MNI: Canada Years Away From New Pipeline Investor - Officials

Canada needs several years to rebuild trust in its regulatory system before any private investor emerges to back a new oil pipeline from Alberta to the west coast even with the Iran conflict improving its viability, current and former industry officials told MNI.

“Alberta is prepared to do that work until such time as there’s the regulatory certainty that a proponent would step in, and I think that’s likely still several years away,” said Ian Anderson, an adviser to the provincial government and former TransMountain pipeline expansion manager.

“You still need the market to respond, you still need the producers, the shippers who are going to commit to the pipe to be there, and those conversations are just starting,” he said in an interview Tuesday.

While former Goldman Sachs banker Mark Carney has lifted sentiment since coming to office last year, industry leaders are skeptical after Justin Trudeau's decade in power fed perceptions about delays. Anderson oversaw the TransMountain expansion that was nationalized after Kinder Morgan backed out and he sees only a long-term boost to Canada's fortunes from recent geopolitical turmoil.

“It’s going to take time as measured in years, if not decades, to fully become what we aspire to,” Anderson said at a Canada 2020 conference. 

THIRTY-THOUSAND-DOLLAR SNAILS

Enbridge executive Steve Elliott told the conference regulatory delays can cost hundreds of millions of dollars. He cited a smaller but telling example of conservation rules to protect an endangered snail that can cost CAD30,000 per animal. 

Oil and gas companies also need certainty beyond pipeline decisions, Canadian Association of Petroleum Producers President Lisa Baiton told MNI. “When you’re building large-scale long-dated assets and you need the investment capital do to that, you need that kind of policy and regulatory certainty that will make Canada not just North American competitive for global capital but globally competitive, and we’re not there yet,” she said.

Multiple projects are needed to meet demand from Asia and Europe, said Mark Cameron, a former research director in the prime minister’s office and a former Alberta deputy minister. 

“It really is about getting not just the three or four LNG projects we have, but another four or five LNG projects after that, and then the pipelines that would feed that, and getting at least one additional pipeline to tidewater,” said Cameron. He was also vice president for a group of energy companies known as the Pathways Alliance and is now with Bluesky Strategy Group. (See: MNI INTERVIEW: Canada Needs Broad Response To US Oil Threat)

TAKING IT ALL

Seeking new markets makes sense because there's little evidence the U.S. will revive the Keystone XL pipeline, Cameron said. He agreed with Anderson and Baiton about time needed to persuade investors. “Durability means dealing with what we call ‘stroke of a pen’ risk, that a future government can change the rules.”

If Canada gets its act together India's top diplomat Dinesh Patnaik told the conference his country is an eager buyer. “We just need to put in a place a system where we work with each other,” he said. “You tell me how much you want to sell, I will take all of it.”

That would narrow the discount Alberta heavy crude faces because of a glut for sale to U.S. refineries, Anderson said.

“As soon as you access global markets, you shrink that differential to global Brent pricing, and a producer is seeing the benefit of that today even with the expansion of TransMountain,” he said. “The U.S. will I think always be the number one choice, but we don’t want it to be the only choice.”