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

Vacuum sparks fire in Fernwood basement

Crews extinguish small fire in Empress Avenue home

Victoria Humane Society takes revenue hit after donation bins vandalized

Organization removes clothing donation bins after contents removed, scattered

First Nations market fills Colwood’s Royal Beach

Event Wednesday in honour of Orange Shirt Day

Lamborghini driver slapped with nearly $1,000 in fines while speeding in Central Saanich

Vehicle impounded by Central Saanich police, 11 points issued

Man arrested after speeding to Victoria court date for driving offence

West Shore RCMP remind drivers to be mindful of construction zones

Weekend sees 267 cases, 3 deaths in B.C.; Dr. Henry says events leading to COVID spread

There are currently 1,302 active cases in B.C., while 3,372 people are under public health monitoring

Ahead of likely second wave, 60% of Canadians relaxing COVID-19 measures

Proportion of Canadians not following safety measures has dropped by 3 per cent in the past two weeks

Canada’s population tops 38 million, even as COVID-19 pandemic slows growth

Immigration, the top population driver, decreased due to the pandemic

Lightning strike: Tampa Bay blanks Dallas 2-0 to win Stanley Cup

Hedman wins Conn Smythe Trophy as playoff MVP

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

16 MLAs retiring from B.C. politics add up to $20M in pensions: Taxpayers Federation

Taxpayers pay $4 for every dollar MLAs contribute to their pensions

Shawnigan Lake’s Kubica gets 25 to life for murder in California

Former Shawnigan Lake man convicted of killing woman in 1990

Pedestrian dies in motor vehicle incident along the highway near Nanaimo Airport

Police investigating scene where 37-year-old woman from Nanaimo died

Police seek help in naming Cowichan farm stand theft suspect

Video captured man prying cash box out of stand on Norcross Road

Most Read