Wary of U.S. trade war, Canada eyes more oil, gas exports to Asia

The potential U.S.-Canada trade war is breathing new life into Canadian oil and gas projects that would expand exports to Europe and Asia.

Canada is overwhelmingly dependent on the U.S. for its exports, and that includes oil and gas. Canada exports more than 4 million barrels per day of oil to the U.S. More than 90 percent of Alberta’s oil exports go to its southern neighbour.

President Trump’s threat of a 25 percent tariff on all Canadian imports, and a 10 percent tariff on Canadian oil, has upended one of the closest and largest free-trade areas in the world. Canadian politicians have expressed shock and disbelief at the suddenly hostile posture from Washington.

But it has also sparked more interest within Canada to build connections to the rest of the world.

“Trump should be the wake-up call. We have a really big economic challenge on our hands…We have been so complacent in relying on the United States,” Martha Hall Findlay, director of the School of Public Policy at the University of Calgary, told the FT.

To date, efforts to build export routes to Asia and Europe have proceeded in fits and starts, with many projects falling by the wayside, weighed down by high costs and construction delays.

Prime Minister Justin Trudeau’s government purchased and built the Trans Mountain Expansion pipeline, a conduit that carries heavy tar sands oil from Alberta to Vancouver for export. But it came at an enormous cost, with the final price tag expected to exceed C$34 billion, a price so high that no private company was willing to take it on. The Trans Mountain Expansion project is a cautionary tale, underscoring the difficulty of building new pipelines to the Pacific Coast in Canada.

Still, more Pacific routes are in the offing. Later this year, Shell will begin operations at LNG Canada, the country’s first LNG export terminal located in British Columbia. That will give Canadian gas drillers market access to Asia.

Several more LNG projects are on the drawing board, or under construction, all of which are located in the Pacific Coast. That includes Ksi Lisims LNG, Cedar LNG, and Woodfibre LNG. All of those projects may see increased interest and urgency from both Canada and potential LNG buyers in the wake of Trump’s new trade confrontation.

In addition, the long-distance Prince Rupert gas pipeline is under construction. More speculatively, the previously cancelled Northern Gateway oil pipeline could be revived, as some have suggested, although there are few concrete details at this time.

LNG in Quebec

On the other side of the country, there is new talk of reviving a cancelled LNG project in Quebec. The project would have involved a nearly 800-kilometre pipeline from Ontario to Quebec, bringing gas east to Saguenay, where an LNG terminal would be constructed. From there, ships would head down the St. Lawrence river to the Atlantic Ocean for export to Europe.

That project was killed off in 2021 due to environmental concerns, but the costs would have also been prohibitive.

Trump’s trade threats have reinvigorated interest in LNG in Quebec. Canadian officials indicated interest in maybe taking a second look. “If it’s the same project with the same specs, the decision will be the same,” Benoit Charette, Quebec’s environment minister, told reporters, as the CBC reported, noting that there are still environmental problems with LNG. “If we respond to those concerns today, it’s a project that could be accepted. Projects are studied based on their merits.”

Canada’s Foreign Affairs Minister Mélanie Joly also expressed interest. “We currently have a vulnerability with respect to the United States for our oil and our gas,” she said, according to the CBC. “Canada has essentially one client. For Alberta oil, 98 per cent of the oil goes to the U.S. but we don’t currently have pipelines that cross Canada to come to Quebec.”

Alberta’s environment minister said Japan, in particular, is a trade partner to which Canada should look.

“Given what we’ve seen in the United States, this is reinforcement that we need to diversify our export markets, and Japan, our already existing relationship, is going to be a key area of focus,” Alberta’s Minister of Environment Rebecca Schulz told Reuters.

“There are a number of projects that are being worked on…four or five for additional market capacity,” Schulz said.

But building new oil and gas infrastructure to address trade dependency concerns will worsen climate change and exacerbate Canada’s fossil fuel dependency.

“We’re concerned that the Province’s decision to fast-track industrial resource projects is laying the groundwork to expand LNG, an industry responsible for worsening health and air and water quality, increasing healthcare system costs, insurance rates and the cost of living, and is making the impacts of climate change even more dramatic for people across BC,” Dr. Melissa Lem, a family physician and President of the Canadian Association of Physicians for the Environment (CAPE), an environmental health NGO, said in response to British Columbia’s efforts to support new LNG.

“It’s understandable to want to diversify and loosen economic ties to the U.S., but we now have an opportunity to be leaders in clean energy—not dirty LNG.”