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

Coast Mountains School District 82 is dealing with a shortage of bus drivers. (Natalia Balcerzak/Terrace Standard)
CMSD82 coping with bus driver shortage in Terrace area

LNG Project, COVID-19 contributing to driver shortage

The District of Stewart has adopted a strategic plan for 2020/21 with six focus areas. (District of Stewart/Facebook)
Stewart adopts 2020 strategic plan

Economy, community areas of focus

Kendra Willems, seen here Nov. 5, created a Facebook page to help facilitate social supports such as clothing donations in an informal manner that supplements existing supports and charities. (Jake Wray/Terrace Standard)
Skeena Voices | ‘We could all use that kind of goodness’

Kendra Willems, new to Terrace, founds charitable Facebook page

A bus shelter in White Rock is emblazoned with an ad from B.C.’s Office of the Human Rights Commissioner on Sunday, Nov. 29, 2020. (Black Press Media files)
VIDEO: ‘Am I racist?’ campaign asks British Columbians to confront their unconscious biases

Signs asking British Columbians to think about racial injustice have been put up across the province

Black Press Media and BraveFace have come together to support children facing life-threatening conditions. Net proceeds from these washable, reusable, three-layer masks go to Make-A-Wish Foundation BC & Yukon.
Put on a BraveFace: Help make children’s wishes come true

Black Press Media, BraveFace host mask fundraiser for Make-A-Wish Foundation

Mary Ellen Turpel-Lafond speaks to a reporter in Vancouver on November 13, 2015. (THE CANADIAN PRESS/Darryl Dyck)
No evidence that B.C. ER staff played blood alcohol level game, but Indigenous racism widespread

Mary Ellen Turpel-Lafond releases findings of independent investigation

(Dave Landine/Facebook)
VIDEO: Dashcam captures head-on crash between snowplow and truck on northern B.C. highway

Driver posted to social media that he walked away largely unscathed

Menno Place. (Google Street View image.)
B.C. care home looks to hire residents’ family members amid COVID-19-related staff shortage

Family would get paid as temporary workers, while having chance to see loved ones while wearing PPE

B.C. Finance Minister Carole James and Premier John Horgan announce $5 billion emergency fund for COVID-19 unemployment and other relief, B.C. legislature, March 23, 2020. (B.C. government)
Carole James stays on to advise B.C. Premier John Horgan

Retired finance minister to earn a dollar a year

Langley RCMP issued a $2,300 fine to the Riverside Calvary church in Langley in the 9600 block of 201 Street for holding an in-person service on Sunday, Nov. 29, 2020, despite a provincial COVID-19 related ban (Dan Ferguson/Black Press Media)
Langley church fined for holding in-person Sunday service

Calvary church was fined $2,300 for defying provincial order

A pedestrian makes their way through the snow in downtown Ottawa on Wednesday, Nov. 25, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Wild winter, drastic swings in store for Canada this year: Weather Network

In British Columbia and the Prairies, forecasters are calling for above-average snowfall levels

NDP Leader John Horgan, left, speaks as local candidate Ravi Kahlon listens during a campaign stop at Kahlon’s home in North Delta, B.C., on April 18, 2017. THE CANADIAN PRESS/Darryl Dyck

Most Read