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Energy and environmental groups are reacting with alarm to a recent agreement between Canada and Alberta to build a new oil pipeline to the West Coast, questioning whether an overseas buyer will be found for the oil that could eventually flow through the pipeline.
Under the Alberta government’s proposal, the pipeline would cost between $35.2 billion and $43.7 billion, and the federal and Alberta governments would remain majority owners of the project. This is despite Premier Mark Carney’s previous promise, specified in the government’s memorandum of understanding with Alberta, that the pipeline would be privately financed.
“What we’re seeing here is that pipelines are being built for political rather than economic reasons, and that’s very concerning,” said Chris Severson-Baker, executive director of the Pembina Institute, an energy think tank that has worked for decades to decarbonize Canada’s oil industry.
“I think a big part of the reason for this deal is to try to address concerns that the Prime Minister has about national unity, which is that the pipeline is not a good economic decision.”
Watch | Canada and Alberta announce pipeline deal:
Carney and Smith agree on southern route for proposed West Coast pipeline
Premier Mark Carney and Alberta Premier Daniel Smith have agreed on a route through southern British Columbia for a new oil pipeline to Canada’s west coast.
Energy transition accelerates in Asia
Alberta Premier Daniel Smith’s push for the pipeline has symbolized a break between the province and Carney’s Liberal government in Ottawa, and last week’s agreement was a chance for the two sides to come together. However, the government was only able to bring one private company into the project, Calgary-based Pembina Pipeline Corporation (no relation to Pembina Institute), with a 10 per cent stake.
The company has not yet invested or committed capital for pipeline construction.
“There are simply no private companies interested in taking on this level of risk. They don’t see a future in oil sands production of that scale in Canada,” Severson-Baker said.
That’s because Asian countries, where Smith wants his oil to go, are rapidly transitioning to electric vehicles and green energy, reducing future demand for climate-warming oil.
China’s electric vehicle exports reached a record high in May this year, increasing by a whopping 49 percent compared to just a year ago, according to a new analysis from the widely cited UK-based energy research agency Enver.
Southeast Asian countries are importing these vehicles in record numbers, showing that the fuel crisis caused by the Iran war is spurring a switch to electrified transport across the region. According to the International Energy Agency, more than half of new cars sold in mainland China today are electric, and most are cheaper than their gasoline equivalents.
Oil demand will continue to rise in some regions, such as India and Africa, but will decline in high-income countries in Europe and North America. According to the IEA model, most of the decline in global oil demand will come from electric vehicles and greener electricity grids, but oil demand will increase from aviation, petrochemicals and other industries.
In a scenario where countries around the world continue to cut emissions and follow all climate change policies they have implemented or proposed to date, the IEA currently says oil demand will peak around 2030 and then gradually decline.
A solar power plant in Qinghai province in western China. China is building one of the world’s largest solar power generation facilities as it moves away from fossil fuels. (Ng Han Guan/AP)
And in China, demand for oil as a fuel has already peaked as the electric vehicle and clean energy boom continues, authorities say.
But the planned Alberta pipeline, which is expected to start construction as early as 2027 and be completed by 2034, could mean global demand for the oil is decreasing.
“We are starting to see evidence that the decline in global oil demand will actually happen even faster, so in theory by the time this proposed pipeline comes online, we are not looking at long-term investments in growth markets,” said Emilia Beliveau, energy transition program manager at the advocacy group Environmental Defence.
Pipeline will require new oil sands expansion
Smith said the new pipeline would transport more than 1 million barrels of oil to Asian markets and double oil sands production. But that would require building new oil sands mines in previously undeveloped areas, known as greenfield development, Severson Baker said.
But since the oil price crash in 2014, when oil companies turned to streamlining their current operations, the industry hasn’t undertaken any new major expansions. The Pembina Institute notes that these measures increased Canadian oil and gas production by more than 47 per cent from 2012 to 2023.
Syncrude oil sands mine north of Fort McMurray, Alta. Building a new oil pipeline to B.C.’s coast would require significant oil sands expansion to fill it. (Todd Collor/Reuters)
It is unclear whether oil companies will embark on new greenfield projects, given that they have largely been on hold for more than a decade. “At a time when the world is moving away from the use of transportation oil, companies are not investing in it because it is a high-risk long-term investment,” Severson Baker said.
He said Alberta and Canada may need to throw in more subsidies to convince companies to expand in the oil sands.
“In some way, it costs Alberta taxpayers and Canadian taxpayers money to force the oil sands business to do things that are not currently part of its corporate strategy.”
