Validation in Canadian oilpatch as world focuses on energy security, abandons Russian crude
Kyle Bakx
Kyle Bakx
MARCH 9,2022
Amid sky-high oil prices and increasing sanctions on Russian energy around the globe, some in the Canadian oilpatch are noticing a change in attitude toward their industry.
The U.S. and U.K. are banning Russian oil and the European Union is moving to end its reliance on Russian natural gas, following the country's invasion of Ukraine. The U.S. was importing about 500,000 barrels per day of oil and other petroleum products from Russia.
Canadian energy leaders say they could immediately replace between one-third to one-half of those volumes and move the oil south of the border by pipeline and rail. And that's now a possibility with the U.S. looking for a steady supply of more oil to lower prices and replace Russian barrels.
Canada can move crude to U.S., energy exec says
"There is capacity for us to be able to move more crude into the U.S.," said Suncor chief executive Mark Little, in an interview.
Little is in Houston, Texas, at CERAWeek, one of the largest energy conferences in the world, and an event he's attended in the past.
Amid sky-high oil prices and increasing sanctions on Russian energy around the globe, some in the Canadian oilpatch are noticing a change in attitude toward their industry.
The U.S. and U.K. are banning Russian oil and the European Union is moving to end its reliance on Russian natural gas, following the country's invasion of Ukraine. The U.S. was importing about 500,000 barrels per day of oil and other petroleum products from Russia.
Canadian energy leaders say they could immediately replace between one-third to one-half of those volumes and move the oil south of the border by pipeline and rail. And that's now a possibility with the U.S. looking for a steady supply of more oil to lower prices and replace Russian barrels.
Canada can move crude to U.S., energy exec says
"There is capacity for us to be able to move more crude into the U.S.," said Suncor chief executive Mark Little, in an interview.
Little is in Houston, Texas, at CERAWeek, one of the largest energy conferences in the world, and an event he's attended in the past.
© Kyle Bakx/CBC
Suncor chief executive Mark Little says the Canadian oilpatch can export more oil south of the border.
"If you go back a couple of years, I would say the conversation about Canada's role with the United States on energy was almost non-existent," he said.
"And the engagement with the Canadian marketplace, I would say was very, very low. I think there's more of a recognition of just how important Canada is."
Oil from the Canadian oilsands is the "most demonized oil in the world," said Daniel Yergin, an author and vice-chair of S&P Global, on Tuesday, because it has traditionally been a high-cost and high-emitting source of energy.
Overall emissions from the oilsands continue to rise, although the amount of greenhouse gases per barrel of oil has decreased over the years.
"I am seeing a big change," said Cenovus CEO Alex Pourbaix, in an interview.
"The only thing that I'm gratified by out of this [conflict in Ukraine] is that I think, energy security is getting the level of scrutiny that I think it deserved for many years."
"If you go back a couple of years, I would say the conversation about Canada's role with the United States on energy was almost non-existent," he said.
"And the engagement with the Canadian marketplace, I would say was very, very low. I think there's more of a recognition of just how important Canada is."
Oil from the Canadian oilsands is the "most demonized oil in the world," said Daniel Yergin, an author and vice-chair of S&P Global, on Tuesday, because it has traditionally been a high-cost and high-emitting source of energy.
Overall emissions from the oilsands continue to rise, although the amount of greenhouse gases per barrel of oil has decreased over the years.
"I am seeing a big change," said Cenovus CEO Alex Pourbaix, in an interview.
"The only thing that I'm gratified by out of this [conflict in Ukraine] is that I think, energy security is getting the level of scrutiny that I think it deserved for many years."
© Kyle Bakx/CBC
Daniel Yergin, left, walks on stage before moderating a panel on Canadian energy with Suncor CEO Mark Little, centre, and Cenovus CEO Alex Pourbaix, right, during CERAWeek by S&P Global.
Canada was one of the first countries to announce a ban on Russian crude, although it hadn't imported any of the oil in a few years.
Sanctions deliver huge blow to energy market
Up until recently, Russia has produced about 10 per cent of the world's oil supply. Economic sanctions, in addition to the direct sanctions on energy, are hampering the country's oil and natural gas exports.
The impacts to Russian energy is potentially the biggest physical disruption to the energy market in history, said Aaron Brady, an executive director with S&P Global.
Climbing costs at the pump
Many private companies such as oil traders, banks, shippers and energy companies are avoiding Russia oil because they don't want to run afoul of sanctions. They also are avoiding Russian oil because of their values and possible reputational risk.
Shell was criticized for buying a shipment of Russian oil last week after the invasion of Ukraine had begun.
"I think there is a degree of vindication," said Alberta Premier Jason Kenney, in an interview.
Canada was one of the first countries to announce a ban on Russian crude, although it hadn't imported any of the oil in a few years.
Sanctions deliver huge blow to energy market
Up until recently, Russia has produced about 10 per cent of the world's oil supply. Economic sanctions, in addition to the direct sanctions on energy, are hampering the country's oil and natural gas exports.
The impacts to Russian energy is potentially the biggest physical disruption to the energy market in history, said Aaron Brady, an executive director with S&P Global.
Climbing costs at the pump
Many private companies such as oil traders, banks, shippers and energy companies are avoiding Russia oil because they don't want to run afoul of sanctions. They also are avoiding Russian oil because of their values and possible reputational risk.
Shell was criticized for buying a shipment of Russian oil last week after the invasion of Ukraine had begun.
"I think there is a degree of vindication," said Alberta Premier Jason Kenney, in an interview.
© Kyle Bakx/CBC
Alberta Premier Jason Kenney says the U.S. would be foolish to source more oil from Venezuela or Saudi Arabia instead of Canada. He made the comments at CERAWeek by S&P Global in Houston on Tuesday.
"I feel like what we have been saying for years is now understood to be true," he said. "And that is, the world needs more liberal democratic energy and less conflict energy."
Many European countries are far more cognizant of the need to source oil and natural gas from stable, democratic countries, according to federal Natural Resources Minister Jonathan Wilkinson.
"In the aftermath of the terrible things that are happening in Ukraine, I think that is something that is going to continue going forward. I think that that is one of the lessons that the Europeans are taking from this," he said in an interview.
There has been a collective amnesia about energy security for decades, some experts say, but now the issue is a top priority.
"It's back on the forefront. It should have never left," said Ryan Lance, CEO of ConocoPhillips, while on stage at CERAWeek.
The oil and gas sector is the largest source of greenhouse gases in Canada, accounting for 26 per cent of total national emissions in 2019, according to Natural Resources Canada.
"I feel like what we have been saying for years is now understood to be true," he said. "And that is, the world needs more liberal democratic energy and less conflict energy."
Many European countries are far more cognizant of the need to source oil and natural gas from stable, democratic countries, according to federal Natural Resources Minister Jonathan Wilkinson.
"In the aftermath of the terrible things that are happening in Ukraine, I think that is something that is going to continue going forward. I think that that is one of the lessons that the Europeans are taking from this," he said in an interview.
There has been a collective amnesia about energy security for decades, some experts say, but now the issue is a top priority.
"It's back on the forefront. It should have never left," said Ryan Lance, CEO of ConocoPhillips, while on stage at CERAWeek.
The oil and gas sector is the largest source of greenhouse gases in Canada, accounting for 26 per cent of total national emissions in 2019, according to Natural Resources Canada.
TARSANDS
Stephanie Thomas
CTV News Calgary Video Journalist
Published March 8, 2022
As oil and gas prices soar and the United States bans imports of all Russian oil products, energy analysts fear it will be a challenge for Alberta's resource sector to respond quickly.
U.S. President Joe Biden announced the ban on Tuesday, calling it "another powerful blow to (Russian President Vladimir) Putin's war machine" while "Americans have rallied support the Ukrainian people."
Meanwhile, speaking at the CERAWeek conference in Texas on Tuesday, Premier Jason Kenney said Alberta is the natural answer for the current energy crisis.
“With the third largest proven and probable oil reserves on earth, 180-billion barrels-plus and one of the largest reserves of proven and probable natural gas reserves, that we (Alberta) are a natural answer to the challenge of global energy security," said Kenney.
Kenney also continued to call for the American government to revive the Keystone XL Pipeline project to bring Alberta oil to U.S. refineries.
Yet on Tuesday, TC Energy Corporation rejected that.
"The Keystone XL Pipeline Project was terminated and will not proceed," said Reid Feist, media relations specialist.
The Russian invasion of Ukraine last month has shifted global energy security and analysts suggest Alberta can be a "pillar" or stable supplier, but lacks time.
"You could argue (Alberta's energy resources) would contribute to greater global stability in the course, that's not where we're at today. In terms of this crisis, there is a lot of pressure for short-term responses and short-term solutions from the upstream sector, but there it will take a little bit longer for them to really respond to it," said Kevin Birn, a Calgary-based crude oil market analyst with S&P Global Commodity Insights.
Birn says the current high-price environment where the North American benchmark teeters to US$130 per barrel is not sustainable for the long-term, but shows strong demand for crude oil.
"We're seeing the world remains very much hydrocarbon-powered, and oil and gas is a fundamental pillar for quality of life in the medium term," said Birn.
Birn says Alberta produces a heavy sour crude that is refined in the American Midwest and Gulf Coast, and although production upstream within Canada could be ramped up -- there are major challenges for Alberta to meet the market gap by the exclusion of Russian oil.
He adds that transportation remains an issue, as pipeline and rail capacity from Alberta to the U.S. is limited.
In addition, Birn says the energy sector in North America has recently shifted to an energy transition, as producers are "looking at a long-term demand scenario where they do see renewables taking a greater share and potential for erosion of the demand (for oil) over the long term."
CLIMBING COST OF LIVING
The price at the pump has shocked Canadian drivers as a direct result of the Russian invasion of Ukraine and a Calgary-based energy retail analyst says it will continue to climb over the next few months.
Gasoline fuel prices have soared across the country to a national average of $1.80 per litre.
Gas prices are already 15-30 cents higher per lite since late February, and are expected to increase another eight to 10 cents in April with the start of the North American driving season, said Vijay Muralidharan, a consultant with Kalibrate, a company that collects gasoline price and consumption data.
"Technically, what you're seeing today in gasoline is what has happened in February ... So you're not going to see any abatement of gasoline prices for at least a month and a half, in my opinion," said Muralidharan.
WHERE ELSE COULD IT COME FROM?
Speculating that energy companies would look to the Middle East to purchase oil, Kenney encourage them to instead look to Albertan oil because, "a flight to Calgary is cheaper than a flight to Riyadh (the capital of Saudi Arabia)."
Kenney also promoted Alberta's energy resources as coming from a politically stable region compared to other oil producing regions.
Russia produces an estimated 10 per cent of crude and products used around the world.
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| BEFORE AND AFTER TARSANDS |
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