Page 9 - NorthAmOil Annual Review 2021

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Improvement the government said it would seek to recoup its
Crude-by-rail exports are not the only factor funds if the project is cancelled.
pointing to an improvement in market condi-
tions for Canada’s oil sands. In March, the gov- What next?
ernment of Alberta – the Canadian province that The gradual improvement in conditions for
holds the oil sands – estimated that its 2021-22 Alberta, its oil sands and its crude-by-rail
budget deficit would shrink to CAD18.2bn exports is still fragile, and remains vulnerable
($14.4bn) as its economy starts to recover from to new impacts from the COVID-19 pandemic.
the damage caused by the pandemic. This com- However, a consensus of cautious optimism over
pares with a 2020-21 deficit of CAD20.2bn post-pandemic recovery is emerging as several
($16.0bn) – lower than a CAD24.2bn ($19.1bn) vaccines are in the process of being administered
deficit projected in August 2020. across a growing number of countries.
The narrowing of the provincial deficit has Meanwhile, Canada is also facing a reset in
been attributed to recovering crude prices. And relations with neighbouring US. While US
with OPEC+ deciding to largely keep their pro- President Joe Biden’s term in office began with a
duction steady in March, this recovery is set blow to Canada’s oil industry when he revoked
continue for now. the cross-border Keystone XL permit, he is now
In any case, after taking a battering last year, seeking to move past this.
Alberta expects to do better this year even In March, Biden had a virtual meeting with The narrowing
though it may still struggle with ongoing pan- Canadian Prime Minister Justin Trudeau – his
demic impacts. The province, which generates first bilateral meeting with a foreign leader since of the provincial
much of its economic activity and revenues taking office in January. Biden and Trudeau deficit has been
from oil and gas, anticipates GDP growth of agreed to work together on the public health
4.8% in 2021, after it contracted by 7.8% last and economic crises caused by the pandemic, as attributed to
year. well as on shared goals that include addressing
The provincial government has forecast that climate change. recovering crude
WTI prices will rise gradually over the coming This comes after US-Canada relations were
years, averaging $46 per barrel over the 2021-22 tested by trade tensions during the presidency of prices.
budget period, rising to $55 per barrel in 2022- Biden’s predecessor, Donald Trump. A law pro-
23 and $56.50 per barrel in 2023-24. While this fessor at the University at Buffalo that specialises
will help the province and its producers if it in US-Canada policy, Kathryn Friedman, was
plays out as expected, it may not be enough to cited by NPR as saying the meeting represented
support significant new oil sands development, a turning of the page from a more contentious
depending on how far producers have managed era.
to bring down costs in recent years. However, it is still early days in Biden’s pres-
The Alberta government has also said its idency, and while his political stance is much
financial exposure from an investment in more aligned with Trudeau’s than Trump’s
the Keystone XL pipeline totalled CAD1.3bn was, the Keystone XL decision suggests that
($1.0bn). The pipeline’s operator, TC Energy, he will not shy away from decisions that Can-
has not yet scrapped the pipeline outright, but ada opposes.™

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