The Oil Recovery Skipped Canada

A shortage of pipelines is weighing on prices for the countrys crude

- Kevin Orland & Robert Tuttle

Alex Pourbaix, chief executive officer of Cenovus Energy Inc., was in his office in downtown Calgary in late August when he checked his phone and noticed his company’s shares were plunging for no apparent reason.

That’s when he learned that a federal appeals court in Ottawa had overturned the government’s approval of an expansion of the Trans Mountain Pipeline, potentially stalling for a year a key project that would help energy companies in western Canada ship oil to new customers in Asia. For Pourbaix’s company, one of the country’s largest oil sands producers, the ruling threatened to prolong a shortage of pipeline capacity that’s weighed on prices for Canadian crude and kept Cenovus and its peers dependent on U.S. refineries.

The court decision was only the latest in a string of failed or delayed pipeline projects that has stymied the Canadian oilpatch while competitors around the globe have enjoyed a steady recovery. “It’s a great tragedy that in this environment where the commodity demand continues to grow unabated, Canada is missing out,” says Pourbaix.

The industry has waged a years long battle to add transport capacity with not much success. The most visible symbol of this struggle is Keystone XL: President Barack Obama rejected the $8 billion project, bowing to pressure from environmental groups and indigenous communities on the pipeline’s path. Trans Canada Corp. won approval from the Trump administration last year, but construction may not start until next year—about a decade after the project was first proposed.