Canada Pledges to Sell Oil to Asia After Obama Keystone Denial

Canadian policy makers reacted to President Barack Obama’s decision to deny a pipeline permit to TransCanada Corp. by pledging to rely less on the U.S. for energy sales and export more oil to Asian markets.

Prime Minister Stephen Harper, in a telephone call today, told Obama “that Canada will continue to work to diversify its energy exports,” according to details of the call provided by Harper’s office. Canadian Natural Resource Minister Joe Oliver said relying less on the U.S. would help bolster the country’s “financial security.”

The “decision by the Obama administration underlines the importance of diversifying and expanding our markets, including the growing Asian market,” Oliver told reporters in Ottawa.

Currently, 99 percent of Canada’s crude exports go to the U.S., a figure that Harper wants to reduce in his bid to make Canada a “superpower” in global oil markets.

Canada accounts for more than 90 percent of all proven reserves outside of the Organization of Petroleum Exporting Countries, according to data compiled in the BP Statistical Review of World Energy. Most of Canada’s crude is produced from oil sands deposits in the landlocked province of Alberta, where output is expected to double over the next eight years, according to the Canadian Association of Petroleum Producers.

Harper “expressed his profound disappointment with the news,” according to the statement, which added that Obama told Harper the rejection was not based on the project’s merit and that the company is free to reapply.

Enbridge Pipeline

Canada this month began hearings on a proposed pipeline by Enbridge Inc. to move crude from Alberta’s oil sands to the British Columbia coast, where it could be shipped to Asian markets.

Environmentalists and Canadian opposition lawmakers welcomed the Obama administration’s decision. Megan Leslie, a lawmaker for the opposition New Democratic Party, said the Keystone pipeline project was harmful to Canada’s energy security.

“What I’m opposed to is continuing the unchecked expansion of the oil sands,” Leslie said by telephone.

The denial came before a Feb. 21 deadline set by Congress after Obama postponed a decision in November. TransCanada said the 1,661-mile (2,673-kilometer) project would carry 700,000 barrels of crude a day from Alberta’s oil sands to refineries on the U.S. Gulf coast, crossing six U.S. states and creating 20,000 jobs.

“I’m disappointed that Republicans in Congress forced this decision, but it does not change my administration’s commitment to American-made energy,” Obama said today in a statement. “We will continue to look for new ways to partner with the oil-and-gas industry to increase our energy security.”

May Hurt Relations

The decision may hurt relations between the two countries, according to David Pumphrey of the Center for Strategic and International Studies in Washington.

“It certainly introduces new uncertainties into the economic relationship,” said Pumphrey, deputy director of the energy and national security program at the CSIS. “This is a cornerstone of economic development for the country.”

Canadian policy makers said they remain optimistic TransCanada will eventually be able to proceed.

Alberta Premier Alison Redford said in a press conference in Edmonton that it is still “entirely possible” the pipeline will be built, and said it was good news that TransCanada planned to apply again.

Canada will continue to support TransCanada Corp.’s plans to build the Keystone XL pipeline, Canadian Foreign Minister John Baird said, adding that it is in the best interests of both Canada and the United States.

“We strongly believe that Keystone’s in the best interests of both countries,” he said. “We’ll continue to be an active supporter of the project.”