Demand Uncertain for Canada’s Proposed Export Pipeline: Chatham House

A proposed new oil pipeline from Alberta to Canada’s West Coast aiming to increase exports by 1 million b/d could lack demand in the long run due to uncertain appetites from Asian markets amid a push toward renewable energy, says U.K. think tank Chatham House.

In a Thursday report, Chatham House said the July proposal by Ottawa, Alberta and five Canadian oil sands companies to diversify oil exports and grow new markets by increasing seaborne exports from Western Canada “risks swapping dependence on the U.S. for other uncertain foreign markets.”

Currently, Canada exports more than 90% of its crude oil and all its natural gas to the U.S. However, President Trump’s tariff policies against Ottawa have poisoned relationships between the two trading partners, raising fears that unpredictable and hostile U.S. policies would hurt Canada’s economy further, Chatham House said.

The think tank said Canada is pinning its hopes on China and India and fast-growing Southeast Asian nations like like Indonesia, Thailand and Vietnam, as plans by those countries to pivot toward gas-fired electricity generation have largely fallen behind.

While the Middle East supply disruption has put a premium on reliable oil and gas, it has also provided incentives for Asian crude importers to “insulate themselves against future shocks, including through renewable energy and electric transport,” it said.

According to Chatham House, most new cars sold are already electric in China, and EV sales in Southeast Asia also more than doubled last year. The rapid growth of solar generation and EV adoption in Asia will lower demand as well as prices for oil and gas, the think tank said.

“The new markets Canada is relying upon for export growth will not buy imported oil and gas forever. And they may reduce their consumption sooner than anticipated,” Chatham House said.

Instead, Canada’s competitive advantage lies with its affordable electricity due to the country’s high share of hydro and nuclear power generation, according to the think tank. Ottawa should invest in and lead its provinces to increase the capacity of a national grid to accommodate rapidly growing electricity demand, Chatham House said.

The report is co-authored by Chris Aylett, research fellow in the Environment and Society Centre and Phesheya Nxumalo, research associate in the Sustainability Accelerator within the Environment and Society Centre.

–Reporting by Frank Tang, ftang@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com