Tim McMillan. Handout

CALGARY – While Russia invades Ukraine, it has a stranglehold on European energy supplies, especially natural gas. Canada should move to supply Europe with oil and liquified natural gas (LNG), but recent project cancellations and delays for LNG projects and pipelines mean we simply don’t have the ability to do it. If Europeans had to rely on us, right now, they’d freeze.

That’s according to the Canadian Association of Petroleum Producers (CAPP) president and CEO Tim McMillan. He spoke to Pipeline Online on Feb. 25.

McMillan started, “Obviously, our first thoughts are with the people of Ukraine. They’re facing devastating and dangerous circumstances and people are in an active war zone.

“I think our second thought is it’s shameful that energy policy has enabled this and that there’s a direct link between the vulnerability that Europe has, their reliance on Russia that has left them unable to respond in any meaningful way. In fact, they’re consuming as much energy from Russia today as they were six months ago. Maybe more. I think that’s shameful. And it also is reflective on Canada that a German utility was trying to build and trying to invest in an LNG facility on our East Coast and was unable to get through the regulatory process. Quebec recently cancelled the Saguenay LNG facility. Canada has had several opportunities to be a partner, a supplier to our friends and allies in Europe and we have not been able to get out of our own way to do it.”

The Energy East Pipeline was initially planned to be in service by December, 2018, but was cancelled in 2017 by proponent TransCanada, now TC Energy. The federal government moved the regulator goalposts after an already-arduous regulator process, and Quebec had expressed opposition to the project. That pipeline would have allowed crude oil from Western Canada to supplant foreign oil imports into Central and Eastern Canada. It also would have made it possible to export oil by tanker into the Atlantic basin, selling to markets like Europe.

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Asked about that, McMillan said, “Eastern Canada imports billions of dollars of oil. As recently as 2019, we imported I think it was $550 million of oil from Russia. We are not self-sufficient, even ourselves. We could be, but again, our regulatory process and our political environment has made these sorts of energy projects undoable in this country to our own detriment, and with harsh consequences to our friends and allies in Europe and Ukraine.”

If Canada goes to war, what can we do?

Asked if CAPP has considered the possibility that Canada could be at war if Russia attacks a NATO country, and what could we doe to ramp up production to make up for that, McMillan said, “I won’t get into the geopolitical predicting.

“But in the current environment, and in some different scenarios going forward, Canada has hundreds of years of supply that we can produce responsibly. That could be displacing oil coming from Russia. Natural gas is coming from Russia. But we can’t ramp up our supply if we have no ability to get it to our allies. We can produce all the gas in the world, but without an LNG facility in Quebec or Atlantic Canada, it is of no value to people that are freezing in the dark in Germany, or in the United Kingdom or in France.”

National imperative

If things get worse, does McMillan think that the Canadian government should move to approve those projects that were cancelled and expedite their construction?

He replied, “No, I don’t think we should wait for things to get worse. I think if we cannot see as plain as day today that Russia’s aggression is enabled because of the energy crisis in Europe, we’re naïve.

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“And the policy decisions that has made them so vulnerable, shutting down nuclear, not developing their own natural gas, shutting down their coal, countries like Canada that made political policy decisions to not build LNG in a meaningful way. That, today, has proven to embolden Russia, and to leave Europe vulnerable, and to leave us vulnerable.

“So we don’t need to wait for any more signs. The federal government should be making this a national imperative. It’s going to require national leadership, because there’s been so much policy challenge that has driven out all private sector initiatives; Energy East, Saguenay, Goldboro. All of these LNG facilities were trying, from a company perspective, to move forward. So, after all of them have been cancelled, it’s only going to be successful if the federal government thinks it’s a national imperative, and pulls on these projects to enable them.”

Russia currently produces about 10 per cent of the global oil market supply. Does McMillan think they should be cut off from the market and we need to replace it from other sources, including Canada?

He said, “On a principled level, when we are seeing their actions in Ukraine, yes and yes. But the reality is that if we were to execute on that, today, as we should, because they’re actively engaging in a hot war in in the Ukraine, people in Europe would freeze. There would be thousands of people dead, civilians, in Europe, because of the energy realities of having those lines cut off. As distasteful as it is, there’s a hot war going on in Ukraine, the gas is flowing from Russia into Europe. And no one in Europe is going to take the principled position on this, unfortunately. So, it’s only when countries like Canada build infrastructure, they could then take that principled stance.”

Infrastructure needed now

If Canada was called upon, either by our allies or by own federal government, to ramp up production as much as possible, has CAPP had or will CAPP have any discussions on how to do that?

McMillan said, “There is no problem in ramping up production. We have the technology. We have equipment. Of course, there would be constraints, but that is not the limiting factor. We can produce far more than we have the ability to export. So, the next obvious step is that the federal government needs to make a national imperative, LNG facilities and pipelines that connect our resources to our allies around the world, and we will be very effective at getting the production to align with that. But no one is going to do the production until we have something, somewhere and some way to get it to those markets.”

Long term, should anyone trust Russia, going forward, under this regime?

He said, “I think that Europeans, they have no choice. I don’t think it’s about trust. It’s about staying warm, tomorrow, and the day after tomorrow. And if they don’t trust Russia, they don’t have the option to get it from somewhere else. Because somewhere else is Canada and countries like Canada that haven’t built the infrastructure. So, they may not trust them, but they are one they are 40 per cent beholden to them, which means that they’re fully beholden to them.”

A lot of people took Putin’s threat of “such consequences that you have never encountered in your history,” to imply a nuclear threat, and on Feb. 27, he put his nuclear forces on alert. But could he have meant shutting off pipelines supplying Europe instead?

McMillan said, “Yeah, I think that that’s the most obvious response that would be extremely devastating. Just to cut it off for a week to Europe would just be devastating to those countries this time of year. And the fact that this aggression is happening in the same year that Europe has their energy crisis, that their policy decisions over the last decade have all cascaded to the shortages. And it’s this year that Russia has initiated these actions? That is not a coincidence. The realities of Europe’s shortages and crisis are not going away in one year. This is a problem that took a decade to create. It’s going to take a long time for them to fix. And Russia is acting early. And I don’t expect that to change unless we can get an energy system from allies like Canada into Europe.”

 

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