By Claudia Cattaneo
(L-R) Ian Whitcomb, President for Irving, Gary Houston, VP of Ontario and Prairies, TransCanada Pipelines Limited, and Dr. Dan Wicklum, Chief Executive Canada’s Oil Sands Innovation Alliance. (Peter J. Thompson / Financial Post)
Backers of the proposed Energy East oil pipeline said too much Canadian capital is flowing out of the country to purchase foreign oil, when it should be benefitting economies across the country.
Refineries in Eastern Canada are spending billions to purchase about 700,000 barrels a day of foreign oil to meet customer needs, while Western Canadian oil is sold to the United States at a discount due to lack of pipeline capacity between producing fields in Western Canada and refineries in the East, said Ian Whitcomb, president of Irving Oil Ltd.
“This is a really important project for Canada,” he said in a meeting with the Financial Post’s editorial board Tuesday on the sidelines of an investment symposium organized by the Canadian Association of Petroleum Producers. “We are spending so much Canadian capital to buy oil outside of Canada and those dollars should stay inside.”
Irving Oil, based in Saint John, N.B., runs Canada’s largest oil refinery. It processes about 320,000 barrels a day, including a third imported from Saudi Arabia, a third imported from the U.S., and the rest shipped by rail from Western Canada or elsewhere.
But Whitcomb said his refinery would continue to purchase foreign oil even if Energy East goes ahead because it wants access to diverse suppliers.
Imports from Saudi Arabia, which started when the refinery opened in 1960, are compelling because of the low cost of transportation on large tankers, he said.
“We will add Western Canadian crude to our portfolio as the economics dictate, but probably not at the expense of our Saudi barrels,” he said.
Irving Oil supports Energy East because of its job creation potential and because it would boost Atlantic Canada, a region that continues to lag economically, he said.
The company has partnered with proponent TransCanada Corp. to build a marine terminal to enable exports of Canadian oil to foreign markets.
Whitcomb said imported oil would eventually meet Canada’s stricter environmental standards and expectations.
We will add Western Canadian crude to our portfolio as the economics dictate, but probably not at the expense of our Saudi barrels.
“It’s very difficult to understand and influence directly and indirectly these foreign markets,” he said. “What we do know is that over time, things will come together. Over time, the environmental agenda is not a Canadian agenda, or a U.S. agenda or a European agenda, it’s a world agenda.”
Gary Houston, vice-president for Ontario and the Prairies at TransCanada, said the $15.7-billion Energy East pipeline is weeks away from finalizing its permit application before the National Energy Board and is anticipating a 27-month regulatory review and a permit in late 2018.
The proposed pipeline has run into strong opposition in Quebec. TransCanada is boosting efforts to address the province’s concerns about safety, he said.
“We have put as much effort into talking about safety and our pipeline in Quebec as anywhere in Canada, but somehow we have missed the market,” he said. “This is a great project for Canada and we are going to safely deliver oil from producers in Canada to refineries in Canada, we are going to get oil off the rails and we are going create a lot of jobs and revenue at the same time.”
Pipeline opponents found political allies in the federal NDP, which at its national convention last weekend voted to back consideration of the Leap Manifesto, a policy that would ban pipeline construction and keep Canadian oil in the ground. The Manifesto has been repudiated by Alberta and Saskatchewan, both major oil producers and pipeline supporters.
Houston noted that the vast majority of Canadians believe that building Energy East is a good idea.
Brian Porter, CEO of the Bank of Nova Scotia, echoed that opinion.
“I’m frustrated that it hasn’t moved ahead. I think Energy East particularly is critically important to this country from an economic perspective,” Porter said. “I would have liked to see further political progress on it at this stage, but it’s going to take time. I’m a realist. But I think that the time for consensus building, all those other things, is over.”
Porter was in Calgary Tuesday for Scotiabank’s annual meeting and said he sees the oilsands and pipelines as a national issue.
“I talk to a lot of industry people here and I’m seeing more this afternoon. I think this project is really important for the national fabric of this country, economically and who we are as a country,” he said.
“It’s time. All the economic assessments, environmental assessments, all that important stuff has been done. It’s time to move ahead.”
Dan Wicklum, president of Canada’s Oil Sands Innovation Alliance, a consortium of oilsands companies that are collaborating to accelerate environmental improvements, said the new NDP stance will have no influence on its efforts.
“We are doing the right things for the right reasons,” he said. “We are going to be global leaders at reducing emissions in the oilsands.”
With files from Barbara Shecter