OPINION: Alberta’s oil problem is Canada’s problem – by Derek Burney (Globe and Mail – November 26, 2018)

https://www.theglobeandmail.com/

Derek Burney was Canada’s ambassador to the United States from 1989 to 1993 and served as a director of TransCanada Corp. from 2005 to 2017.

Alberta’s energy sector is hurting severely but few in the rest of Canada seem to care. What had been a locomotive for growth both in the province and the country is reeling under the combined pressure of collapsing oil prices and policy paralysis. What limited amounts of oil Alberta is able to export sells at roughly US$13 per barrel, 40 per cent below the world price and well below the costs of production.

With world prices at US$40+ the lost revenue from the “Canadian discount” is about US$100-million per day or US$36-billion per year. Cuts are being implemented by energy producers on capital spending, on work forces and on production and are prompting demands by some for OPEC-style production quotas that would help stabilize the market.

All this at a time when global demand for oil and gas continues to grow. Oil production in the United States alone has increased by two million barrels a day, to 11 million, which, along with increased global production, is squeezing Canadian supply even further. Transportation costs, especially by rail, for lengthy supply chains are an additional burden.

The major problem is the chronic lack of pipeline capacity in Canada that would enable shipments to markets south, east and west of our borders. Plans have either been delayed, discarded or rejected outright by policy gridlock in Ottawa, regulatory delays and erratic, judicial activism.

The only plan that is still alive is the extension of the Trans Mountain line in British Columbia. When the owner (Kinder Morgan) backed away because of political and regulatory uncertainties, the government nationalized the project at a cost of $4.5-billion to taxpayers. Yet, there is still no guarantee that this pipeline will ever be built.

For the rest of this article: https://www.theglobeandmail.com/opinion/article-albertas-oil-problem-is-canadas-problem/

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