Trump’s trade threats reinvigorate talk of new Canadian pipelines

Welcome to Power Supply coming to you from London.

This week’s publication focuses on US President Donald Trump’s rising commerce struggle and its potential impression on power flows, between the US and Canada, and likewise between the US and India.

Final week, following a gathering between Trump and India’s Prime Minister Narendra Modi the 2 leaders agreed to spice up Indian imports of US oil and gasoline. They have been no additional particulars however analysts anticipate liquefied pure gasoline, fairly than oil, to be Washington’s most important focus.

“I feel LNG is the brand new bargaining chip in all places within the effort to avert tariffs,” Helima Croft, international head of commodity technique at RBC Capital Markets, informed me final week. “It seems to be a key element in Trump’s artwork of the deal.”

In an interview shortly earlier than Trump and Modi’s assembly, India’s oil and gasoline minister Hardeep Singh Puri, seemed to be nicely briefed on Washington’s expectations, telling the FT that he was prepared to purchase extra gasoline “from all sources”. For extra particulars on the power implications of the US-India deal take a look at this story from Andres Schipani and Jamie Smyth in at present’s FT.

For now although, keep right here for FT Canada correspondent Ilya Gridneff’s must-read tackle what a commerce struggle will imply for the power sector throughout America’s northern border.

Thanks for studying. — Tom

Canada bets on power as its commerce struggle trump card

President Donald Trump’s assaults on Canada have sparked a wave of newfound patriotism throughout the border, together with calls to turn out to be an “power superpower” by way of beforehand cancelled pipeline tasks that will diversify the nation’s oil economic system away from the US.

Canada, which has the world’s third-largest oil reserves, is the largest overseas provider to the US, accounting for about 60 per cent of its complete oil imports. Aside from file ranges of oil and gasoline, Canada additionally provides the US with electrical energy and uranium.

Many argue Canada is already an power superpower, particularly because the nation’s new liquefied pure gasoline terminal on the west coast of British Columbia is predicted to start out exporting to Asia later this 12 months.

On common Canada sends about 4mn barrels of crude to the US every day, in response to the US Power Data Administration. These imports have turn out to be more and more essential to ageing US oil refineries, which have been constructed to deal with heavier grades of crude, akin to the kind produced in Canada.

However as Trump’s tariff threats in opposition to Canada — together with a ten per cent levy on oil — undermines a buying and selling relationship value C$1.3tn ($910bn), power has turn out to be essential to reinforcing the nation’s economic system.

Beforehand scrapped pipelines akin to Power East, which might ship oil 4,600km from resource-rich Alberta province to Canada’s Atlantic coast, and Northern Gateway, one other undertaking to export heavy oil to the Pacific coast, are being mentioned as methods to search out new buying and selling companions farther afield.

Alberta’s premier Danielle Smith has described the Trump presidency as a “wake-up name” and argues new pipeline tasks might assist double Canada’s oil output.

Quebec’s premier François Legault informed reporters there isn’t any plan to revive the Power East oil pipeline — a undertaking first proposed in 2013 — that will move by means of the province. However he added, “what Mr Trump is doing could change the scenario”.

Earlier this month, Canada’s pure assets minister Jonathan Wilkinson conceded a brand new west-east oil pipeline could also be wanted as “being so depending on the US for the export of oil is a vulnerability”.

Nonetheless, constructing pipelines is an advanced course of. It’s costly, requires an enormous logistical endeavor and wishes quite a lot of time, effort and political capital in consensus constructing with First Nations, native communities and environmental teams.

Then there’s the regulatory processes, authorized points and every province to cope with.

Canada’s most up-to-date addition to its community, the Trans Mountain Growth pipeline that opened final Could, sends oil to the west coast for exports to Asia. It took greater than a decade to construct on account of authorized challenges and technical points. It was ultimately rescued by the federal government at a price of C$34bn — 4 instances over funds.

What is obvious, nevertheless, is that the dialog is evolving. In contrast with 18 months in the past, Canadians are almost twice as prone to emphasise financial progress as an important consider deciding power coverage, in response to an Angus Reid Institute ballot launched final week. The survey additionally confirmed local weather change has dropped down their checklist of issues.

Oil watchers stay sceptical of a Canadian manufacturing increase, principally on account of cautious Wall Avenue buyers who see a pattern in direction of an “power combine” fairly than a fossil fuels resurgence.

On the identical time, pipeline corporations akin to Enbridge or TC Power will not be main the cost. Equally, regardless of Trump’s need to relaunch the Keystone XL pipeline that would pump almost 800,000 b/d from Alberta’s oil sands area, there isn’t any business plan to revive it.

One other problem is Canada’s notably turbulent political local weather.

Justin Trudeau, who resigned final month as prime minister, might be changed on March 9 by both former finance minister Chrystia Freeland or former Financial institution of Canada governor Mark Carney. Following that, a nationwide election is predicted to be referred to as.

Certainly one of Freeland’s proposed platforms is “to make Canada an power superpower, from powering our grids with hydro to exporting LNG to our allies”. Carney has promoted renewable power and a “value on carbon” coverage, drawing the suspicion of the oil and gasoline sector.

Opposition chief Pierre Poilievre, a 45-year-old profession conservative politician who has had a double-digit lead on Trudeau for greater than a 12 months, will virtually definitely be the winner on the subsequent election. However his “Canada is damaged” slogan seems out of step with the brand new temper of patriotism, as current polls present his lead shrinking.

Poilievre has stated Canada’s oil is “underpriced” and underutilised as a result of there is just one pipeline that doesn’t head straight to the US. He has additionally stated Trump ought to approve the Keystone XL undertaking.

No matter their variations, there’s livid settlement from all quarters that Canada’s power is its trump card in a commerce struggle. (Ilya Gridneff)

Energy Factors

Power Supply is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with assist from the FT’s international staff of reporters. Attain us at power.supply@ft.com and observe us on X at @FTEnergy. Make amends for previous editions of the publication right here.