Canadian oil producers are facing a pipeline crunch that could limit the industry’s vast development plans as early as 2015, but face a long and increasingly bitter battle to expand their capacity to ship crude to market.
The Canadian Association of Petroleum Producers (CAPP) issued a forecast Tuesday that oil sands production will double, to three million barrels a day, by 2020 and grow to five million by 2030 – which would make Canada one of the world’s top crude suppliers with a total of 6.2 million barrels a day.
But to enhance the "security of demand" needed by Canadian oil companies, the federal government is being urged to adopt a far-reaching strategy to diversify markets to Asia, including the possibility of a publicly owned "energy transportation corridor" through British Columbia to the coast.
In a report to be released Wednesday, the Asia-Pacific Foundation said governments in Ottawa and the producing provinces – along with industry – need to do a better job persuading other Canadians, including first nations, that they stand to benefit from expanding energy sales to Asia.
Western Canadian producers are already facing pipeline constraints, as booming light-oil production in the U.S. is added to lines that have traditionally be used only by Canadian producers.
That should ease if and when pipeline companies get approval and proceed with projects such as TransCanada Corp.’s Keystone XL and Enbridge Inc.’s proposed reversal of the Line 9 pipeline in Ontario to extend the market for domestic crude. Companies are also making greater use of rail cars to ship their crude.
But CAPP vice-president Greg Stringham said access to the West Coast is critical for producers to supply growing Asian markets. Enbridge is currently in regulatory hearings for the fiercely contested Northern Gateway pipeline that would have a terminus at Kitimat, B.C., while Kinder Morgan Inc. is planning to expand its TransMountain route to Vancouver, increasing it to 750,000 barrels a day from 300,000.
But all the new pipeline proposals would only add two million barrels a day of capacity, so additional projects would be needed to handle oil sands production. One official said Canada will have to look to Asia, rather than to the United States, where demand for imported crude is expected to fall.
Canada needs a national strategy that ensures benefits are spread across the country, environmental concerns are addressed, first nations are consulted as full partners and renewable energy industries are included in the push for Asian access, according to the report.
It envisages the kind of effort being pursued by Alberta Premier Alison Redford, who is pushing for a vaguely defined Canadian energy strategy.
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