Does Canada have the capacity to replace oil and gas imports from Russia?

By Bruce Lantz

Led by its photo-op-oriented leader, Canada is in danger of throttling an industry which is largely responsible for the nation’s favourable position on the world stage.

Prime Minister Justin Trudeau, no stranger to taking centre stage, has told the world Canada will be a leader in the battle against climate change, citing increased taxation of carbon products (April 1 saw a 15% jump in the carbon tax) and, as gasoline prices rise, at home he is pushing for – and supporting with taxpayers’ dollars – the creation of a mass market for electric vehicles (EVs).

Yet while the world wrestles with record inflation rates, a war between Russia and the Ukraine, and a myriad of other problems including oil shortages, Canada sits on the third-largest oil supply in the world but relies heavily on imports because the federal government fails to offer the resource industry its much-needed support and in fact throws down roadblocks to the industry at every turn. Yet our neighbours the United States are releasing about a million barrels of oil per day from their reserves to help offset rising gasoline prices, and have increased LNG exports 16% to a record level.

Canada’s oil and gas industry is in a sadly unique position: Despite its record of heightening economic performance nationwide, providing jobs for taxpaying citizens and profits for taxpaying companies, and its potential to do much more worldwide, it is widely regarded as a pariah by the very government that has in the past relied on its income. This at a time when the federal government is planning to spend C$9 billion on climate and green initiatives and grants to the private sector to build EVs, C$4 billion to municipalities to build new homes, C$2.7 billion more toward the building of affordable homes – even C$12 billion on defense spending.

On the other side of that coin lies the federal debt, which will reach a record C$1.25 trillion in the next fiscal year, and the nation’s position as last in the world in real gross domestic product growth per capita.

Trudeau has taken to the world stage to tout Canada’s climate leadership, somehow ignoring the fact that the nation has missed every emissions reduction goal it has ever set but gleefully mandating the oil and gas industry to cut emissions by 42% by 2030. Ottawa says that goal can be reached by cutting methane output and new technologies such as carbon capture and storage. That target is unrealistic, says the Oil Sands Pathway Alliance, a group of Canadian oil and gas companies which is aiming for a 32% reduction in emissions by 2030.

“The Pathways Alliance has been clear that the interim goals set for our industry must be flexible, realistic and achievable,” said Alliance interim director Kendall Dilling in a statement.

But while industry struggles to meet the demands placed on it by government, what is government doing? If Mr. Trudeau fancies a favourable profile among his peers worldwide, then perhaps he should look at the ways Canada’s abundant supply of oil and natural gas could be put to good use – at home and abroad.

A poll conducted in March by Research Company for Canada Action found strong support exits among Canadians for its energy industry, with 78% supporting all Canadian energy including oil and gas. Three in four want more support for agriculture and almost 75% want the country’s mining and metals sector to be the world’s preferred supplier, as it operates to the highest environmental standards.

Canada has the capacity to increase oil and gas exports from our vast supplies by up to 300,000 barrels per day (bpd) to replace energy imports from Russia, which many nations are now refusing, federal Natural Resources Minister Jonathan Wilkinson has admitted. In that scenario, oil exports could increase 200,000 bpd and natural gas by up to 100,000 barrels of oil equivalent per day (boepd), Canada currently sends about 4 million bpd of oil to the U.S., a small portion of which is re-exported overseas, mostly to India, China and South Korea.

Russia thus far has been meeting roughly 40% of Europe’s natural gas needs but those consumers want to end that dependence. Canada’s oil and gas industry is ready to step up to do its part, but for that to happen, government must act in support of it, not just talk about it. Industry leaders have offered many times to sit down with government to discuss how best to move product to Europe and, indeed, to the nation’s East Coast. With little government support for LNG export-oriented terminals, and Ottawa’s willingness to let the Province of Quebec bar the Energy East pipeline from crossing its boundaries to take much-needed product to Canada’s Atlantic Provinces and beyond, any assertion that this is an energy-leading nation rings hollow.

As it stands, Canada has limited LNG capacity although it has infrastructure companies that are working to move their product efficiently and reliably while keeping emissions down. But more transmission and distribution infrastructure is needed, along with more export LNG facilities on both coasts. Likewise, the nation’s oil pipeline system is sparse, to say the least, Yet governments at all levels are slow to jump on board, a lack of initiative hurting both the industry and customers around the world.

Is it too costly to help the oil and gas industry? Well apparently Mr. Trudeau has found money to increase the dollars Canada sends to other countries, boosting that largesse 27% to C$8.4 billion in 2021 from C$6.6 billion in 2020. Of that, Afghanistan got C$178 million, Ethiopia C$140 million, Lebanon C$123 million (a 39% hike), South Sudan got C$115 million and Mali another C$109 million. In all, African nations received a third of the total. All that while healthcare, the homeless, veterans and pensioners suffer at home.

Fear not, Mr. Trudeau, the oil and gas industry is willing to spend its own money on its own projects – if support and legislative approvals come from government. Now the ball is in your court.