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Rail shipments remain an option for transporting more oil
By Laura Dhillon Kane and Robert Tuttle
Canada is “urgently exploring options” with provinces and the energy industry to boost oil supply, as trade disruptions caused by war in the Middle East spur huge volatility in global crude markets.
The country is looking at ways to increase output “to advance international energy cooperation and security,” Charlotte Power, a spokesperson for Energy Minister Tim Hodgson, said. “We maintain the ability to adjust transportation through marine and rail shipments should supply routes require reorientation.”
Officials are reviewing whether planned maintenance activities could be delayed to free up additional production capacity, according to a person familiar with the discussions.
Canada is the world’s fourth-largest oil producer, but most of its crude goes to the U.S. The expanded, government-owned Trans Mountain pipeline — which opened in 2024 — has allowed for a surge in shipments to Asia, with the line running at about 81 per cent utilization in December.
Rail shipments remain an option for transporting more oil, though those volumes have fallen in recent years as new pipeline capacity became available.
The war in Iran is curtailing exports in the Strait of Hormuz, through which about a fifth of the world’s oil supply usually flows. Companies operating in Alberta’s oil sands are entering a period of spring maintenance that’s poised to cut output by 150,000 barrels a day or more in the second quarter.
Those maintenance plans and the effects of the war have narrowed the discount on Canadian heavy crude to about US$13 a barrel from nearly US$16 a month ago, based on General Index and Modern Commodities data. Western Canadian Select, a grade of heavy crude, has also surged to its highest price in more than three years.
Earlier Tuesday, Group of Seven energy ministers, including Hodgson, asked the International Energy Agency to prepare scenarios for releasing emergency oil stockpiles. While Canada doesn’t maintain a U.S.-style strategic petroleum reserve because it’s a net exporter, it does have emergency supplies that could be tapped for domestic use if needed, Power said.
That would occur only in an extreme situation, said the person familiar with the situation, speaking on condition they not be identified so they could discuss confidential matters. The person noted that crude is still flowing to North American and European markets, though prices remain volatile and the trajectory of the Iran conflict is uncertain.
G7 leaders will meet on Wednesday to discuss the crisis in Iran, including rising energy prices, Prime Minister Mark Carney said in a statement following a call with French President Emmanuel Macron.
Conservative Leader Pierre Poilievre has urged Carney’s Liberal government to pass an “emergency energy supply plan” in response to the Middle East turmoil, including scrapping environmental rules he says are holding back oil and gas development.
Power, the energy minister’s spokesperson, noted that Canada has signed a memorandum of understanding with Alberta to support construction of a new bitumen pipeline to the west coast.
“We are laying a path that will allow Canada to unlock increased export capacity on our west coast to diversify our energy exports and support our allies across the world,” she said.
Bloomberg.com
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