Middle East Chaos Hands Canada a $65 Billion Gift
- Rising oil prices from ~$54 to over $86/barrel could generate an estimated C$90?billion in extra revenue for Canadian producers
- The oil price rally could turn Alberta's projected $10?billion deficit into a surplus.
- While Canada has untapped reserves and can increase output, insufficient pipeline capacity—especially to the west coast—hinders the ability to fully capitalize on the Middle East supply disruption.
At the end of February, the Alberta government released its draft budget for the year, forecasting a deficit resulting from low oil prices, set to extend over the next three years. Now, Canada—and Alberta specifically—are about to become some of the big winners from the oil price rally resulting from the Middle East supply crunch.
Canadian oil producers are set to get an additional revenue of some C$90 billion ($65.6 billion) from the rally, Enverus recently predicted, using modelling that showed for every $10 gain in oil prices, Canadian producers stood to see additional revenues to the tune of between C$25 billion and C$30 billion.
“$90 a barrel over the course of the year would be sufficient to wipe out, and probably turn into a surplus, what was going to be a $10-billion deficit,” one former adviser to the Canadian Prime Minister said earlier this month in comments on the global oil supply situation and its impact on Canadian oil revenues.
In fairness, Canadian crude has yet to reach $90 per barrel. However, it has gone up from around $54 per barrel at the end of February to over $86 per barrel at the time of writing, just like all the other benchmarks. Ninepoint Partners’ Eric Nuttall called the situation a unique opportunity for Canadian oil producers, noting the amount of yet untapped reserves of heavy crude that producers could bring into the market if the supply disruption extends further in time.
“The resource is definitely there. Producers are definitely capable of ramping up production to that level. And it’s just a question of responding to what is a time-bound opportunity,” the chief executive of TC Energy, Francois Poirier, said recently, as quoted by the Financial Times. The problem, however, is the lack of sufficient transport infrastructure to take the oil to customers.
“We would like to see the underlying regulatory environment get simplified, get streamlined and timelines accelerated, because that is what will be required to get capital to flow to Canada,” Poirier said, urging the federal government to implement “fundamental reform of existing regulations” on oil pipelines.
Canada sends almost all of its export oil to the United States. Recently, the industry has gotten more serious about finding more markets, to which end the Trans Mountain pipeline was expanded, doubling its capacity. As a result, China quickly became Canada’s second-largest oil client after the United States. South Korea, India, and Singapore have also become buyers of Canadian crude after the expansion of the Trans Mountain conduit.
Diversification of buyers, then, works. Now, however, the question is how fast Canadian producers can ramp up production in response to the crisis in the Middle East. The industry has been expanding production consistently, despite the growing burden of climate regulations. Last year, the average daily hit 5.19 million barrels, down from an all-time high of 5.44 million barrels daily in December 2024 but up from the 2024 average of 5.13 million barrels daily, according to the latest data from the Canada Energy Regulator. Still, the expansion cannot simply accelerate without an outlet for the additional crude—which is why calls for new pipelines to the west coast are going to intensify in all likelihood.
“This war is yet another screaming example of why it’s in Canada’s national priority and why the global oil market needs Canada to build a new 1 million-barrel-a-day pipeline,” Ninepoint’s Nuttall told the Financial Times. The publication went on to note recent research that calculated Canada could generate an additional C$31.4 billion in annual GDP over the next ten years if it builds a new pipeline with a capacity for 1.5 million barrels daily.
That additional GDP growth would translate into 1.1%, according to the research conducted by Studio Energy and ATB Financial. That 1.1% may seem modest, but it’s not too shabby for a country that saw its economy grow by a rather modest 1.7% in 2025—the slowest GDP growth pace since 2020, according to Yahoo Finance.
“New energy infrastructure doesn't yield just a marginal gain for Canada's economy — it's a structural shift that will pay ongoing export dividends,” the chief economist of ATB Financial, Mark Parsons, said. “Expanding our export capacity would fundamentally improve our national economic health and global standing at a time when Canada needs it most.
Building a new pipeline, however, is easier said than done. For all the Prime Minister’s talk of the new government’s pivot towards a more pragmatic view on energy, opposition to new energy infrastructure could interfere with plans for international expansion. The latest evidence: opposition towards a proposed pipeline from Alberta to the west coast that PM Carney said the federal government would exempt from climate regulations.
Canada certainly has the capacity to become a more prominent international player in oil markets. Whether it can realize its potential in this respect, however, remains to be seen, depending on the federal government’s genuine interest in energy expansion
By Irina Slav for Oilprice.com
Canada’s IEA supply pledge faces oil sands production hurdles
The Canadian government’s promise to boost oil supply by 23.6 million barrels in the coming months faces significant hurdles because of the industry’s seasonal production cuts for maintenance, a scarcity of pipeline space and the looming threat of wildfires.
The International Energy Agency on Thursday confirmed that Canada’s commitment toward a global initiative to supply 400 million additional barrels would come from production increases. The country would be the third-largest contributor to the IEA’s program, with the additional crude equal to about 130,000 extra barrels a day if rolled out over six months.
But Canadian oil companies have been planning to take more than 300,000 barrels a day of production offline for maintenance in the spring and 400,000 barrels in the fall, Taylor Lee, vice president of upstream research at Rystad Energy, said at a conference in Calgary this week.
In order to get more crude out fast, they would have to put off that work, which they typically have locked in because of long planning times. Some new projects are set to begin production this year, including an offshore oil play off the coast of Newfoundland owned by Cenovus Energy Inc., but they’re not quite ready.
“Maybe in the max case scenario, you could get 200,000 barrels per day, but through deferral of maintenance,” Lee said. “These maintenance and deferral periods involve long lead times. Most of these companies have their budget set.”
So far, none of the major Alberta oil sands companies, including Cenovus, Suncor Energy Inc., Canadian Natural Resources Ltd. or Imperial Oil Ltd., have announced plans to postpone or scale back maintenance. Emails and phone calls to the companies to ask about turnaround delays were not returned.
Production in Alberta, the source of about 85% of Canada’s oil output, falls an average of 5.7% in the second quarter versus the first quarter, with May being the month when output is most often at its lowest, according to Alberta Energy Regulator data.
Federal Energy Minister Tim Hodgson announced the country’s contribution last week. The 32-member IEA made the move in a bid to address a near-total shut down of oil exports through the Strait of Hormuz, where about 20% of global crude flows.
As one of the world’s largest crude exporters, Canada holds no strategic petroleum reserve. The country produces more than 5 million barrels a day.
With West Texas Intermediate soaring to nearly $100 a barrel, companies have every incentive to run major oil sands sites at maximum production, but higher output doesn’t mean they could access export pipelines.
Enbridge Inc. has been rationing space on its Mainline, the largest oil export conduit. While the Trans Mountain pipeline has some room, it has run at as high as 96% capacity in recent months and could exceed that as Asian buyers look for alternatives to Middle East oil.
Shipping crude by rail isn’t currently economical due to the price differences between destinations, according to Martin King, RBN Energy’s managing director of North America energy market analysis.
“There’s not really room on the pipe, and if you’re going to put it on rail, the differentials right now would have to be more attractive and they’re not attractive enough,” he said. “So it’s a little bit of a mystery from where this crude is supposed to originate and how it’s supposed to get to market.”
The Canadian Association of Petroleum Producers trade group said new pipelines would be required for meaningful new oil and gas production growth. “There is very minimal short‑term ability for Canadian producers to further increase production in response to potential supply disruptions arising from the conflict in the Middle East.”
Oil sands producers regularly plan what are called turnarounds to shut equipment and repair machinery. Turnarounds this spring include major work on Suncor’s Firebag in-situ oil sands site starting in April that will cut output by 85,000 barrels a day for the second quarter, according to the company and a local union.
Work on the Suncor Base Plant mine upgrader will reduce output of bitumen and synthetic crude by a combined 85,000 barrels a day in the same quarter. Additional downtime is planned at Cenovus’s Foster Creek site, at Suncor’s Fort Hills mine and Imperial’s Kearl mine.
Repairs on Suncor’s majority-owned Syncrude upgrader, planned for March through May, were pushed back until August due to an unrelated breakdown, Bloomberg News reported last week.
Another potential challenge are wildfires that tend to erupt in oil-producing regions of northern Alberta. Last year, three major oil sands in-situ well sites, accounting for about 350,000 barrels a day of production, were briefly shut due to a blaze near Cold Lake.
Some projects that are set to open this year could help fulfill Canada’s goal. New wells are being added to Cenovus’s Foster Creek, and International Petroleum Corp.’s Blackrod project in the oil sands will start producing crude this year.
And off the coast of Newfoundland, the Cenovus majority-owned West White Rose project is slated to open in the second quarter and ramp up to 80,000 barrels a day by decade’s end.
(By Robert Tuttle)
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