Key Findings
IEEFA’s analysis of future supply scenarios and global market conditions challenges the notion that the West Coast Oil Pipeline can be justified based on capacity need.
Brownfield pipeline expansion projects can accommodate forecasted production growth at lower costs with higher degrees of execution certainty.
The West Coast Oil Pipeline’s tolls are likely to be significantly higher than existing pipelines, and the project would likely represent a net loss to the industry.
Even if oil exported to the Pacific can achieve a premium, this is unlikely to translate to WCS prices, and high tolls would mean lower netbacks for producers.
Executive Summary
In this report, IEEFA assesses whether the Government of Alberta’s proposed West Coast Oil Pipeline would be necessary to support crude oil growth under the range of projections detailed in the Canada Energy Regulator’s (CER) Canada’s Energy Future 2026 report. We conclude that the proposed pipeline, which would transport 1 million barrels of oil per day between Alberta and the west coast of British Columbia, is unlikely to be needed to meet capacity needs in the future.
Our analysis also indicates that the likely cost to the industry in terms of commitments and tolls on exports would outweigh the potential economic benefits, and the project as a whole is risky in the context of the energy transition. In particular, our report finds:
- Under the four scenarios modelled by the CER, only the Higher Scenario would indicate a need for more capacity beyond that which can be added by clearly delineated brownfield expansions.
- The ongoing energy transition has significantly slowed oil demand growth and looks set to bring about a plateau or decline in the coming years. In this context, long-term USD95 per barrel world oil prices driving supply growth in the CER’s Higher Scenario appears increasingly unlikely, particularly with demand for electric vehicles and other clean technologies rising in response to recent oil supply shocks.
- IEEFA's analysis concludes that the West Coast Oil Pipeline is unlikely to be needed to meet future export capacity requirements.
- Existing pipelines and proposed, lower-cost expansion projects provide sufficient pipeline capacity under all likely CER scenarios.
After examining the need for additional West Coast Oil Pipeline egress capacity in light of existing and planned pipeline projects and expansions, we analyze potential economic impacts of the project on the industry.
- The high costs associated with the project mean it is unlikely to generate a net economic benefit for Canada’s oil and gas sector. Tolls are likely to be significantly higher than those of existing pipelines, with our modelling yielding initial tolls of CAD18.7-23.7 per barrel assuming a similar tolling framework to the Transmountain Expansion Project (TMX).
- Even if prices on exports to Asia at Canada’s Pacific coast are higher than those in the U.S., routing new pipeline capacity to the Pacific over the U.S. is unlikely to impact the Western Canada Select-West Texas Intermediate (WCS-WTI) differential due to the high transportation cost and availability of other routes.
- Any potential premium on oil prices at the Pacific coast compared to the U.S. is unlikely to compensate for the high tolls that would need to be charged on the West Coast Oil Pipeline. Our analysis sees long-term committed shippers on the proposed pipeline achieving USD5-8 (2025 prices) less value per barrel exported in most scenarios compared to without the pipeline, depending on the final pipeline cost estimate. This could represent an annual drag on industry with a value of CAD2.2-3.2 billion (2025 dollars) over a 20-year contract period.
In addition, the pipeline project faces significant execution risks. As with other recent pipeline proposals in Western Canada, the project would have to overcome considerable challenges, including the potential for material delays and cost overruns. The project also poses substantial risks to the public sector—based on current proposals, governments could ultimately own approximately 90% of the pipeline and, while long-term shipping contracts may provide revenue certainty, previous contractual arrangements suggest these public sector pipeline owners would bear much of the execution risk.
In sum, our analysis suggests that the large commitments required to support the West Coast Oil pipeline may harm rather than secure future returns for investors. The global energy sector is undergoing significant changes that challenge the economic outlook of the pipeline project—wider market conditions that would be required to support rapid output growth are far from certain and the global energy transition may make this even less likely. Potential benefits of the pipeline are steeped in risk, and other investment priorities may offer more economic resilience as the energy transition moves forward.
