(Calgary) Canada’s oil producers could immediately increase their exports to the U.S. by some measure, industry watchers and analysts say, but whatever they could supply in the short term would not be enough to fill the void left by Russia.
Updated yesterday at 5:55 p.m.
Following U.S. President Joe Biden’s decision to ban the import of Russian energy products, some on Tuesday called for a greater role for Canadian oil and natural gas.
In Houston, Texas, where he was attending the CERAWeek international energy conference, Alberta Premier Jason Kenney said he was spreading the message that his oil-producing province is ready and willing to help the United States meet its energy needs.
“Instead of replacing oil from Russia with oil from Saudi Arabia, Iran and Venezuela, work with us,” Kenney tweeted on Tuesday. “Alberta is the solution. »
In recent days, Mr. Kenney has also called on Mr. Biden to reinstate approval for the Keystone XL pipeline project, which the US president canceled shortly after its inauguration, in order to increase Canadian oil exports to the United States. south of the border.
According to data from the United States Energy Information Agency, the United States imported nearly 700,000 barrels per day of crude oil and petroleum products from Russia in 2021.
Canada was, however, the top exporter to the United States in 2021, shipping nearly 4.3 million barrels per day.
Tristan Goodman, president of the industry group of the Association of Explorers and Producers of Canada, said the country has the ability to increase that number immediately, either through existing pipeline networks or using crude shipments by rail.
“There is an immediate ability to add some degree of production, and I really mean immediate – it’s a matter of weeks or months. It will be a small amount, but it will be noticeable,” Goodman said.
However, Mr. Goodman notes that due to the underinvestment of recent years in pipeline infrastructure and in the Canadian energy sector as a whole, the maximum Canada could expect to supply would be 400,000 barrels per day, “hopefully”.
“Can we help? Yes. Will this be the miracle solution to replace all Russian crude production destined for the United States? No,” he asserted.
On Tuesday, the White House said it had already committed to releasing more than 90 million barrels of its strategic reserves in the current fiscal year, as well as an emergency sale of 30 million barrels last week.
Members of the International Energy Agency also agreed to a collective release of an additional 30 million barrels.
Kevin Birn, a fellow at the Canadian Global Affairs Institute and chief Canadian oil market analyst for IHS Markit, said the immediate need in the United States would likely be met by stocks, strategic oil reserves and member countries. of the Organization of the Petroleum Exporting Countries (OPEC).
“Canada is capable of producing a lot more oil, but it just won’t be able to be the first to respond to that,” Birn said. “To increase supply consistently, Canada would need time. »
“A real challenge”
While Canadian oil sands producers have operated near full capacity so far in 2022, they may consider postponing scheduled maintenance projects this spring in a bid to increase production and take advantage of record prices, said Richard Masson, a researcher and energy expert at the University of Calgary’s School of Public Policy.
“But oil sands projects don’t easily scale up production – it takes time,” Masson noted.
Where the industry can move quickly, Masson said, is in conventional drilling. But even then, the significant labor shortage that has plagued the industry this year may make it difficult to add rigs and drill more wells quickly.
“In practice, it will be a real challenge,” he said. We just don’t have the supply chains to deliver that quickly. »
In recent years, oil producers in Canada and around the world have focused on paying down debt and increasing shareholder dividends, and investors have little appetite for major capital projects or expansion of the industry, added Mr. Masson.
“We had a bunch of years where we just didn’t invest a lot, and that’s why the price was so high, even before [l’Ukraine] “, he underlined.
“It’s not like there’s a whole lot of capacity available anywhere, so turning on the tap now is going to be really difficult. »