Oil exports and Canada’s energy security

According to Premier Ed Stelmach of Alberta (A reminder of U.S. self-interest, editorial, 3 July 2010), “A good neighbour lends you a cup of sugar. A great neighbour supplies you with 1.4 million barrels of oil per day”. Perhaps, but some people might question the common sense of a neighbour who would give away essentials needed for the welfare and wellbeing of their own family. Yet this is what Canada is permitting with the growing export of non-conventional oil from the tar sands to the United States.

Oil (conventional, non-conventional, and natural gas liquids) from Canadian sources meets about 28% of Eastern Canada’s (that is, all provinces to the east of the Manitoba border) unrefined oil demand—the rest is imported from outside of Canada. A decade ago, this may not have been an issue; however, production from two of Canada’s major suppliers (Norway and the United Kingdom) has peaked. Although the loss of this supply is being made up by imports from countries such as Iraq, Angola, and Algeria, these countries cannot be considered secure suppliers as they exhibit considerable domestic and political stability risks.

Moreover, growing demand for oil from China and other non-OECD countries (not to mention the likelihood of greater demand for imports by the United States should President Obama’s six-month deepwater drilling embargo remain in effect) can be expected to put more upward pressure on world oil prices. This may be good news for oil exporting jurisdictions (yes, like Alberta) but it isn’t for oil importing jurisdictions (like Eastern Canada).

This is a question of Canada’s energy security—and can be discussed in terms of supply and infrastructure. On the supply side, Canada produces sufficient oil to meet its own needs, although supplies from Newfoundland and Labrador have peaked and will decline until about 2017, when the Hebron field is expected to begin production (by then, total production from Newfoundland and Labrador will be considerably below today’s production levels). Even without east-coast production, the tar sands could meet Canada’s oil demand; however, there is not the pipeline infrastructure to supply Western Canadian oil past Montreal to Atlantic Canada (the Portland-Montreal pipeline could be reversed to carry Western Canadian oil to Portland, Maine and then shipped north for refining to meet Atlantic Canada’s demand).

An energy superpower needs leaders who recognize that the present and future energy needs of the country must be put before the demands of its export market. For example, this past weekend it was reported that King Abdullah of Saudi Arabia has called for oil exploration to cease “in order to keep the earth’s wealth for our sons and grandsons”. Clearly, Canada’s leaders (and the Globe and Mail’s editorial staff) need to be reminded that domestic energy supply is in Canada’s self-interest.

Submitted to Globe and Mail, 4 July 2010. Unpublished