Canada Seeks New Energy Markets to Achieve Superpower Ambitions

Canada's Ambitions to Become an Energy Superpower

At Calgary’s annual stampede this summer, Canadian Prime Minister Mark Carney made a bold statement by donning a cowboy hat and making a Texas-sized promise. The government in Ottawa is “highly, highly likely” to back the construction of a new oil pipeline to the West Coast as a national priority, according to Carney. His support aligns with a broader pledge to make Canada an energy superpower. Analysts believe this move could provide a significant boost to Canadian energy companies, but it may also complicate U.S. energy plans.

The proposed pipeline would transport oil from the Alberta oil sands to British Columbia, allowing Canada to expand its ability to send more crude to markets in Asia. This initiative is part of a larger strategy to diversify Canada’s energy exports and reduce its reliance on the U.S. market, which currently accounts for the majority of Canadian energy exports.

Canada has a long history of opposition to oil pipelines. The country’s only existing pipeline to the West Coast took years to build and required billions of dollars in government support. In June, the Canadian parliament authorized the government to fast-track major national projects like pipelines and other energy infrastructure. Carney has indicated that the proposed pipeline from Alberta will be among these projects.

Erin McLaughlin, senior economist at The Conference Board, notes that while Canada has the potential to become an energy superpower, the process is expensive and time-consuming. “It takes a lot of time to build out a supply chain that operates by different modes than it did before,” she said. However, the advantage lies in not relying on one country to support the economy.

Currently, the U.S. is the largest market for Canadian energy, importing four million barrels of the 5.5 million barrels of oil Canada produces each day. This makes Canada the fourth-largest oil producer globally, behind the U.S., Russia, and Saudi Arabia. Canada is capable of increasing production significantly, and new infrastructure could help the country find new markets where it can command higher prices.

So far, there are no announced plans for the Alberta pipeline or its exact route, but officials have stated that private companies are interested. Jackie Forrest, executive director of Arc Energy Research Institute, suggests that nation-building projects may include more than just oil and gas pipelines. These could involve a large new hydro dam in Quebec, a big wind farm in Nova Scotia, and other renewable energy initiatives. While the government may need to provide some support, the ideal scenario is for these projects to be driven by private capital.

A list of new projects is expected this fall, according to Forrest. The trade war with the U.S. and President Donald Trump’s call earlier this year to make Canada the 51st state have fueled Canadian nationalism. This has sparked a renewed interest in taking control of the marketing and exploitation of Canada’s own energy resources.

Despite the potential benefits, any new pipeline risks facing political wrangling and opposition from environmentalists and indigenous populations. However, a recent Environics Research survey found that 73% of Canadians support oil pipelines. The government-owned Trans Mountain pipeline is currently the only pipeline to the West Coast. Following an expansion in 2024, it carries about 890,000 barrels a day from Alberta to Vancouver for export to Asia and the U.S.

There is also a moratorium on tanker traffic to other parts of western Canada, north of Vancouver. This policy is contentious, and Carney’s support for the new pipeline suggests he will push for changes to the moratorium. “No one’s going to build a pipeline until that gets removed,” said Forrest.

Canada is also expanding its gas exports. Its first shipments of liquefied natural gas (LNG) were launched by Shell-led LNG Canada from the West Coast last month. According to Forrest, Canada currently has a capacity of 1.8 billion cubic feet a day of LNG, which is expected to grow to seven bcf a day by 2030. Other early-stage proposals aim to export LNG through the subarctic waters of the Hudson Bay.

Imports of Canadian energy have helped the U.S. become the world’s largest energy exporter. However, the U.S. has developed energy independence, which comes with its own complexities. Daniel Pickering, chief investment officer at Pickering Energy Partners, noted that the U.S. still imports a significant amount of crude oil and exports crude products. It isn’t simple to claim that the U.S. is the biggest producer of oil in the world.

It could take five years for Canada to expand its export markets, Pickering said. If successful, the U.S. could receive less Canadian oil and end up paying more for Canadian energy. West Canadian Select crude currently sells for about $10 a barrel less than U.S. West Texas Intermediate. This price differential was even wider before Canada began exporting oil to Asia through the Trans Mountain pipeline.

U.S. refiners that process Canadian crude could suffer, as the majority of Canadian oil imports currently head to refineries in the Midwest. However, stronger prices in western Canada could benefit Canadian producers of oil and gas. A lack of pipeline capacity has limited their production growth, and the new project could make Canada a more desirable place for upstream investment.

Canadian producers include companies such as Canadian Natural Resources, Suncor Energy, Imperial Oil, and Cenovus. Enbridge is the largest pipeline company, operating the main pipeline that goes south to the U.S.

Becoming an energy superpower will require Canada to address difficult questions, such as how much to invest in fossil fuel production when economies may need less of it in the future. “That is the crux of the debate here,” said Forrest. “But there’s a growing consensus that oil demand won’t come down that quickly.”