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

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

A dose of COVID-19 vaccine is prepared at a vaccination clinic in Montreal’s Olympic Stadium on Tuesday, Feb. 23, 2021. THE CANADIAN PRESS/Paul Chiasson
39 new cases of COVID-19 in Interior Health region

The total number of cases in the region since the pandemic began is now at 7,334

The Site C Dam location is seen along the Peace River in Fort St. John, B.C., Tuesday, April 18, 2017. The cost of British Columbia’s Site C hydroelectric dam has grown to $16 billion and the completion has been moved up a year to 2025. THE CANADIAN PRESS/Jonathan Hayward
BC Liberal energy critic blasts ‘lack of transparency’ on Site C

MLA Tom Shypitka says Site C going ahead is a ‘good thing’, blames NDP for mismanagement

Volunteers from the Elk River Alliance cleared 14 car batteries from the Elk River near Elkford this week. (Photo contributed)
Elk River Alliance to move to more holistic environmental monitoring

The details of the ERA’s 2021 program will be discussed at the AGM next month

The Kitimat RCMP responded to false alarms, an apartment fire and more between Jan. 29 to Feb. 3, 2021. (Black Press Media File Photo)
Sparwood backs campaign to study Surrey RCMP impact

The City of Surrey is home to the largest RCMP detachment in the province

Brent Bidston is the president of Angel Flight East Kootenay. Black Press file photo.
RDEK ponders funding for Angel Flight East Kootenay

The district is considering funding for operations or to eventually help acquire a larger plane

A health worker holds a vial of AstraZeneca vaccine to be administered to members of the police at a COVID-19 vaccination center in Mainz, Germany, Thursday, Feb. 25, 2021. The federal state of Rhineland-Palatinate, start with the vaccination of police officers in internal police vaccination centers. (Andreas Arnold/dpa via AP)
B.C. officials to unveil new details of COVID vaccination plan Monday

Seniors and health-care workers who haven’t gotten their shot are next on the list

An investigation is underway after a man was shot and killed by Tofino RCMP in Opitsaht. (Black Press Media file photo)
Man shot and killed by RCMP near Tofino, police watchdog investigating

Investigation underway by Independent Investigations Office of British Columbia.

B.C. Supreme Court in Vancouver on Tuesday December 11, 2018. THE CANADIAN PRESS/Darryl Dyck
B.C.’s compromise on in-person worship at three churches called ‘absolutely unacceptable’

Would allow outdoor services of 25 or less by Langley, Abbotsford and Chilliwack churches

Baldy Mountain Resort was shut down on Saturday after a fatal workplace accident. (Baldy Mountain picture)
Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Jasmine and Gwen Donaldson are part of the CAT team working to reduce stigma for marginalized groups in Campbell River. Photo by Marc Kitteringham, Campbell River Mirror
Jasmine’s story: Stigma can be the hardest hurdle for those overcoming addiction

Recovering B.C. addict says welcome, connection and community key for rebuilding after drug habit

A Vancouver restaurant owner was found guilty of violating B.C.’s Human Rights Code by discriminating against customers on the basis of their race. (Pixabay)
Vancouver restaurant owner ordered to pay $4,000 to customers after racist remark

Referring to patrons as ‘you Arabs’ constitutes discrimination under B.C.’s Human Rights Code, ruling deems

Nanaimo children’s author and illustrator Lindsay Ford’s latest book is ‘Science Girl.’ (Photo courtesy Lindsay Ford)
B.C. children’s writer encourages girls to pursue the sciences in new book

Lindsay Ford is holding a virtual launch for latest book, ‘Science Girl’

Pig races at the 145th annual Chilliwack Fair on Aug. 12, 2017. Monday, March 1, 2021 is Pig Day. (Jenna Hauck/ Chilliwack Progress file)
Unofficial holidays: Here’s what people are celebrating for the week of Feb. 28 to March 6

Pig Day, Canadian Bacon Day and Grammar Day are all coming up this week

Most Read