Oil pipelines to drive Canadian economy like 1880s railroads

Oil pipelines, under attack from environmentalists, are essential to Canada’s economic growth just as railroads were in the 1880s, Enbridge Inc. Chief Executive Officer Al Monaco said.

“Pipelines are very similar to railroads,” Monaco said at the Bloomberg Canada Economic Summit in Toronto yesterday. “When you really get down to it, Canada is an export-driven resource economy. This is our foundation.”

Pipelines already carry 15% of Canadian exports in the form of crude, mostly to U.S. markets. Plans by Enbridge and TransCanada Corp. to spend more than a combined C$50 billion to expand networks to the Pacific and Atlantic coasts, are opposed by environmental groups such as ForestEthics. The nation’s oil trade rose 7% to about C$73 billion ($71 billion) last year, according to Statistics Canada, and is set to grow faster than the total economy.

The completion of a transnational railroad line in 1885 opened up much of what is now Alberta, Saskatchewan and Manitoba for settlement, helping to establish Canada as one of the world’s largest agricultural exporters. Pipeline companies are proposing conduits that would help transport millions of barrels of new production from oil-sands projects in Alberta to refineries in eastern Canada, markets in the U.S. and export facilities in Western Canada.

Commodity Driver

Building pipelines that will move crude from Canada to new markets is the most important driver for the economy, according to Toronto-based consultancy En-Pro International Inc. The gap between Canadian crude prices and U.S. and global benchmarks has widened in the past year as production overwhelms existing pipeline capacity, depressing energy stocks and reducing government royalties and taxes on oil exports.

Production of bitumen, which is refined into fuels, is poised to double from last year to 3.8 million barrels a day by 2022, according to Alberta’s Energy Resources Conservation Board.

“Oil is the commodity driving the economy,” Roger McKnight, senior petroleum analyst at En-Pro, said in a May 16 phone interview. “We’re a commodity producing country and we can’t hide from that. Pipelines define who we are as an economy.”

Enbridge’s proposed Northern Gateway conduit that will terminate in Kitimat, British Columbia, risks polluting fisheries and coastal habitat, Alphonse Gagnon, a hereditary chief of the Wet’suwet’en aboriginal group, said in a May 6 statement.

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