gas pipe line

Source: ZE

Since Canada has one of the world’s largest oil sands projects (after Saudi Arabia and Venezuela), expected to pump out three million barrels a day by 2018 according to the western province of Alberta’s Government, it might come as a surprise that it is also a large importer of OPEC oil. In fact, Canada exports over 60% of its oil to the United States and it needs to import almost half of its oil from other countries to support its eastern provinces (CBC.ca). While the West is busy producing this energy source, the East has been relatively cut off from accessing that oil.

This paradox comes from the fact that in Canada we don’t have the infrastructure needed to get our Alberta oil to our Eastern provinces – and that problem is what has prompted TransCanada’s East Energy Pipeline proposal on August 1. With the future of the Keystone XL pipeline to the United States being up in the air and the British Columbia port to Asia also currently on hold, the Calgary-based company has offered a solution to create jobs, share oil, and keep the oil business flowing in Canada.

The West-to-East Pipeline Project at a Glance

The new TransCanada proposed project has a cost of $12 billion, would convert 3,000 km of existing natural gas pipeline, would add 1,400 km of new pipeline, would create 2,000 new construction jobs and a few hundred refining jobs for Canadians, and “would send 1.1 million barrels of oil per day from Western Canada to refineries and export terminals in Eastern Canada” (CBC.ca) – specifically to New Brunswick and Quebec. TransCanada is seeking approvals in 2014, hoping to see the first flows of oil to the East by 2018.

Why Canadians Need Canadian Oil

On one extreme end of the spectrum, QMI Agency editorialist Ezra Levant is pro-Canadian oil. He says, “it’s not just that Canadian oil is produced in a more environmentally friendly manner than OPEC oil; we also use the proceeds for peaceful purposes, treat our workers well and respect human rights. It’s like the difference between Canadian diamonds and African blood diamonds” (Freedom Oil). Levant also points out that we pay more for foreign oil since Canadian oil is discounted, often at $10-35 less than world prices.

Looking at his argument, it does seem to make sense to supply and sustain our country first – and reaping the side effects of saving money purchasing oil, creating jobs to build and maintain the pipeline, and to reduce our dependency on outside supplies. However, those aren’t the only points to consider.

Why Canadians Don’t Need Canadian Oil

First on the “Why Canadians Don’t Need Canadian Oil” list is the fact that this project will take billions of dollars to build a project for the transportation of a finite source. Other issues include: this non-renewable energy source can run out, energy prices and the world’s consumption of oil must remain high to make the pipeline worth it, regulatory hiccups at either New Brunswick or Quebec (or, most likely both) can add years to the end date, natural habitats and farmer’s land and fields may be displaced or harmed during the time of the build, and the fact that the construction jobs will be gone once the build is done. In addition to this, a focus on sun, solar, wind, and hydro energy have slowly been increasing to phase out Canada’s dependence on oil, gas, and coal for power generation. When you take these issues into consideration, purchasing what oil we need for the East Coast from OPEC seems like a very economically sound way to go.

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Figure 1: Wind (green) and Biomass (orange) renewable energy production trends in Canada. Source: AESO. Graph created by ZEMA.

When you take all of the above into consideration, it will be interesting to see which way Canada’s oil companies and provinces decide to go. The Prime Minister has already taken a back seat to the idea, stating that he will let the pipeline be a market-driven decision, not one mandated by the Federal Government (CBC.ca).

The value of data in the energy system will most likely play a huge role in making the final decision on this project. Global supply and energy prices coupled with local energy use and innovation will yield thousands of price points for analysis and forecasting. If your company is faced with this kind of data challenge, check out what our commodity and financial market data solution software, the ZEMA Suite, can do for you.