same time backing oil projects in U.S. states.

Nevertheless, Canada is pursuing the TransMountain expansion and a slate of LNG export projects planned for British Columbia. Those projects will cater to Asian markets, rather than the U.S., giving Canada stronger access to international markets.

Against the cries of hypocrisy, however, the two countries combined could represent a major export hub to both the Asian and European economies at a time when geopolitical issues are in the crosshairs of broader global trends in the energy sector. As nations realign in the wake of Russia's invasion of Ukraine, the North American energy pole will get a lift from cross-border cooperation between the U.S. and Canada.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).