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

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

Just Posted

St. Andrew’s Roman Catholic Cathedral in Victoria. (Black Press Media file photo)
Victoria bishop apologizes for church’s role in residential schools

Bishop Gary Gordon voices commitment to healing and reconciliation

Police are asking opponents of logging near Port Renfrew not to involve their children following additional arrests Saturday. (Black Press Media File)
Police arrest eight protesters including two minors near Port Renfrew Saturday

RCMP ask parents not to involve their children in Fairy Creek logging protests

Future grads at Oak Bay High will have greater scholarship opportunities available through the Oak Bay Rotary Club. (Black Press Media file photo)
Private donor quadruples donations to Oak Bay Rotary scholarship funds

The club has awarded more than $25,000 to Oak Bay High students

Elaine Kirwin in her Expedia Cruises office talks about the future of travel. (Don Denton/Black Press Media)
Sidney travel agency charts course through pandemic

Owner of Expedia Cruises in Sidney expects smooth sailing ahead once travel restrictions lift

Canadian Prime Minister Justin Trudeau participates in a plenary session at the G7 Summit in Carbis Bay, England on Friday June 11, 2021. THE CANADIAN PRESS/Adrian Wyld
Canada donating 13M surplus COVID-19 vaccine doses to poor countries

Trudeau says the government will pay for 87 million shots to be distributed to poor countries

Indigenous Services Minister Marc Miller is seen during a news conference, Wednesday May 19, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Indigenous child-welfare battle heads to court despite calls for Ottawa to drop cases

Feds are poised to argue against two Canadian Human Rights Tribunal rulings

The Great Ogopogo Bathtub Race has been held in Summerland as a fundraising event. Do you know which Canadian city introduced this sport? (Black Press file photo)
QUIZ: A summer’s day at the water

How much do you know about boats, lakes and water?

Two-year-old Ivy McLeod laughs while playing with Lucky the puppy outside their Chilliwack home on Thursday, June 10, 2021. (Jenna Hauck/ Chilliwack Progress)
VIDEO: B.C. family finds ‘perfect’ puppy with limb difference for 2-year-old Ivy

Ivy has special bond with Lucky the puppy who was also born with limb difference

A million-dollar ticket was sold to an individual in Vernon from the Lotto Max draw Friday, June 11, 2021. (Photo courtesy of BCLC)
Lottery ticket worth $1 million sold in Vernon

One lucky individual holds one of 20 tickets worth $1 million from Friday’s Lotto Max draw

“65 years, I’ve carried the stories in my mind and live it every day,” says Jack Kruger. (Athena Bonneau)
‘Maybe this time they will listen’: Survivor shares stories from B.C. residential school

Jack Kruger, living in Syilx territory, wasn’t surprised by news of 215 children’s remains found on the grounds of the former Kamloops Indian Residential School

A logging truck carries its load down the Elaho Valley near in Squamish, B.C. in this file photo. THE CANADIAN PRESS/Chuck Stoody
Squamish Nation calls for old-growth logging moratorium in its territory

The nation says 44% of old-growth forests in its 6,900-square kilometre territory are protected while the rest remain at risk

Flowers and cards are left at a makeshift memorial at a monument outside the former Kamloops Indian Residential School to honour the 215 children whose remains are believed to have been discovered buried near the city in Kamloops, B.C., on Monday, May 31, 2021. THE CANADIAN PRESS/Darryl Dyck
‘Pick a Sunday:’ Indigenous leaders ask Catholics to stay home, push for apology

Indigenous leaders are calling on Catholics to stand in solidarity with residential school survivors by not attending church services

Most Read