Tariffs could force ‘rebalancing away’ from U.S. for oil exports: Cenovus
February 20, 2025
Cenovus Energy logos are on display at the Global Energy Show in Calgary, Alta
Cenovus Energy logos are on display at the Global Energy Show in Calgary, Alta
THE CANADIAN PRESS/Jeff McIntosh
The threat of U.S. tariffs on Canadian energy won’t affect planned spending by Cenovus Energy Inc., but the company says such levies may prompt a “rebalancing away from the United States” when it comes to where it ships its oil.
U.S. President Donald Trump’s plan to slap widespread tariffs on U.S. imports of Canadian goods is on hold until March. Trump had previously signed an executive order that would impose a 10 per cent tax on Canadian energy products, along with 25 per cent tariffs on all other goods.
Speaking on Cenovus’s fourth-quarter earnings call on Thursday, president and CEO Jon McKenzie said the tariffs could affect “so many of the variables that impact our cash flow,” including oil prices.
“But there’s also knock-on impacts on the price of condensate, the price of natural gas, which are all inputs to our business,” McKenzie told analysts.
He added U.S. refining margins and foreign exchange rates could also take a hit if the tariff threat comes to pass.
“So when you look at the spectrum of all the things that impact our cash flow, it’s really not clear to us who’s going to pay which portion of the tariff, as well as what the overall impact would be to the company,” he said.
“If we are in a world, unfortunately, in March where tariffs do come, we will watch those price signals and react accordingly.”
That could include a pivot when it comes to where oil products transported along the Trans Mountain pipeline are exported, said Geoff Murray, executive vice-president of commercial for Cenovus.
“I think we would see ... a rebalancing away from the United States and the balance to head globally,” he said.
There has generally been a 50/50 split between California and Asia for deliveries of oil transported along the pipeline, said Murray.
“Without tariffs, that continues unabated. Should tariffs show up, that would obviously look to an economic reason for rebalancing,” he said.
“We expect that would obviously drive as much volume as possible through Trans Mountain, perhaps beyond the contracted capacity, provided that volume can find a home out the dock, and then it would preferentially head globally, rather than to California.”
Asked if the tariffs would affect Cenovus’s spending plans for 2025, McKenzie said the company has already limited its capital spending to “fairly modest levels” and is in the process of completing a few major projects.
“I don’t think there’s anything on the tariff side that would change any of our operating plans this year or in the near future,” he said.
McKenzie highlighted milestones associated with a few of its projects in the fourth quarter, including the mechanical completion of the Narrows Lake pipeline.
The 17-kilometre pipeline connecting its Narrows Lake oilsands reservoir to its Christina Lake main processing facility is expected to result in up to 30,000 barrels per day of additional production from the site, starting in mid-2025.
Mechanical work was also completed on the concrete gravity structure and topsides for the West White Rose project off the coast of Newfoundland.
West White Rose, a multi-billion-dollar extension of the existing White Rose offshore oilfield, is now 88 per cent complete and on pace to produce its first oil in 2026, McKenzie said.
On Thursday, the Calgary-based company reported its fourth-quarter profit and revenue fell compared with a year ago as it saw lower oil and natural gas prices.
Cenovus said it earned $146 million or seven cents per diluted share for the quarter ended Dec. 31, down from $743 million or 32 cents per diluted share in the final three months of 2023.
Cenovus said its adjusted funds flow amounted to 87 cents per diluted share in its latest quarter, down from $1.08 per diluted share a year earlier.
Revenue totalled $12.8 billion, down from $13.1 billion a year earlier.
Total upstream production for the quarter amounted to 816,000 barrels of oil equivalent per day, up from 808,600 a year earlier. Downstream throughput amounted to 666,700 barrels per day, up from 579,100 in the fourth quarter of 2023.
Cenovus’s net debt at the end of 2024 was $4.6 billion, an increase of around $420 million from the previous quarter. It was also above the company’s target of $4 billion, a milestone it had previously reached in its second quarter.
McKenzie said the net debt increase reflected a weakened Canadian dollar, a temporary buildup in inventory of around 22,000 barrels per day, along with its share buyback program.
Sammy Hudes, The Canadian Press
This report by The Canadian Press was first published Feb. 20, 2025.
The threat of U.S. tariffs on Canadian energy won’t affect planned spending by Cenovus Energy Inc., but the company says such levies may prompt a “rebalancing away from the United States” when it comes to where it ships its oil.
U.S. President Donald Trump’s plan to slap widespread tariffs on U.S. imports of Canadian goods is on hold until March. Trump had previously signed an executive order that would impose a 10 per cent tax on Canadian energy products, along with 25 per cent tariffs on all other goods.
Speaking on Cenovus’s fourth-quarter earnings call on Thursday, president and CEO Jon McKenzie said the tariffs could affect “so many of the variables that impact our cash flow,” including oil prices.
“But there’s also knock-on impacts on the price of condensate, the price of natural gas, which are all inputs to our business,” McKenzie told analysts.
He added U.S. refining margins and foreign exchange rates could also take a hit if the tariff threat comes to pass.
“So when you look at the spectrum of all the things that impact our cash flow, it’s really not clear to us who’s going to pay which portion of the tariff, as well as what the overall impact would be to the company,” he said.
“If we are in a world, unfortunately, in March where tariffs do come, we will watch those price signals and react accordingly.”
That could include a pivot when it comes to where oil products transported along the Trans Mountain pipeline are exported, said Geoff Murray, executive vice-president of commercial for Cenovus.
“I think we would see ... a rebalancing away from the United States and the balance to head globally,” he said.
There has generally been a 50/50 split between California and Asia for deliveries of oil transported along the pipeline, said Murray.
“Without tariffs, that continues unabated. Should tariffs show up, that would obviously look to an economic reason for rebalancing,” he said.
“We expect that would obviously drive as much volume as possible through Trans Mountain, perhaps beyond the contracted capacity, provided that volume can find a home out the dock, and then it would preferentially head globally, rather than to California.”
Asked if the tariffs would affect Cenovus’s spending plans for 2025, McKenzie said the company has already limited its capital spending to “fairly modest levels” and is in the process of completing a few major projects.
“I don’t think there’s anything on the tariff side that would change any of our operating plans this year or in the near future,” he said.
McKenzie highlighted milestones associated with a few of its projects in the fourth quarter, including the mechanical completion of the Narrows Lake pipeline.
The 17-kilometre pipeline connecting its Narrows Lake oilsands reservoir to its Christina Lake main processing facility is expected to result in up to 30,000 barrels per day of additional production from the site, starting in mid-2025.
Mechanical work was also completed on the concrete gravity structure and topsides for the West White Rose project off the coast of Newfoundland.
West White Rose, a multi-billion-dollar extension of the existing White Rose offshore oilfield, is now 88 per cent complete and on pace to produce its first oil in 2026, McKenzie said.
On Thursday, the Calgary-based company reported its fourth-quarter profit and revenue fell compared with a year ago as it saw lower oil and natural gas prices.
Cenovus said it earned $146 million or seven cents per diluted share for the quarter ended Dec. 31, down from $743 million or 32 cents per diluted share in the final three months of 2023.
Cenovus said its adjusted funds flow amounted to 87 cents per diluted share in its latest quarter, down from $1.08 per diluted share a year earlier.
Revenue totalled $12.8 billion, down from $13.1 billion a year earlier.
Total upstream production for the quarter amounted to 816,000 barrels of oil equivalent per day, up from 808,600 a year earlier. Downstream throughput amounted to 666,700 barrels per day, up from 579,100 in the fourth quarter of 2023.
Cenovus’s net debt at the end of 2024 was $4.6 billion, an increase of around $420 million from the previous quarter. It was also above the company’s target of $4 billion, a milestone it had previously reached in its second quarter.
McKenzie said the net debt increase reflected a weakened Canadian dollar, a temporary buildup in inventory of around 22,000 barrels per day, along with its share buyback program.
Sammy Hudes, The Canadian Press
This report by The Canadian Press was first published Feb. 20, 2025.
By Tsvetana Paraskova - Feb 19, 2025
The heavy dependence on the United States for Canadian oil exports has rekindled talk about resuscitating previously abandoned Alberta-to-coast pipeline projects that would give Canada access to more markets.
Over the past decade, only one pipeline made it through all the protests.
With tariffs and trade war back on the table for Canada’s economy, politicians and pipeline industry executives say that the narrative has shifted.
The U.S. tariff threat was a wake-up call for Canadian policymakers that the federal and provincial governments may have too hastily scrapped over the past decade Alberta-to-coast pipeline projects that could have diversified Canada’s oil and gas exports.
Everyone in Canada agrees that energy exports are the biggest leverage the country has in a trade war with its neighbor to the south.
Canada supplies around 60% of all U.S. oil imports. The oil province of Alberta alone supplies 56% of all U.S. oil imports—twice as much as Mexico, Saudi Arabia, and Iraq combined, Alberta Premier Danielle Smith says.
But the heavy dependence on the United States for Canadian oil exports has rekindled talk about resuscitating previously abandoned Alberta-to-coast pipeline projects that would give Canada access to more markets.
Over the past decade, only one pipeline made it through all the protests. The Trans Mountain Expansion Project, after it was abandoned by Kinder Morgan and purchased by the federal government, tripled the capacity of the original pipeline to 890,000 bpd from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia.
For other projects, it’s all just talk for now. No company is officially proposing reviving any scrapped pipeline plan, but politicians outside of Alberta have started to realize that things could change as the rules of the game have changed.
There has been talk of the scrapped projects Energy East, which would have delivered oil from Alberta east to Ontario and Quebec shores, and of Northern Gateway, which would have run from north of Edmonton in Alberta to Kitimat on British Columbia’s North Coast.
These two projects were scrapped between 2016 and 2017. Back then, Canada’s federal government led by Justin Trudeau was rejecting oil and gas projects on environmental grounds. In addition, green activists’ opposition in provinces other than Alberta was killing off many attempts of Alberta-based oil producers and pipeline operators to have pipelines built to Canada’s shores—and not only those going straight south to the biggest refining centers in the U.S.
With tariffs and trade war back on the table for Canada’s economy, politicians and pipeline industry executives say that the narrative has shifted.
Earlier this month, Canada’s Industry Minister, François-Philippe Champagne, said that the country may need an Alberta-East Coast pipeline.
“Things have changed … you cannot be in the past,” Champagne told CTV in an interview on February 9.
“We cannot be dependent,” the minister said.
Canadians have increased their support for Alberta-to-coast pipelines. Public support to revive Energy East has jumped to 65% from 58% since 2019, with support in Quebec growing from 33% to 47%, a new poll from the non-profit Angus Reid Institute showed last week.
Northern Gateway (Alberta to B.C.) generates the support of a slight majority of Canadians, with one-quarter opposing it. Notably, Northern Gateway generates 55% support in British Columbia, with 32% opposition, the polling showed.
Among all Canadians, the majority, 63%, believe the economy would greatly benefit from the expansion of oil and gas pipeline capacity, according to the poll.
Compared to 18 months ago, Canadians are now also nearly twice as likely to emphasize economic growth as a key factor in deciding energy policy, with a corresponding decline in the importance of environmental concerns, a separate Angus Reid Institute poll found last week.
Canadian federal Natural Resources Minister Jonathan Wilkinson said earlier this month that Canada should consider a West-East pipeline as U.S. President Donald Trump’s tariffs threats exposed a “vulnerability” in Canada’s energy infrastructure.
“There are some vulnerabilities that we did not actually believe existed. We should be reflecting on the vulnerabilities and deciding whether there are some things we should do,” Wilkinson said.
Pipeline giants, however, are less enthusiastic—they had to cancel projects due to too much regulatory burden, opposition at federal and provincial level, and environmental campaigns against pipelines.
Enbridge, which had its Northern Gateway proposed pipeline scrapped by the federal government in the 2010s, says that Canada needs real change in many aspects of its regulatory and approval processes.
“For us to be willing to seriously consider reinvesting in a project like that, whether it's east or west or just west, we need to see real change on numerous fronts,” Enbridge’s president and CEO Greg Ebel said on the Q4 earnings call this month.
“We would need to see real legislative change at the federal and provincial government level that specifically identifies major infrastructure projects like Northern Gateway as being in the national interest and therefore legally required,” Ebel said.
Permitting changes and federal and provincial support for more energy would also help the potential revival of pipeline plans, the executive added, noting that there have been positive comments from Canada’s policymakers since the U.S. tariff threats.
“They're saying the right things, but it's going to take real actions, laws, regulation to attract the capital in our view,” Ebel concluded.
By Tsvetana Paraskova for Oilprice.com
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