Workers survey around pipe to start of right-of-way construction for the Trans Mountain Expansion Project, in Acheson, Alta., Tuesday, Dec. 3, 2019. Energy projects like an LNG Canada export terminal and the Trans Mountain pipeline expansion may face short-term setbacks but the pandemic and oil price crash shouldn’t threaten their long-term viability, economists say. THE CANADIAN PRESS/Jason Franson

Trans Mountain, LNG Canada say they are on track despite pandemic

Some have mused that the oil price plunge signalled the beginning of the end for oil

Energy projects like an LNG Canada export terminal and the Trans Mountain pipeline expansion may face short-term setbacks but the pandemic and oil price crash shouldn’t threaten their long-term viability, economists say.

Andrew Leach, an energy economist at the University of Alberta, said the long-term forecast for both natural gas and oil remains steady, even as some companies scale back workforces to meet safety protocols.

“I think the consensus amongst most people is that there isn’t a big impact of what we’re seeing right now beyond the timeline of the pandemic and the recovery,” he said.

Global oil prices recently plunged amid oversupply concerns as storage tanks near capacity while refineries are reducing output as economic activity slows during the pandemic. The low prices have forced some producers to cut production in Canada’s oilpatch.

Werner Antweiler, an energy economist at the University of British Columbia, said the oil industry is facing a “double whammy” of a global decrease in demand coupled with a Saudi Arabia-Russia price war. A recent agreement by OPEC and other countries to reduce production doesn’t go far enough to balance supply with falling demand, he said.

But pipelines face slightly different market forces than the producers who fill them. There may be increased pressure on pipelines as Canadian producers seek to get oil to markets at the best price possible, while the spectre of American protectionism could also increase the pressure to get Canadian oil to Asian refineries if U.S. ones becomes unavailable, Antweiler said.

Trans Mountain said in a statement that construction on the expansion project is progressing well at its terminals and along the right-of-way in B.C. and Alberta with COVID-19 safety measures in place.

Current oil prices don’t have a direct impact on the project, the company said. Its customers have made 15- and 20-year commitments for roughly 80 per cent of the capacity in the expanded pipeline. It’s still due to come into service in late 2022, the statement said.

The existing Trans Mountain pipeline operated at its maximum capacity for the first quarter of 2020, the company said.

LNG Canada has reduced its workforce to manage the risk of spreading COVID-19, director of corporate affairs Susannah Pierce said in a statement. But the company and its engineering procurement and construction contractor, JGC Fluor JV, continue to hit “critical construction milestones,” she said.

READ MORE: LNG Canada to halve its Kitimat workforce

Antweiler said liquefied natural gas has a good long-term outlook because of the ongoing switch from coal to gas globally and the increase in demand for energy in Asia.

“These two things, they will continue once the economy returns to normal.”

In the case of Coastal GasLink, the 670-kilometre natural gas pipeline that would feed LNG Canada’s export terminal on the B.C. coast, the pandemic may never rival the disruption earlier this year by its opponents, Leach said.

Construction on most projects that are underway could be vulnerable to disruptions caused by outbreaks but otherwise appear to be continuing at status quo. Leach biked through a Trans Mountain construction zone in Edmonton on Thursday and it seemed unchanged, he said.

“It feels like it’s going full speed ahead,” he said.

A pipeline like Trans Mountain, which is regulated by the Canadian Energy Regulator, is not a commercial venture in the sense that it doesn’t take full merchant risk and has bounds on the tolls it can charge. It’s also largely able to pass any extra costs on to producers, Leach said.

READ MORE: Virtual route hearings set for Trans Mountain pipeline

“They can’t charge whatever the market will bear at any point of time and as a consequence of that they also have some protection for their capital investments,” Leach said.

The wildcard project is Keystone XL for several reasons, including that it doesn’t have all its permits and is not materially under construction, he said.

“It’s relatively early in the process and the cross-border nature of it, the length of it, all these sorts of things make it more challenging in the current market. So that’s probably one of the projects that is most likely to be affected,” Leach said.

TC Energy, which owns the project, did not respond to a request for comment.

While some have mused that the oil price plunge signalled the beginning of the end for oil, Leach and Antweiler don’t buy it.

It would take broad public policy shifts or an energy technology revolution to stimulate a mass shift away from oil dependency. If anything, Leach said physical distancing habits could discourage drivers from making the switch to public transit, for example.

“I’d love to see the oil industry fade away more quickly than it will, but as an energy economist I still know we depend on oil for transportation,” Antweiler said.

He said he expects demand for oil to remain stable for the next few years and it will be up to countries around the world to curb demand through policy until cleaner options become more cost effective.

“There will be potentially a reduction in demand for oil but it won’t be as fast as some hope,” he said.

Amy Smart, The Canadian Press


Like us on Facebook and follow us on Twitter.

CoronavirusLNGPipelineTrans Mountain pipeline

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Young Abbotsford cancer survivor rides 105-km with Terry Fox’s brother

Jacob Bredenhof and Darrell Fox’s cycling trek raises almost $90,000 for cancer research

B.C. families financially affected by pandemic eligible for grocery gift cards

Program open to struggling families in Lower Mainland and Fraser Valley communities

‘Each step is a prayer’: Ojibwe man will walk from Hope to Vancouver Island for Indigenous healing, reconciliation

James Taylor departs Sept. 20, returns to Saanich in five days for sacred fire

COLUMN: We don’t need an election. But it’s 2020, so we’ll probably get one anyways.

There are only selfish reasons for the NDP to trigger an election this fall

Say ‘Hi’ to the mountains (and rain): The smoke is gone from the Fraser Valley, for now

Saturday’s Fraser Valley air quality forecast at ‘moderate risk,’ but morning showers leave skies clear

B.C. or Ontario? Residential school survivors fight move of court battle

It’s now up to Ontario’s Court of Appeal to sort out the venue question

VIDEO: Shots fired outside Langley gas station that was scene of 2018 homicide

No reports of injuries in Saturday evening incident

B.C. migrant, undocumented workers rally for permanent residency program

Rally is part of the Amnesty for Undocumented Workers Campaign led by the Migrant Workers Centre

Preparations underway for pandemic election in Saskatchewan and maybe B.C.

Administrators in B.C. and around the country are also looking to expand voting by mail during the pandemic

Nearly 20 per cent of COVID-19 infections among health-care workers by late July

WHO acknowledged the possibility that COVID-19 might be spread in the air under certain conditions

Ferry riders say lower fares are what’s most needed to improve service

Provincial government announces findings of public engagement process

Air quality advisory ends for the Lower Mainland

It had been in effect since Sept. 8

Supreme Court Justice Ruth Bader Ginsburg dies at 87

The court’s second female justice, died Friday at her home in Washington

Emaciated grizzly found dead on central B.C. coast as low salmon count sparks concern

Grizzly was found on Gwa’sala-‘Nakwaxda’xw territory in Smith Inlet, 60K north of Port Hardy

Most Read