US tariffs that went into effect today underline Canada's need to build energy infrastructure that limits its dependence on its southern neighbor and improve access to other markets, Canadian oil and gas producer groups said today.
"A bold and necessary action that the Canadian government should take to respond is to build retaliatory pipelines to diversify our economy to other markets beyond the United States," the Explorers and Producers Association of Canada (EPAC) said following the US' imposition of a 10pc tariff on Canadian energy.
The Canadian oil and gas industry has long criticized federal energy policy for inhibiting development and scaring off investors amid concerns for getting its production to markets. This includes what it called burdensome regulations and a ban on oil tanker traffic on much of its Pacific coast.
The government under Prime Minister Justin Trudeau effectively killed Enbridge's 525,000 b/d Northern Gateway pipeline project and TC Energy's 1.1mn b/d Energy East project, which would have allowed Canadian oil producers to bypass the US. Regulations need to change to allow for such project again, industry groups say.
"Canada urgently needs a policy overhaul to create a streamlined and durable regulatory framework," said Canadian Association of Petroleum Producers (CAPP) president Lisa Baiton.
Long-term stability for Canadian producers will come from diversifying exports into Asia and Europe. "We are at a significant moment in Canada's history — we need to seize this moment," said Baiton.
Canada sends about 80pc of its 5mn b/d of crude production to the US through a combination of onshore pipelines, crude by rail and waterborne cargoes.
Canada accounts for 60pc of all US crude imports, with refiners in the US midcontinent having few alternative supplies.
EPAC, which represents 100 producer and associate members who produce 40pc of Canada's crude and 65pc of the country's natural gas, encouraged the Canadian government to continue to work on border security concerns that the US had raised and take a measured approach in its response.
Heavy sour WCS priced at Hardisty, Alberta, was assessed at a discount of $13.80/bl to the April Nymex WTI calendar month average on 3 March, wider by about 95¢/bl compared to the session prior.
Indications Tuesday show WCS has continued to fall, but not to the depths seen on the eve of the previous trade threat on 3 February — before a deal was struck to delay the tariffs by 30-days — when it sank as low as a $15.75/bl discount. This suggests traders may have already priced in the trade action ahead of the latest threat.
Some degree of price support could also be coming from upcoming turnaround season in Alberta's oil sands region.
