While speaking in Calgary on Tuesday, Suhail al-Mazrouei told a TD investor conference that Canada should build pipelines to transport its oil and natural gas or risk investment shifting to the US.  Reuters photo by Rod Nickel.

Lack of capacity on Canadian pipelines has deepened discount to WTI

OPEC President Suhail al-Mazrouei is urging Canada to invest in pipelines to move the country’s oil and natural gas to market to ensure investment doesn’t shift to the United States.

Speaking during the Calgary Stampede at a TD investor conference in Canada’s oil capital, al-Mazrouei said “If you don’t have the major infrastructure, investors are going to go to your neighbour, where infrastructure is not an issue”.

“Act and act quickly if you want to retain those investors. I am being frank because I want to be a true friend to the Canadians”, said al-Mazrouei.

“I don’t want them to lose opportunities.”

As well as possible investment losses to the US, a lack of capacity on Canada’s pipelines has resulted in a significant discount between Canadian heavy crude and US light oil futures.

Al-Mazrouei, who is also the United Arab Emirates’ Energy Minister, added that much of Canada’s natural gas is low-priced because it is landlocked and Canada does not have a robust LNG export sector to consume it.

“The solution is LNG and pipelines to export that natural gas,” Mazrouei said. “If you provide optionality for the gas, it’s going to fix itself.”

LNG Canada is close to making a final investment decision on the $40 billion project which would see BC natural gas be shipped from northeastern British Columbia to an LNG facility in Kitimat on the West Coast.

From there, LNG would likely be shipped to Asia.

LNG Canada says it will make a final decision on the project by the end of the year, however, a number of analysts say the joint venture could get the green light much sooner, possibly this month.

In May, the Canadian government agreed to purchase Kinder Morgan Canada’s Trans Mountain oil pipeline expansion project for $4.5 billion.