Canada’s oil industry pivots to Asia as US trade tensions simmer

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Big Oil executives are under pressure to spell out their plans for future growth, a departure from years of cost-cutting as investors fretted about peak oil demand.

With the transition to clean energy now expected to be slower, ExxonMobil, Chevron, Shell, BP and TotalEnergies are being asked to prove the longevity of their reserves, the FT’s Malcolm Moore reports.

For today’s newsletter we turn to Canada, where our correspondent Ilya Gridneff explores the Canadian oil industry’s push into Asia. 

Canada’s energy ambitions in Asia

Prime Minister Mark Carney’s recalibration of the Canadian economy away from an over-reliance on the US is gathering pace as Ottawa looks to India and China as new destinations for its oil, gas and potentially uranium. 

Canada’s oil sector is thriving as it pushes into Asian markets in a bid to reduce its dependence on the US, where a majority of its crude is sold, at a time when the industry is already pumping record volumes and boosting shareholder returns in spite of weak global oil prices.

Canada is the world’s fourth-largest oil producer and has the world’s third-largest proven reserves, mostly in the Alberta oil sands region, infamous for its carbon-intensive process.

It is also one of the world’s biggest uranium producers at a time of renewed nuclear energy interest.

As trade tensions with the US simmer, Ottawa is accelerating efforts to diversify its exports to Asian powerhouses hungry for energy. 

Last month Carney visited Beijing, a first for a Canadian prime minister in almost a decade, where he touted “building a new strategic partnership” with China.

At first US President Donald Trump appeared unbothered by the trip but later lashed out, threatening to impose 100 per cent tariffs on Ottawa, and went so far as to say China would ban ice hockey from being played in Canada.

“China is successfully and completely taking over the once Great Country of Canada,” he posted on social media.

Canada’s oil sales to China more than quadrupled to 88.7mn barrels last year, according to shipping data analysed by the Baltic and International Maritime Council. The surge comes after the opening of the Trans Mountain Expansion pipeline in May 2024, which enabled Canadian crude to flow from Alberta’s oilfields to the west coast for export to Asia.

Next month, Canada is looking to India.

Carney visits New Delhi and Mumbai at the beginning of March after energy minister Tim Hodgson’s recent trip during India’s Energy Week, the first time a federal Canadian minister attended the conference.

“I heard a lot of Indian companies that want more LNG here saying, hey, this is a new potential source of supply,” Hodgson told local media during the trip.

He also hinted that Carney’s trip to India may include the signing of a $3bn uranium deal with Cameco, the world’s largest publicly traded uranium company, based in Saskatoon, Saskatchewan.

But getting more energy to Asia requires more infrastructure built in Canada.

The country plans to double its LNG production and aims to fast-track new production sites. Similarly, a memorandum of understanding signed in November between oil-rich Alberta and Ottawa signals the need for a new pipeline to the west coast that could produce an additional million barrels a day for Asian markets.

Those ambitions took a hit last Friday when Enbridge, North America’s biggest pipeline company, announced it was not willing to build a new pipeline from Alberta to Canada’s west coast.

“I don’t think investors or the infrastructure companies should be taking on all that risk of development in jurisdictions that have historically created challenges,” Enbridge chief executive Gregory Ebel said on an earnings call.

Similarly, Carney has said any increase in oil production requires the sector to help bankroll a carbon capture and storage mega-facility, known as the Pathways Alliance, which will offset emissions and has an estimated price tag somewhere between C$10bn-C$20bn. But the consortium of Canadian oil companies involved in Pathways is reluctant to add the decarbonisation project to their annual operating costs.

Despite Carney’s so-called grand bargain with Alberta’s oil and gas industry, the sector is still grumbling about mixed signals, particularly when it comes to policy over federal methane regulations and the proposal to significantly alter the industrial carbon pricing structure.

Canada’s per capita emissions are among the world’s highest. Despite a population of only 40mn people, the country is the 10th-largest polluter on the planet.

Last Friday the Canadian Climate Institute reported the nation would not meet either the 2026 interim emissions reduction goal, the 2030 Paris Agreement commitment, or the long-term goal of achieving net zero emissions by 2050.

“The country is not on track for its targets — indeed, it has moved away from them,” the report concluded.

How Carney manages to pump more oil and gas to Asia while balancing the relationship with Washington and climate goals underscores the challenges to his goal of making Canada an energy “superpower”. (Ilya Gridneff)

Power Points

Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Rachel Millard, Malcolm Moore and Ryohtaroh Satoh, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.