Oil pipelines need to be a 'national priority,' TD says

It's in Canada's best interest to support and expand the country's network of oil pipelines, TD Bank said today.
TransCanada's Keystone XL pipeline has been the subject of a lot of controversy. (Canadian Press)

It's in Canada's best interest to support and expand the country's network of oil pipelines, TD Bank said today.

The bank said in a report Monday that the economies of all provinces will suffer, long term, unless policymakers make Canada's pipeline network a "national priority."

Although Canada is fast becoming one of the largest oil producers in the world, the industry is largely dependent on U.S. refineries and e-port terminals to bring Canadian crude to the global market.

TD says that's costing Canada billions, as an inefficient distribution system means Canada isn't getting top dollar for its oil and isn't extracting the most value out of the crude because it's being refined abroad.

Building new pipelines to bring crude oil to Canada's east and west coasts would alleviate that, as would expanding the current network of pipelines that bring Canadian oil to the U.S. Gulf coast.

"In order to access rapidly growing overseas markets, Canada needs access to a port where oil can be shipped by supertanker," the bank argued.

"Canada’s lack of diversity has cost the economy dearly in recent years."

That's a veiled reference to the opposition to the Keystone XL pipeline, a massive 16,000-kilometre project that will more than double the amount of Canadian oil that makes it to refineries and ports on the Gulf coast.

But TD's report says Keystone alone is not enough. Canadian bitumen is trading as a discount as it is, mainly because exporters don't have a lot of options for places to ship their oil, so they must accept whatever their customers are willing to pay.

The bank's report makes a strong case in favour of building pipelines to ship oil east and west — not just south. Allowing Enbridge’s Northern Gateway pipeline and Kinder Morgan’s Trans Mountain Expansion pipeline projects would both bring Alberta oil west to export hubs on the Pacific coast, where they could then be shipping to Asian customers.

On the other side, the report is a strong backer of Enbridge's plan to reverse the flow of its Line 9 between Sarnia and Montreal. Indeed, the bank advocates in favour of building an as-of-yet non-existent pipeline to take that oil even further east, to Quebec City or Saint John, where it could be processed in the Irving Oil refinery.

Despite Canada's status as an emerging oil superpower, most of the eastern half of the country actually imports much of its oil, as much as 680,000 barrels per day last year. Quebec imported $10.9 billion in oil, while the Maritimes imported $13 billion last year.

An east-west pipeline could close that gap and open up the possibility for Canada to start shipping oil to Africa, Latin America and Europe, something we're not doing in any major way at the moment.

"There is minimal pipeline capacity to facilitate exporting to these markets," TD's report reads.

The bank estimates about 20 per cent of Canada's economic expansion of the last two years is directly tied to increased investment in the Alberta oilsands.

"In our opinion, the best thing that the Canadian governments can do to help create economic opportunity and diversify Canada’s international market access is to ensure a timely and thorough regulatory process for approvals for pipeline projects like these," the report says.