Canada’s Carney Taps State-Owned Firm to Build Oil Pipeline to Serve Asia

Danielle Smith, Alberta's premier Photo by Todd Korol /Photographer: Todd Korol/Bloombe

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(Bloomberg) — Trans Mountain Corp., a pipeline operator that’s owned by the Canadian government, has been tapped to build a new export conduit connecting Alberta’s oil sands to a Vancouver-area port, Prime Minister Mark Carney said.

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The proposed 1 million-barrel-a-day pipeline will link to a deepwater port capable of receiving Very Large Crude Carriers, or VLCCs, with the goal of “meeting significant Asian demand from countries like Japan, Korea, China and India,” according to the government of Alberta. 

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The project will largely follow the route of the existing Trans Mountain line, Carney said. That’s the only crude pipeline in Canada that currently reaches an ocean port, limiting Canada’s ability to send oil to markets other than the US. 

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“Canada and Alberta will be equal partners in this project, and there will be a meaningful ownership stake for Indigenous communities,” Carney said in Calgary, speaking alongside Alberta Premier Danielle Smith. 

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Carney and Smith, while sometimes political rivals, are seeking a shared goal of diversifying Canada’s exports to become less reliant on the US market after President Donald Trump launched a trade war last year.

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Selling more oil to growing Asian markets such as India and China will allow Canada to get better prices per barrel, they believe, boosting Alberta’s wealth and helping shield the economy from the protectionism that has defined US trade policy under Trump.

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By doing the project through Trans Mountain, the two leaders are effectively providing a government backstop for a complex energy project that is certain to cost tens of billions of dollars. The Alberta government said construction of the project could cost between C$35.2 billion ($24.8 billion) and C$43.7 billion if investment is greenlit in the next three years. But it also forecast the potential to increase Canada’s real gross domestic product by more than 0.6% a year by the 2040s.

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Calgary-based Pembina Pipeline Corp. will help build the new line for an initial 10% stake in the project with the option to raise the stake to 20% when the line is operating, it said in a non-binding statement. The project has now been submitted to the federal Major Projects Office for review — a process that may eventually qualify it for faster regulatory approval.

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The prime minister also said terms have been reached with the largest Canadian oil sands companies to move forward on Pathways, a large carbon capture system. Carney had said the project to reduce energy-sector emissions was a condition of his government’s backing of a new oil pipeline.

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The choice of a route through southern British Columbia, and into Canada’s third most-populated metropolitan area, is a reversal for Smith, who had repeatedly said she preferred a northwestern route because it would shorten the shipping time to Asia. 

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But earlier on Thursday, Carney and BC Premier David Eby announced that a federal ban on oil tankers along the northern BC coast would stay in place with no exceptions. The federal government also announced billions in funding for energy, mining and transportation projects in BC.