With Christmas a few weeks away, Santa and his reindeer are prepping for another worldwide tour of handing out gifts, and Canada’s oil and gas sector is hoping to find some presents underneath the tree this year.
This year has been one of the hardest on record for the battered and bruised industry, experiencing a once-in-a-lifetime global pandemic and a historic price collapse that saw thousands of people lose their jobs.
So with Christmas around the corner, the oil and gas sector has been writing its list of presents it wants to send to the North Pole. From being hopeful about President-elect Joe Biden, further development with Keystone XL and Trans Mountain pipelines, Canadian unity around pipeline products, and a potential COVID-19 vaccine and seeing a demand for oil and gas products, the sector has a big wish list.
President-Elect Joe Biden
In just over one month, Joe Biden will be inaugurated as the next president of the United States of America. Even with his $2 trillion energy plan to fight for climate change, saying one of his first acts will be to reverse President Donald Trump’s decision to back out of the Paris climate agreement and concern he could scrap Keystone XL, which could unearth a world of problems for Biden. He would not only be undermining a lot of U.S. investments in exports, but it could severely impact their global competitiveness, and potentially the relationship with Canada.
It will be important to keep an eye on the Senate, as that race is to be decided in January. If Republicans keep Senate, Biden could be in a quagmire. Also, energy’s transition to net-zero isn’t going to happen overnight, and it also won’t happen over Biden’s first term. Any regulations instilled by Biden would most likely be workable for the industry. The oil and gas industry in the U.S. is a large employer and source of tax revenue, not the least in New Mexico and Pennsylvania, two key wins for Biden during the election. It’s a difficult balance for Biden to strike with the sector, and shouldn’t be seen as all doom and gloom.
Keystone XL and Trans Mountain Pipelines
With construction now underway on the Alberta segment of Keystone XL, in which the Alberta government has invested $1.5 billion in equity investment in 2020, which is to be followed by a $6 billion loan guarantee in 2021, this project is important to Alberta and its access to international markets, and help attract new investment.
Over the next two years of construction, it’s expected there will be roughly 2,000 people hired, and in a year that has seen industry lay off thousands of people, jobs are a welcome sight to families across the province. It also adds economic activity along the construction route, especially in retail, hospitality, associated trades, and food services. The project is expected to contribute approximately $2.4 billion to Canada’s GDP, and generate $30 billion in tax and royalty revenues for current and future Albertans. In the face of a Joe Biden presidency and concerns over the project being axed, once the pipeline is operational, it will carry 830,000 barrels per day of crude from Western Canada to Gulf Coast refineries, helping to meet the demand of millions in North America.
Trans Mountain, approved in 2019 by the Government of Canada after being purchased for $4.5 billion in 2018, has an expected in-service date of December 2022 and would create a pipeline system capable of shipping 890, 000 barrels per day. It is expected that the twinning of the 1,150-kilometre long pipeline will generate $46 billion for the government and $73 billion for producers.
This is another project that will provide thousands of jobs for people and unlock global markets and investors for Canadian oil, and once the pandemic has cleared, it’s expected there will be a strong demand for oil and gas products. Seeing as how the pipeline would increase traffic off of B.C.’s cost from five tankers to 34 tankers a month, this could potentially put Canada in a good spot for getting its product to tidewater.
Canadian Unity on Pipelines
Pipelines, and the oil and gas sector in general, are divisive and polarizing topics in Canada. They have many on both sides who vehemently defend their position and stance, both with objectivity and subjectivity. When it comes to pipelines, its staunch defenders tout its myriad benefits of economic wellbeing and how it would help Canada on a global market and get one of its most abundant natural resources to billions around the world, and create jobs for thousands of Canadians. And in a struggling economy ravaged by a raging pandemic, jobs for families is a good thing.
The people who oppose pipelines bring up how pipelines are bad for the environment and what it does to the land and local ecosystems. Earlier this year, a tanker carrying Alberta oil travelled all the way down to the Panama Canal and up to New Brunswick, a 12,000 km journey. It’s hard to see how that journey is anywhere better for the environment than the Energy East pipeline would have been. And for the government, it is a tough position to be in. Not everyone will be pleased, no matter how projects go.
Regardless of where people stand, it’s a fact of the matter that oil and gas is still a commodity in high demand, and that will be exacerbated once the pandemic is over. It’s still going to be produced, and this presents a major opportunity for Canada, both from an economic standpoint and from a position of getting people back working.
The COVID-19 pandemic has taken no prisoners throughout the course of 2020. While it’s been a trying year devoid of much positivity, both Pfizer and Moderna announcing news on potential vaccines has caused an uptick in oil and gas prices, and those prices should continue to rise. A vaccine would be a welcome sight for the industry, which is slowly working on its recovery. Demand outlook has also improved, and that could also benefit Canada.
Much of the world’s activities and travels have been halted during the pandemic. This has people itching for a return to normal, and to power the world once again, we require oil and gas products to entertain this lifestyle.
While Canada’s oil and gas sector’s Christmas wish list isn’t long, it is hopeful for some presents to open on Christmas morning that would bring a smile to millions of people across the country.