West Coast Oil Pipeline Faces Uncertain Future Amid Peak Demand Predictions

The proposed West Coast Oil Pipeline in Alberta has been met with skepticism by energy analysts at IEEFA. According to their report, the pipeline is not needed to meet future capacity needs due to forecasted production growth and global market conditions.

Brownfield pipeline expansion projects can accommodate this growth at lower costs with higher degrees of execution uncertainty.

The West Coast Oil Pipeline's tolls are likely to be significantly higher than existing pipelines, representing a net loss to the industry. Even if oil exported to the Pacific can achieve a premium, it is unlikely to translate to Western Canadian Select (WCS) prices, and high tolls would mean lower netbacks for producers.

The report also notes that global oil demand is expected to peak by 2030, well before the pipeline would come into service, and advances in technology could push demand into long-term decline faster than currently expected. Mark Kalegha, IEEFA energy finance analyst and co-author of the report, says: “The global energy sector is undergoing significant changes, and both the ongoing trade war with the United States and the economic effects of the current Iran conflict have highlighted the importance of economic diversification.”