University of Calgary School of Public Policy, U of C web image
CALGARY — Canada’s push to find new overseas buyers for its oil is becoming an economic strategy in its own right, with projects such as Pacific Link and a proposed 300,000-barrel-per-day expansion of the existing Trans Mountain system potentially opening more Pacific access for Alberta crude.
Trans Mountain is advancing optimization projects that could increase its current capacity of about 890,000 barrels per day by as much as 300,000 barrels per day, bringing total system capacity to roughly 1.19 million barrels per day.
RJ Johnston, director of Energy and Natural Resources at the University of Calgary’s School of Public Policy, says the economic case for diversifying Canadian oil exports extends beyond the recent strain in Canada-U.S. relations.
“Yes, it’s hard to see why market diversification would be a bad thing under any circumstances in almost any industry,” Johnston said.
He said the United States has been a major customer for Canadian oil for more than 50 years, but its emergence as a net exporter of oil and refined products raises questions about how much additional growth remains in the market.
Johnston said relying heavily on a single customer also leaves Canadian producers exposed to concentration risk, regardless of which party controls the White House or the state of Canada-U.S. relations.
Asia-Pacific markets offer a potential alternative because they have stronger growth prospects and refining capacity capable of processing heavier crude, he said.
“I think that logic will continue regardless of policy coming from Washington,” Johnston said.
The Trans Mountain expansion, which entered service in 2024, increased the pipeline system’s capacity from about 300,000 barrels per day to 890,000 and significantly increased Canada’s ability to move western crude to the Pacific Coast.
The proposed Pacific Link pipeline would further expand access to Pacific markets. Johnston said efforts to diversify should continue even if political and trade relations with the United States improve.
The shift could also affect the price Alberta producers receive for their oil.
Johnston said getting more Canadian crude into markets with different supply-and-demand conditions could reduce the risk of congestion and oversupply in the United States, which can contribute to wider discounts for Western Canadian crude.
“The more we’re exposed to different price points and different markets, I think the better it is for our pricing,” he said.
He said Canadian producers have historically been vulnerable when too much crude is directed into a limited number of U.S. markets, particularly if refinery outages reduce demand for Canadian heavy oil.
Greater access to Asia and other markets gives producers more options for where those barrels are sold.
Johnston said current energy insecurity, including instability around the Persian Gulf, is also increasing commercial interest in Canada.
He cautioned against assuming Canadian crude will automatically command a premium simply because it comes from a politically stable producer. Oil prices will continue to be driven primarily by global supply and demand.
However, Johnston said energy-security concerns could make governments and investors more willing to support Canadian production and infrastructure.
He said instability affecting major oil-producing regions is helping give Canada an opportunity to become a larger participant in global energy markets.
Johnston said the U.S. will remain an important customer for Canadian crude, but improved relations between the two countries would not eliminate the economic rationale for developing additional export markets.
“I think it’d be a mistake to pull back our focus on the Asian Pacific market for the reasons we discussed earlier,” Johnston said.
He said the broader goal is not to replace the U.S. market, but to give Canadian producers access to more customers, different pricing environments and growing markets outside North America.
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