Prime Minister Mark Carney returned from India last week with a new energy trade agreement that is the cornerstone of one of the most important bilateral trade agreements Canada has signed with a single nation in decades.

With a population that now exceeds China, and an annual GDP growth of 6% to 7%, India is an up-and-coming, energy-hungry economic powerhouse that Canada cannot ignore.

The Strategic Energy Partnership that Canada and India recently signed is therefore, I think, a very big deal.

B.C. commodities – LNG and LPG (liquefied petroleum gas) – are among the key energy exports identified in the agreement.

“The commodities market in the next few years will be tied to how quickly India can grow,” said Heather Exner-Pirot, director of energy, natural resources and environment for the Macdonald-Laurier Institute.

“They want Canadian LNG, LPG, metallurgical coal, crude oil, uranium, grains, oilseed, fertilizer, minerals, you name it.

“We’ve made a lot of mistakes in the past decade. We cannot miss the boat of growing market share with India in this moment.”

The agreement on energy trade is part of the greater Comprehensive Economic Partnership Agreement (CEPA) that Canada and India hope to conclude by the end of this year.

That agreement could see Canada’s trade with India double to $70 billion by 2030, a PMO news release states.

Energy security lends urgency to energy pact

It’s expected CEPA could be concluded by the end of this year, though it could take longer, said Vina Nadjibulla, the Asia Pacific Foundation’s Indo-Pacific strategist.

In the meantime, the Strategic Energy Partnership allows the countries to move forward on energy trade now.

“In the short term, energy’s an area where I think we can move really quickly,” Nadjibulla said.

The PMO’s office specifically identifies two important B.C. commodities – LNG and LPG (propane and butane) – along with uranium, hydrogen and renewables as part of the new energy trade agreement.

The Canada-India trade talks have already borne fruit for two Canadian mining companies.

India and Saskatchewan’s Cameco have struck a $2.6 billion supply agreement, in which Cameco will supply India with up to 22 million pounds of uranium between 2027 and 2035 for its nuclear energy sector.

And Elk Valley Resources in B.C. signed memorandums of understanding with steelmakers in India to supply $285 million worth of metallurgical coal.

For B.C., the single most important export commodity identified in the agreement is LNG. Nadjibulla notes that India is the world’s fourth largest LNG importer. Most of that comes from the Middle East.

The war in Iran and the closure of the Strait of Hormuz, through which 20% of the world’s oil and LNG moves, has no doubt lent some urgency to discussions with India on energy security.

“Given the volatility in the market, there is something to be said for a reliable, predictable source like Canada,” Nadjibulla said. “So I think there is an argument now that India is more interested in Canadian oil and gas than it has been historically.”

India could become LNG investor

While contracts for Phase 1 of LNG Canada are already locked up in places like Japan, China and South Korea, Nadjibulla said there is now potential for India to become both a customer for, and potential investor in, LNG Canada Phase 2.

“India could be a potential market, both in terms of current shipments, but, more importantly, in Phase 2 of LNG Canada conversations as potentially also an investor,” she said.

“I think, with India, the bottom line is that they will buy whatever we can sell and get to market, when it comes to LPG, LNG and even crude.”

As for LPG (mainly propane and butane), Asia-facing export capacity of propane at the Port of Prince Rupert is set to grow.

AltaGas currently exports 80,000 to 85,000 barrels per day (bpd) of propane through its Ridley Island Propane Export Terminal (RIPIT).

That will increase by 56,000 bpd through its Ridley Island Energy Export Facility (REEF), a joint venture with Royal Vopak.

An optimization project would also add another 25,000 to 30,000 bpd. By 2027, AltaGas’ propane export capacity will be up to 170,000 bpd.

James Shelford, chief commercial officer of Midstream for AltaGas, notes that the big market in India is not so much propane, but butane, which AltaGas also produces.

He also notes that India is a lot further away than its current customers in Japan, China and South Korea. It takes 34 days for LPG carriers to reach India, compared to just 10 days to Japan.

On the other hand, those carriers don’t need to pass through the Strait of Hormuz, and right now, nothing is moving through the Strait of Hormuz except warships.

It appears India is suddenly very interested in Canadian LPG.

“The high commissioner of India, we’ve had many calls with him over the last week,” Shelford said.

“We are engaged with all the different buyers in India, and we look forward to their discussions and how REEF, when it comes online, can be part of their energy security.”

The longer term opportunity for LPG

While India may provide some optionality, the main buyers of propane from B.C. will likely remain in Japan, China and South Korea.

The longer term opportunity for LPG producers like AltaGas, actually lies in LNG export growth. LPG production is inextricably tied to natural gas and LNG production.

Natural gas liquids like butane, propane and condensate are, in a sense, byproducts of natural gas production, though some Montney producers might argue it’s the other way around – that it’s the liquids that are most valuable, and that dry gas is the byproduct.

Whichever way you look at it, growth in LNG production also means growth for LPG production.

“As LNG picks up, that means there’s egress for natural gas, which means more liquids will come with that,” Shelford said.

“The more natural gas that Canada is exporting, it means there’s then going to be more LPGs to export. It doesn’t work the other way.”

And what about that new oil pipeline?

While the Strategic Energy Partnership specifically mentions LNG, LPG, uranium and hydrogen, conspicuously absent is any mention of crude oil, which is the one commodity India really wants and needs.

India is the world’s third largest crude oil consumer, and has been increasing its oil refining capacity. It currently imports about 40% of its crude oil from Russia, and 45% from the Middle East.

There could be significant opportunities for Canadian oil exports to India.

“Given the volatility in the market, there is something to be said for a reliable, predictable source like Canada,” Nadjibulla said. “So I think there is an argument now that India is more interested in Canadian oil and gas than it has been historically.”

As the gateway to Asia and Indo-Pacific, British Columbia stands to be the biggest beneficiary of increased energy trade with India. Everything that India might buy would move through B.C. ports.

But B.C. could also be one of the biggest obstacles to energy trade. Because standing at this gateway is a gatekeeper, David Eby, who doesn’t want any more Alberta oil moving through B.C. ports.

An energy trade agreement between Canada and India that doesn’t include oil weakens Canada’s case as a reliable trade partner.

When it comes to something as important as oil, the only question a customer like India will have for Canada is this: Can you deliver?

And as long as there is opposition in B.C. to a new West Coast oil pipeline, the answer to that is “no, we can’t.”

Let’s hope Carney can be as persuasive with Eby as he has been with Indian Prime Minister Narendra Modi, because without pipeline, rail and port access in B.C., Canada cannot deliver.

Nelson Bennett’s column appears weekly at Resource Works News. Contact him at [email protected]