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‘To diversify is fairly critical, and the best places to diversify are going to be China and India,’ said Tristan Goodman, president of the Explorers and Producers Association of Canada
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For decades, almost all Canadian oil and natural gas exports headed in only one direction: south to the United States.
That’s still largely the case, but with the startup of the Trans Mountain expansion in mid-2024 and the LNG Canada project last summer, oil and supercooled natural gas produced in the country are reaching other international destinations in growing volumes.
And in a world rocked by uncertainty, the federal government is looking for more trade partners as it seeks to secure markets for Canadian energy.
“The message is positive and constructive, and is the right message,” Tristan Goodman, president of the Explorers and Producers Association of Canada, said Monday.
“Our oil will continue to move to the United States, regardless of the current sort of problems or concerns, difficulties, that are being seen between the two countries. But to diversify is fairly critical, and the best places to diversify are going to be China and India.”
Returning from a trade trip to India last week, federal Natural Resources Minister Tim Hodgson touted the importance of the world’s most populous country to increasing Canadian exports.
“Given that Canada is serious about being an energy and resources superpower, we have to be serious about India,” Hodgson told reporters Friday.
“There is a natural match between Canadian producers and Indian consumers.”
That message arrives at a critical juncture.
Since the start of January, oil prices have gyrated from below US$58 a barrel to exceeding $65 last week — before closing Monday at $62.14, down more than $3 a barrel — in the midst of mounting geopolitical upheaval, from Venezuela to Iran.
At the same time, U.S. President Donald Trump’s tariff threats toward Canada have ramped up in the wake of Prime Minister Mark Carney’s trip to Beijing and his speech in Davos last month.
For Ottawa, energy is no longer just an economic resource for the federal government to oversee with the provinces, but a strategic asset to promote in a world where global trade rules are shifting.
“Oil usually is — and is still — a geopolitical tool, a geo-economic tool, and it’s probably Canada’s best geopolitical tool,” said Heather Exner-Pirot, director of natural resources, energy and environment at the Macdonald-Laurier Institute.
“We are looking for different trade partners and it’s obvious that the front foot that we’re leading with is oil and gas.”
Encouraging energy trade with other countries comes with both economic and strategic imperatives, experts say.
Canadian oil and gas can help other countries with their energy needs, while accessing key growth markets, said Robert Johnston, director of energy and natural resources policy at the University of Calgary’s School of Public Policy.
“We are not going to use our energy as a coercive diplomacy weapon against others, as the Russians have done with the Europeans, for example. However, I think in terms of soft power,” he said.
“Canada should use its natural resources and its energy as a wedge to open up markets in Asia that are resource-constrained.”
When it comes to India, Hodgson hopes to see more energy and mining products — including uranium, oil, LNG and liquefied petroleum gas (LPG) — sold to India in the future.
According to the International Energy Agency, India is forecast to be the largest-single contributor to global oil demand growth by 2035. It’s also projected to have the second-highest demand growth for electricity, and third-largest global demand growth for natural gas.
The government is “positioning Canada as a reliable, long-term energy and natural resources partner to buyers across the world, including major Asian markets,” Hodgson said Monday in a statement.
Canada is also looking to increase energy trade with China, as the country has become a major buyer of Canadian crude that is shipped through the Trans Mountain pipeline system from Alberta to the British Columbia coast for export.
A recent report by RBC Capital Markets indicates 25 oil tankers left B.C. in December, with direct shipments to China making up 15 port destinations.
In October and November, a record 15 per cent of Canadian oil was sold to countries outside of the U.S., compared with 2.6 per cent in November 2023 — before the Trans Mountain expansion started up — while gas exports outside of the U.S. increased to 8.4 per cent through the ramp up of LNG Canada, noted Charles St-Arnaud, chief economist with Servus Credit Union.
Moving oil to other markets helped shrink the discount on Western Canadian Select (WCS) heavy crude during TMX’s first year of operations, bolstering oil revenues in this country by an estimated $13 billion — and providing more revenue to producers and taxes to governments, St-Arnaud said.
Opening up energy trade can also help attract much-needed foreign investment in large multibillion-dollar projects, say industry analysts.
For example, the LNG Canada project was developed by a consortium that includes five international firms: Shell, Petronas, PetroChina, Korea Gas Corp. and Mitsubishi Corp.
“I hope that LNG model can be replicated in the oil world and critical minerals, and other areas as well,” said Johnston.
Meanwhile, the trade situation with the U.S. is evolving, as tariffs have hit several Canadian sectors, including autos, aluminum and steel in the past year, but almost all energy is exempt from such levies under the Canada-U.S.-Mexico Agreement.
The agreement is set for review this summer.
For Canada’s oil and gas producers, the broader change in tone from the federal government toward promoting energy trade is welcome as the sector continues to increase its output and looks to attract more capital.
“Canada should continue pursuing a parallel path to diversify our access to global markets,” Lisa Baiton, CEO of the Canadian Association of Petroleum Producers, said in a statement.
“For us, this is not about replacing the U.S., it’s about increasing our production and enhancing our ability to export and reach new customers.”
Chris Varcoe is a Calgary Herald columnist.
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