Like father, like son. In 1975, Pierre Trudeau, Canada’s then prime minister, set up Petro-Canada, a national oil company. Four decades later his son Justin, the present prime minister, is also making a bold move into state ownership by agreeing last week to buy the Trans Mountain oil pipeline from Kinder Morgan for C$4.5bn ($3.5bn). The reason: he wants to keep alive the fiercely contested proposal to expand Trans Mountain’s capacity. That plan has become a test case for Canada’s future as an oil exporter. If it fails, it will be a severe blow for crude producers in the oil sands of Alberta, and to Mr Trudeau’s entire energy and climate strategy.
The Trans Mountain pipeline runs for 720 miles from Edmonton in Alberta to Burnaby on the coast of British Columbia. Today it carries about 300,000 barrels a day, but the planned expansion would almost triple capacity to 890,000 b/d. Oil producers in western Canada need more pipelines to be able to keep growing. The country’s output is set to rise by about 700,000 b/d over 2017-20, according to IHS Markit, but after that further increases will depend on whether more export capacity is available. The strain on the oil transport system was demonstrated over the winter when a shortage of trains and bad weather caused disruption on the rail network. The discount for Western Canadian Select, the region’s benchmark crude, compared with US West Texas Intermediate soared from $10-$15 a barrel to more than $30.