Construction will soon ramp up on the expansion of the Trans Mountain oil export pipeline, including the installation of pipe in British Columbia where opposition to the project has been loudest.
The multi-billion dollar project is owned by the federal government and will transport oil from Edmonton to the Vancouver area. A lack of new export pipelines has been a problem for the oilpatch for several years and is a reason for limits on Alberta’s oil output.
For a sector in the midst of historically low oil prices and layoffs, progress on pipeline projects like Trans Mountain provides some much needed optimism.
Contractors began installing pipe in Alberta late last year and the first section of the pipeline, near Edmonton, is 60 per cent complete, according to the company.
Crews are taking a brief hiatus for a period dubbed “spring breakup,” when the ground is too muddy and soft to move heavy equipment. So far, about 42 kilometres of pipe is in the ground, all of which is in Alberta.
Next month, the company expects to break ground along the 1,147-kilometre route and begin pipeline construction near Kamloops, B.C.
The exact path through the Lower Mainland area around Vancouver may still change as detailed route hearings are underway by the Canada Energy Regulator. Such hearings typically deal with specific routing issues, like area-specific tree removal or road crossings.
‘We are on track’
Trans Mountain officials expect construction to be underway along every section of the pipeline route by the end of the year.
“We are pleased where we are at,” said spokesperson Ali Hounsell. “We are on track and it is a challenging time for everyone but we’ve managed to, together with our contractors, be able to ensure we are meeting all the health and safety requirements.”
The portion of the pipeline route west of Edmonton is relatively straightforward on flat prairie land. As contractors begin work on the other side of the provincial border, they will face a variety of different challenges such as navigating the Rocky Mountains, crossing the Fraser River, and working in populated areas of the Lower Mainland.
With so many delays to the start of construction, there has been ample time for crews to prepare.
“Now we are in the execution phase and this is where we put all those plans and expertise into practice,” said Hounsell.
More than 2,900 people have been hired for the project.
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Export pipeline space was at a premium in recent years and tight shipping capacity has been blamed for prices in Alberta being heavily discounted compared to the rest of North America. That’s why the country set a record high in February for the amount of oil exported by rail.
The Altex Energy heavy oil loading terminal near Lloydminster, Sask., was operating at its highest level in January and February. However, since the pandemic began, the terminal is moving half as much oil.
“The tone in the industry changed dramatically over the course of a few days,” said John Zahary, chief executive of Altex Energy, pointing to the decision by Russia and Saudi Arabia to flood the global market with oil and the plunge in demand for fuels as governments began COVID-19 lockdown measures.
“From the perspective of somebody who has now been in the industry for about four decades, this is as bad as it has ever been,” said Zahary. “The drop in price and the swiftness of the drop in price has made it extremely tough to be an oil and gas producer in Western Canada.”
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Future of the oilpatch
Industry leaders expect the situation to improve as demand increases slowly as lockdown measures are eased and the oil market balances from so many companies and countries cutting back on production.
“The industry will look a lot different when that happens than it did before this started,” said Zahary, as he expects more companies in Western Canada to fail, “but certainly we need oil to drive our lifestyles.”
In recent weeks, energy companies have been reporting their financial results for the first three months of the year and the numbers have been grim, with losses in the billions of dollars. Many companies are already warning investors that second-quarter results will be even worse.
But, an increase in demand for fuel is already being noticed, according to Suncor, which owns several oilsands facilities in Northern Alberta, in addition to refineries and the Petro-Canada gas station chain.
Demand for gasoline dropped by half at some points during the pandemic, according to the company, while jet fuel demand tumbled by 70 per cent.
‘Innovation and drive’
The sector’s recovery will take time, but the industry has a bright future, especially the oilsands, according to Suncor chief executive Mark Little.
“I think with the innovation and drive, the focus on lifting Indigenous people up as we go on our journey, dealing with environmental (issues) and our focus on reducing carbon, I see Canada playing a significant role going forward,” he said during an interview with CBC News.
Some oilpatch leaders have pointed to one possible bright spot of the pandemic: more Canadians will appreciate the oilpatch for what it provides, such as plastics used in personal protective equipment and medical supplies as well as the fuel to keep trucks, trains and supply chains moving.
Little agrees with that sentiment and how the country came together to battle the pandemic.
“When the chips were down, and we’re facing a huge challenge, a global challenge that we need to get through as a country, we came together,” said Little. “I see that as a great opportunity as we think about the energy transition and also how are we going to deal with greenhouse gas emissions in the country.”
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The federal government has provided the oilpatch with $2.5 billion in aid aimed at reducing methane emissions and cleaning up old oil and gas wells. Ottawa also announced a plan to expand the Business Credit Accountability Program credit support to medium-sized businesses with larger financing needs.
Suncor does not need any help, said Little, but he does want Ottawa to help smaller producers who are in dire straits.
“We’re advocating that not only liquidity be provided to the small and medium-sized companies, but that it happens quickly because this is a very important sector in our country,” he said.
Trans Mountain is not the only major export project proceeding right now in Canada. Enbridge’s Line 3 replacement project could be finished by the end of the year, while TC Energy’s Keystone XL could break ground in the U.S. this summer.
All three projects still face specific regulatory and legal challenges.
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