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Canada’s oil industry will turn around in a $10 billion ‘wrong project’

by Saurav Biswas
Canada

The experience of Canada’s oil companies over the past decade can be summed up in one sentence: a friend who has a friend needs an enemy. The thing is, pipelines have been installed in the southern part of Canada to export oil, but the US court has stopped the installation of new pipelines. Canada’s oil industry is suffering. Canadian oil companies are losing hundreds of billions of dollars in revenue; The development of the country’s oil industry is being disrupted.

A new oil project is expected to revive the country’s oil industry. However, many say that the project was a mistake to undertake. Because the benefit will be less compared to the investment. Based on the report of Bloomberg, a report of the Times of India has highlighted these facts.

According to the report, oil is being transported at full capacity through the existing pipelines. As a result, even if an additional barrel of oil is to be exported from Canada to the United States, it will have to be sent by rail, which costs a lot. The situation took a turn for the worst in 2018. Canadian crude oil was sold at a much lower price then. At that time, Canadian oil companies received up to $50 less per barrel than US oil.

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A few years passed like this. But Canada’s oil industry now has a solution, albeit an expensive one. That is, the Canadian government has undertaken to connect the Vancouver port on the Pacific coast with the oil fields of Alberta by spending 26 billion or 2,600 billion US dollars. Construction is almost over. If all goes according to plan, the pipeline will start supplying oil before next June. Through this, it is assumed that the loss of the Canadian oil companies, which were forced to sell oil at a discount, will be reduced.

The novelty of this pipeline is that through it, Canada will be able to export oil for the first time, bypassing its southern neighbor, the United States. Canada’s oil reaching that Pacific port through the pipeline means that it will be possible to supply this oil to Asian and Chinese markets by tankers.

Canada
Image- Reuters

After nationalizing the project in 2018, Canadian Prime Minister Justin Trudeau said it would create huge economic opportunities. The plan was to build a state-owned pipeline and sell oil to private investors. From this point of view, the construction of this pipeline at the expense of taxpayers is a ‘big mistake’, according to the Times of India news.

The project is called The Trans Mountain Expansion. The problem is, the project cost too much. Because of that, the income from here will be much less compared to the government’s investment. According to the Bloomberg news after reviewing various calculations, the cost of this pipeline will be 10 billion or one thousand billion dollars. 2 lakh 50 thousand US dollars per capita of Canadian people have been spent on this project. The Trudeau government is already known to be environmentally friendly. For that reason, questions have arisen about taking such projects during his tenure. It is said that the country’s petroleum sector has been greatly assisted through this.

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Despite the huge cost, the Trans Mountain Expansion Project has some advantages. First, it will reduce the gap between Canadian and US crude oil prices. This will increase revenue for Canada’s petroleum sector; Provincial government revenue will also increase. Apart from this, new investment opportunities will be created through this project. This will increase the revenue of the country’s government.

Canada ranks fourth in oil production in the world. The country’s oil production will increase in the next few years. But the reality is that due to this pipeline, Canada’s oil transportation capacity will increase by 600,000 barrels per day. If there is more production, it has to be transported by railway. As a result, it is believed that this project will not be very profitable.

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