Ottawa and Alberta race to push West Coast pipelines as heavy crude competition looms
Canadian energy investors just got a blunt reminder of what over-reliance on one buyer looks like.
Canadian oil and gas stocks sold off Monday after US President Donald Trump ordered a military operation that captured Venezuelan President Nicolás Maduro.
He also announced plans to put Venezuela’s oil reserves in the hands of American companies, raising concerns about future competition for Canadian heavy crude.
According to BNN Bloomberg, shares in Cenovus Energy Inc. and Canadian Natural Resources Ltd. fell about 5 percent, Suncor Energy Inc. dropped 1.4 percent, and Enbridge Inc. and South Bow Corp. each lost around 3 percent, pulling the TSX energy subindex down more than 3 percent.
CBC News said the TSX energy index was down about 4.5 percent at midday before closing roughly 3.5 percent lower.
West Texas Intermediate ended the day up 1.7 percent at just over US$58 per barrel, still about US$15 below year-ago levels.
The core risk for Canadian names is straightforward: Venezuela produces heavy crude similar to Alberta’s oilsands output, and US Gulf Coast refineries are configured to run that grade.
BNN Bloomberg reported that US sanctions have kept virtually all Venezuelan barrels out of the American market, allowing Canadian heavy crude to fill part of the gap.
Canada currently sends about 400,000 barrels a day to the Gulf Coast out of roughly 4m barrels a day it exports to the US, with most volumes going to Midwest refineries linked to Enbridge’s Mainline and South Bow’s Keystone systems.
Jackie Forrest, executive director of the ARC Energy Research Institute, told BNN Bloomberg that if restrictions on Venezuela are lifted, “Canada may have more competition right away” on the Gulf Coast.
She said any additional discount on Canadian heavy crude would likely be “modest” — around US$2 to US$3 a barrel — and argued Monday’s reaction “seems a bit overdone.”
She added that exports via the Gulf Coast and the Trans Mountain line to the West Coast can help offset pricing pressure.
Some market participants framed the move as more sentiment than substance.
Dane Gregoris, managing director of Enverus’s oil and gas research group, told BNN Bloomberg that not much has changed in the near term and that it could take months or years for sanctions policy and Venezuelan output to shift meaningfully.
He called Monday’s selling “a little bit overstated” even as he said there is a “reasonable case” for trimming exposure on the assumption more heavy barrels could eventually hit the US market.
Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners, was more blunt.
He told BNN Bloomberg the move was “based upon a lot of ignorant views,” calling the belief that Venezuela will “suddenly, magically” surge heavy output and displace Canadian demand “really, really dumb.”
He said global markets will still need “every barrel that Venezuela can produce in addition to every barrel that Canada can produce,” noting that non-OPEC+ supply growth is peaking and that demand is expected to rise until at least 2050.
The scale and timing of a Venezuelan comeback are central to that view.
BNN Bloomberg reported that Venezuelan production peaked at 3.5m barrels a day in 1998 and has since fallen to less than one-third of that, with most exports going to China.
CBC News said the country produced about 900,000 barrels a day last year, far below its historical highs, after years of underinvestment and sanctions.
Scotiabank economist Derek Holt wrote, as cited by BNN Bloomberg, that Venezuela holds about 300bn barrels of reserves, roughly 17 percent of global reserves, and said it is clear Trump wants to control them.
He described the move as “a hostile takeover in the global energy sector, the only difference being that guns were used instead of shareholder tactics,” and warned against assuming this will “unleash a torrent of new supply” that buries Canada’s oil industry.
Nuttall told BNN Bloomberg that adding just 500,000 barrels a day could take two years and about US$10bn to US$20bn of capex, while restoring output to 3m to 4m barrels a day could take a decade and up to US$100bn.
He said Venezuela’s pipeline network “hasn’t been touched in 50 years” and estimated maintenance alone at nearly US$60bn.
Randy Ollenberger, managing director of oil and gas equity research at BMO Capital Markets, told BNN Bloomberg that Venezuela remains a direct competitor to Canada in heavy crude.
He said that if sanctions are lifted and Venezuela complies with US demands, an extra 300,000 to 400,000 barrels a day of heavy oil could enter the US market. He expects any major impact on Canadian producers to take 24 to 36 months, though smaller increases could arrive sooner.
The structural issue behind all this is Canada’s reliance on one export market.
The New York Times reported that until 2024, virtually all of Canada’s oil exports, mostly from Alberta’s oilsands, went to the US.
Rory Johnston, founder of Commodity Context, told the Times that “the only way, in the long term, to increase our competitiveness and increase our optionality is with pipeline capacity that doesn’t just point to the United States.”
The Times reported that an expanded government-owned pipeline to the Pacific Coast in 2024 has started to reduce that dependence, with an estimated 500,000 to 700,000 barrels a day now heading to Asia out of roughly 4m barrels a day in total exports, particularly to China.
Alberta Premier Danielle Smith said in a statement reported by BNN Bloomberg that the capture of “Venezuelan dictator Nicolás Maduro” underscores the need to “expedite the development of pipelines to diversify our oil export markets,” including a new line to British Columbia’s West Coast.
BNN Bloomberg said Smith highlighted a November agreement with Prime Minister Mark Carney that paves the way for a potential Indigenous co-owned bitumen pipeline and targets a July 1 deadline to file a proposal with Ottawa’s Major Projects Office.
Nuttall told BNN Bloomberg that Canada needs another West Coast pipeline to add at least 1m barrels a day of capacity and diversify its customer base.
“We cannot be under the thumb of the US,” he said, calling the Venezuela shock “yet another example” of why.
