New pipelines to Canada's West Coast won't succeed in fetching unusually higher oil prices for Canada over the long term, the chief executive officer of Imperial Oil Ltd. says.
Instead, the current situation in global oil markets, which has seen North American -- and particularly Canadian -- crude sell on the cheap is only temporary, and will balance with time, Imperial head Bruce March said Friday. That means Asia is unlikely to be a more lucrative market than, for instance, the U.S., in the future, Mr. March said on the sidelines of the Spruce Meadows Changing Fortunes conference south of Calgary.
Mr. March was quick to point out that new pipelines are still needed to take fast-rising oil sands production to market.
But his comments appear to differ from part of the underlying rationale for controversial new projects like the $6-billion Enbridge Inc. Northern Gateway project, and the $4.1-billion expansion of the Kinder Morgan Trans Mountain line. Both projects are intended to deliver oil to the Pacific for export to markets in California and Asia where, pipeline companies have argued, buyers are willing to pay a premium.
Mr. March said that's unlikely to be true.
"Is Asia better than the Gulf Coast of the United States? In time, we think all that balances out," he said.
He added: "both are good markets and I think if you give these markets enough time, oil and energy prices have a way of equilibrating all across the world, particularly oil, because it's fungible, it moves, it's easily transportable."
On Friday night, Imperial spokesman Pius Rolheiser said the company did not want to appear to contradict pipeline builders. "We are not contrary to the views held by the proponents of these pipelines. In fact, we're strong supporters of those pipelines."
He did reiterate, however, that the balancing Pacific and U.S. oil prices was likely to happen, through "a combination longer-term of raising the Gulf Coast price along with eventual gradual lowering of Asian prices."
Mr. March spoke during a week when Enbridge sought to defend projections showing that Northern Gateway will open access to a market thirsty enough for crude that it will raise the price of Canadian barrels by $2 to $3 (U.S.) a barrel. Between 2018 and 2035, that gain will result in a staggering $45-billion (U.S.) net benefit to Canada, the company argued before a federal review panel that is determining whether Northern Gateway should be approved.
A premium on oil sold to Asia does exist today -- in some cases, Bank of Canada Governor Mark Carney said Friday, Canadian barrels are selling for $35 less than their international equivalents, and companies are currently scrambling to get as much oil west as they can.
But, Mr. March said, the current imbalance is due to issues with the sources of supply and demand that are likely to ease.
"In time Asia, the Gulf Coast, the East Coast -- all these things balance out," he said.
Still, he said, new pipelines are needed, even if western-destined crude doesn't ultimately fetch unusually strong pricing.
"It's a question of takeaway capacity. It's a question of how much Alberta can produce, how much the world needs, and what are the outlets," he said.