Canada expected to announce boost in oil exports to help ease energy supply crisis

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Natural Resources Minister Jonathan Wilkinson is expected to announce Canada’s plan to hike oil exports to help ease the global energy crunch exacerbated by Russia’s invasion of Ukraine one month ago, the Financial Post has confirmed.

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Wilkinson will make the announcement Thursday afternoon following a second day of meetings at the International Energy Agency’s (IEA) annual ministerial gathering in Paris. The announcement will include details of Canada’s response to international calls for increased energy production to replace Russian oil and gas, as first reported by Reuters.

Discussions between governments and industry about the security of energy supplies have ramped up in recent weeks as Moscow has faced crippling economic sanctions and global importers have come under increasing pressure to stop trading in Russian oil and gas. The IEA said Wednesday that oil markets could lose three million barrels per day (bpd) of Russian crude and refined products from April.

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During a trip to Brussels for an emergency meeting with NATO leaders, Prime Minister Justin Trudeau said Wednesday that Canada will deepen cooperation with its allies to improve the security of energy supplies and to make progress on a net-zero energy transition.

“A dedicated working group on green transition and LNG is being created to develop a concrete action plan on these matters, and our officials will meet this week to further discuss enhancing energy-related cooperation,” Trudeau said in a joint statement with the President of the European Commission.

Canadian energy firms have also been consulted by governments seeking potential solutions to the crisis.

North America’s largest pipeline company, Calgary-based Enbridge Inc., confirmed Wednesday that it has been in talks with governments.

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“At the moment, both our liquids and natural gas systems are at or near capacity but we’re exploring options that may be taken to provide more energy throughout North America and Europe,” the company said in a statement to the Financial Post. “That includes using export facilities on the Gulf Coast for crude and natural gas.

North American producers have so far been reluctant to increase output after years of pressure from investors to avoid costly expansion projects. A shortage of workers and equipment has also made it difficult for companies to ramp up production. And, in Canada, infrastructure constraints remain a barrier to increasing oil and gas exports.

“There’s not much more we can do right now,” said Peter Tertzakian, managing director of ARC Financial said in an interview this week. “We can’t do very much other than supply more oil to the US, and, indirectly, the US can export more to Europe. It’s an indirect contribution.

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“Our conventional oil and gas is basically level and is difficult to grow. Oilsands are not building any more facilities. There’s mild increases in production across the board, but not very much.”

Alberta Energy Minister Sonya Savage said she has heard from energy firms in the province that production could increase in the near term by another 200,000 to 400,000 bpd.

“With optimization programs and other ways they can ramp up production quite quickly,” Savage said in an interview.

“And if we can get infrastructure built, we can significantly increase production in the oilsands and even in the conventional sector, and we can be the solution. But we have to get the energy policy right — and the energy policy can’t only be about climate change, it has to be about energy security, reliability and affordability, too.”

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In its statement Wednesday, Enbridge said recent events have been a reminder that Canada has a role to play in improving energy security.

“We produce the most ESG-friendly energy in the world and we are committed to doing what we can to help stabilize the energy supply the world requires,” the company said.

The war in Ukraine has exacerbated existing global problems around limited output capacity.

Top OPEC+ producers Saudi Arabia and United Arab Emirates, which are rare among global producers in having surplus capacity, are not fully opening their taps and the IEA does not expect output rises from Canada, the United States and others to eliminate global undersupply.

The world is set for a supply deficit of 700,000 bpd in the second quarter of 2022, the IEA said.

Storage levels in OECD countries in January stood at their lowest levels since April 2014, it said.

With files from Reuters

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