Canada pledges to increase oil exports by up to 300,000 barrels per day in response to European supply shortages

Natural Resource Minister Jonathan Wilkinson is announcing that Canada will increase its 2022 oil and gas exports incrementally by up to 300,000 barrels per day in response to supply shortages brought on by ongoing conflict in Ukraine.

In a teleconference from the International Energy Agency’s (IEA) ministerial gathering in Paris, he explained to CTV News the increase intends to displace Russian oil and gas, while not increasing global emissions.

This comes as discussions between governments and industry over the security of energy supplies has ramped up in recent weeks as Moscow faces crippling economic sanctions and global importers come under increased pressure to stop trading Russian oil and gas.

"This is a crisis,” Wilkinson said.

“These folks in Europe are looking at the prospects potentially of not having fuel for the trucks that provide groceries for people to survive on or potentially not having adequate supplies of gas to heat their homes.”

Wilkinson notes that Canada does not have a strategic petroleum reserve of its own, but analysis and work in conjunction with provinces and industry over the past couple of weeks determined this incremental increase was possible.

He says different estimates of production output were made, but the intention is to continue working with producers and the U.S. Department of Energy to ensure sufficient offtake capacity.

Alberta Energy Minister Sonya Savage has also confirmed in recent weeks that she heard from energy producers in the province able to increase production in the near term by another 200,000 to 400,000 barrels per day.

So far, a number of Canadian energy firms have been involved in consultation with governments as they seek to be a solution to the energy crisis.

Calgary-based Enbridge Inc., North America’s largest pipeline company confirmed Tuesday that it has been in talks with the government and doing what it can to increase energy security.

“At the moment, both our liquids and natural gas systems are at or near capacity but we’re exploring options that may be taken to provide more energy throughout North America and Europe,” the company said in a statement to CTV News.

“That includes using export facilities on the Gulf Coast for crude and natural gas.”

Despite this commitment, North American producers have still faced a number of challenges, including years of pressure from investors to avoid costly expansion projects.

Deputy director of ARC Energy Research Institute, Peter Tertzakian, says producers are dealing with shortages of labour in the field to be able to boost domestic production through conventional drilling.

“Many of the facilities are now built operational, but there really aren't a lot of expansion plans and bringing on incremental oil from any of these sources requires a fair amount of spending,” he said.

“There are also lags in the system, in other words, it takes many months before you can actually ramp up.”

Tertzakian adds that Canada is left in a position where it can’t do much more than supply oil to the U.S., and indirectly, the U.S. can export more to Europe.

“So we can help by boosting production, but that production of both oil and natural gas has to dominantly transit through the United States, where then it gets to places like the Gulf of Mexico and then gets put onto tankers and taken to Europe.”

“It's really a collective North American effort that we can be part of in terms of helping our European friends.”

But this kind of increase in production might not be enough to offset the loss of Russian oil exports.

Russia is the world’s third largest producer of oil, accounting for 10 per cent of global supplies and it’s also the second largest exporter of oil at about seven per cent of global supplies, including refined products.

Founder of Context Commodities, Rory Johnston, says the loss of Russian oil and gas for European countries leaves a big gap.

“So just in terms of the kind of scale we're talking about, we would need to see Canadian production more or less double, to offset completely which isn't realistic. We still have to think about where all these other sources of oil can come from though,” said Johnston.

“We're still counting on a lot of U.S. shale production growth. We'd like to see some growth in Canada for sure, but I think again, that's going to be more of a stable kind of consistent growth we want to see from Canada rather than like a big jump in the nearer term.”

CANADIAN GOVERNMENT STILL COMMITTED TO CLIMATE CHANGE TARGETS

As Canada increases its domestic production of oil and gas for export, the federal government notes that its climate change goals will stay top of priority.

“While Europe is currently seeking to eliminate short-term energy insecurity, its leaders remain committed to accelerating an energy transition and eliminating their reliance on oil and gas altogether,” Wilkinson added.

“Canada believes we collectively must act only to address pressing energy issues, but clearly we must do so in a manner that will ensure that we do not lose sight of and that we concurrently address the climate crisis.”

Canada announced $8 million for the IEA’s Clean Energy Transition Programme (CETP) to help emerging economies accelerate their energy transitions while meeting their energy needs.

The federal government also announced in a press release, a joint collaboration between the Clean Energy Ministerial Empowering People Initiative (EPI) and IEA. The goal is “to develop in-depth analysis and guidance on actions aimed at ensuring all people benefit from new job opportunities in clean transition.”