US President Donald Trump’s erratic unilateralism represents nothing less than abdication of global economic and political leadership.
Trump’s withdrawal from the Paris climate agreement, his rejection of the Iran nuclear deal, his tariff war, and his frequent attacks on allies and embrace of adversaries have rapidly turned the United States into an unreliable partner in upholding the international order.
But the administration’s “America First” policies have done more than disqualify the US from global leadership.
They have also created space for other countries to re-shape the international system to their liking.
The influence of China, in particular, is likely to be enhanced.
Consider, for example, that if the European Union perceives the US as an unreliable trade partner, it will have a correspondingly stronger incentive to negotiate a trade deal with China on terms acceptable to President Xi Jinping’s government.
More generally, if the US turns its back on the global order, China will be well positioned to take the lead on reforming the rules of international trade and investment.
So the key question facing the world is this: what does China want? What kind of international economic order do its leaders have in mind?
To start, China is likely to remain a proponent of export-led growth.
As Xi put it at Davos in 2017, China is committed “to growing an open global economy.” Xi and his circle obviously will not want to dismantle the global trading system.
But in other respects, globalisation with Chinese characteristics will differ from globalisation as we know it.
Compared to standard post-World War II practice, China relies more on bilateral and regional trade agreements and less on multilateral negotiating rounds.
In 2002, China signed the Framework Agreement on Comprehensive Economic Co-operation with the Association of Southeast Asian Nations.
It has subsequently negotiated bilateral free-trade agreements with 12 additional countries.
Insofar as China continues to emphasise bilateral agreements over multilateral negotiations, its approach implies a diminished role for the World Trade Organisation (WTO). The Chinese State Council has called for a trade strategy that is “based in China’s periphery, radiates along the Belt and Road, and faces the world.” This suggests that Chinese leaders have in mind a hub-and-spoke system, with China the hub and countries on its periphery the spokes.
Others foresee the emergence of hub-and-spoke trading systems centred on China and also possibly on Europe and the United States – a scenario that becomes more likely as China begins to re-shape the global trading system.
The government may then elaborate other China-centred institutional arrangements to complement its trade strategy.
That process has already begun.
The authorities have established the Asian Infrastructure Investment Bank, headed by Jin Liqun, as a regional alternative to the World Bank.
The People’s Bank of China has made $500bn of swap lines available to more than 30 central banks, challenging the role of the International Monetary Fund.
Illustrating China’s leverage, in 2016 the state-run China Development Bank and Industrial and Commercial Bank of China provided $900mn of emergency assistance to Pakistan, helping its government avoid, or at least delay, recourse to the IMF.
A China-shaped international system will also attach less weight to intellectual property rights.
While one can imagine the Chinese government’s attitude changing as the country becomes a developer of new technology, the sanctity of private property has always been limited in China’s state socialist system.
Hence intellectual property protections are likely to be weaker than in a US-led international regime.
China’s government seeks to shape its economy through subsidies and directives to state-owned enterprises and others.
Its Made in China 2025 plan to promote the country’s high-tech capabilities is only the latest incarnation of this approach.
The WTO has rules intended to limit subsidies.
A China-shaped trading system would, at a minimum, loosen such constraints.
A China-led international regime would also be less open to inflows of foreign direct investment.
In 2017, China ranked behind only the Philippines, Saudi Arabia, and Indonesia among the 60-plus countries rated by the OECD according to the restrictiveness of their inward FDI regimes.
These restrictions are yet another device designed to give Chinese companies space to develop their technological capabilities.
The government would presumably favour a system that authorises other countries to use such policies.
In this world, US multinationals seeking to operate abroad would face new hurdles.
Finally, China continues to exercise tight control over its financial system, as well as maintaining restrictions on capital inflows and outflows.
While the IMF has recently evinced more sympathy for such controls, a China-led international regime would be even more accommodating of their use.
The result would be additional barriers to US financial institutions seeking to do business internationally.
In sum, while a China-led global economy will remain open to trade, it will be less respectful of US intellectual property, less receptive to US foreign investment, and less accommodating of US exporters and multinationals seeking a level playing field.
This is the opposite of what the Trump administration says it wants.
But it is the system that the administration’s own policies are likely to beget. – Project Syndicate

* Barry Eichengreen is professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. His latest book is The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era.

WARSAW, Aug 3 (Reuters) – Poland’s dominant gas firm PGNiG said on Friday that its LNG purchases from Qatar and elsewhere jumped by 60 percent in January-July from a year earlier, as the country diversifies its sources to reduce reliance on Russian gas.

PGNiG has to buy certain amounts of gas annually from Russia under a long-term deal with Russia’s Gazprom, which expires in 2022 and which Warsaw has said will not be renewed.

In the first seven months of this year, PGNiG’s imports from Gazprom rose by 6 percent, it said, but the Russian share of PGNiG’s total gas imports fell by 2 percentage points from a year earlier to 75 percent.

LNG, purchased from Qatar, Norway and the United States, accounted for 19 percent of PGNiG’s total gas imports during the period, an increase of 6 percentage points from a year earlier.

PGNiG has been buying more LNG via a terminal at the Baltic Sea in Poland also plans to build a gas link to Norway by 2022, which would give it access to gas from the North Sea.

“PGNiG is getting prepared to start supplying the Polish market with gas produced on the Norwegian continental shelf,” PGNiG said.

The company also said that gas consumption in Poland rose to 17 billion cubic metres (bcm) last year, from 15 bcm two years previously.

China needs to secure LNG to supply its push to replace coal with cleaner burning natural gas to reduce air pollution. After Beijing started the program last year, China has overtaken South Korea as the world’s second-biggest buyer of LNG.

Tying up with Qatar, the world’s biggest LNG producer, makes sense as the Middle Eastern country seeks buyers for a planned output expansion.

One of the deals under discussion as late as last week covers several million tonnes of annual supply starting this year though 2022, said two of the sources briefed on the discussions. The price and volume is yet to be finalised.

A third source, who was also briefed on the matter, said PetroChina is also discussing a longer-term agreement with Qatar, without giving further details.

China’s LNG imports may surge by 70% over the next three years to 65 million t in 2020, according to consultancy SIA Energy. Last year, China imported a record 38.1 million t, 46% more than the previous year.

“The short-term deal is to supplement an existing long-term agreement,” said a Beijing-based industry executive.

PetroChina started supply talks with Qatar, the world’s largest LNG exporter, several months ago to cover a growing long-term supply gap as demand is set to rise faster than domestic fields could produce.

Despite growing competition from rival exporters such as Australia, Russia and the US, Qatar stands among the most competitive suppliers to China due to the size of its output, geographic proximity and low cost, said Chen Zhu, managing director at consultancy SIA Energy.

The talks with Qatar follow China’s decision to add LNG from the US to the latest list of US goods under tariffs amid the trade war between the world’s two-largest economies.

China’s imports are bound to grow as the country has only secured 43 million tpy of imports and is expected to need 65 million tpy of imports by 2020, rising to 87 million tpy by 2020, according to SIA Energy forecasts.

“Given the growing appetite for imported LNG, China has to look for new LNG sources and investments. This will benefit new projects in Qatar, Canada West Coast, Russia, Mozambique, Australia and Papua New Guinea,” said Chen.

Qatar is looking to expand its LNG capacity to 100 million tpy from 77 million tpy currently.

Ras Laffan in Qatar is home to the world’s most productive LNG liquefaction complex, the world’s largest LNG carrier fleet and the world’s newest LNGC repair yard

Located within the Erhama Bin Jaber Al Jalahma Shipyard complex at Ras Laffan in northern Qatar, the joint venture Nakilat-Keppel Offshore & Marine Ltd (N-KOM) facility has successfully delivered in excess of 800 marine and offshore projects to date.

N-KOM has leveraged the extensive experience and technical know-how of its parent companies to become recognised as an expert in handling gas carriers and a variety of other vessels. The company offers a comprehensive range of repair, conversion, maintenance and fabrication services to the marine, offshore and onshore sectors, while its track record of safe, quality and timely deliveries has helped the facility win new and repeat business.

Cavalcade of LNGC repairs

The N-KOM shipyard has attracted numerous LNG carriers for routine docking and membrane tank repair and maintenance work so far in 2018. Among the LNG carriers repaired are vessels from Shipping Corporation of India (SCI), Maran Gas Maritime, Nakilat Shipping Qatar Ltd (NSQL), Teekay Shipping, Shell, MOL LNG Transport, K-Line Shipmanagement and NYK LNG Shipmanagement.

Most of these vessels underwent routine drydocking and repairs such as cargo tank inspections, overhauling of main engine cylinders, LNG cargo and spray pump servicing, general steel repairs, and hull treatment and painting. In addition, load tests for lifeboats and other related inspections have been carried out.

Evidence of the N-KOM yard’s popularity with LNG shipowners and managers can be seen in the fact that the facility has been fully booked for repairs in the months of July and August 2018.

 “The growth of the LNG spot market has resulted in a significant increase in inquiries for repairs from LNG vessels that have not traditionally traded in the Middle East Gulf area”

N-KOM has two graving docks and one floating dock able to accommodate LNG carriers of up to the 266,000 m³ Q-max size, as well as an alongside berthing capacity of 3,150 m. Handling the complexities of repair work on sophisticated ships such as LNG carriers is facilitated by the yard’s well-equipped cryogenic cleanrooms.

N-KOM points out that the presence of prominent maritime service providers such as Gaztransport & Technigaz (GTT), Goltens, Wärtsilä, Wilhelmsen Ships Service, Turbo Technik and Cargotec operating within the shipyard helps smooth the overall repair process, offering convenience to shipowners and managers patronising the facility. In addition to its team of GTT-qualified membrane welders, N-KOM works with various specialist membrane repair contractors.

The growth of the LNG spot market has resulted in a significant increase in inquiries for repairs from LNG vessels that have not traditionally traded in the Middle East Gulf area. Given the reputation of the yard, in terms of experience, quality standards and the range of equipment and services available, vessel owners have been keen to book their ships at N-KOM as they align repositioning manoeuvres with routine ship maintenance requirements.

Earlier this year N-KOM received an award for the ‘Best Behavioural Safety Initiative’ during a safety workshop organised by Shell International Trading and Shipping Company Ltd (STASCO) for its contractors. The yard was lauded for deploying effective strategies and achieving successful measurable results, with a specific focus on safety and quality. N-KOM reports that the Shell award bears further testament to its commitment to high operating standards.

Ballast treatment

N-KOM continues to see interest in ballast water treatment system (BWTS) installations, and the yard has experience in handling such installation work for several vessels.

Understandably for large LNG carriers, the choice of BWTS is relatively limited. The focus is on those systems that can meet not only the ballast volume and flow requirements of the ship, but also the need to complete the necessary ballast treatment operations in line with their cargo-handling timescales.

On the plus side, LNG carriers have sufficient space and power available to enable the installation of a BWTS able to meet its needs. N-KOM cautions that the engineering of the retrofit process should be carefully planned and rehearsed before drydocking.

One of the challenges in this process involves optimising installation processes and the costs of manhours and materials. From interactions with ship operators, N-KOM observes that there have been delays on the part of owners in selecting the BWT systems, albeit with reasonable justifications.

The maturity of the technology, equipment approvals and regulations are the main three parameters that pose serious challenges to the operators. As such, adequate planning and preparation are highly recommended to facilitate the correct choice of BWTS in a timely manner.

N-KOM is able to observe the choices of shipowners to ensure compliance with the more stringent air emissions requirements coming into force, most notably the 0.5% global sulphur cap that becomes mandatory on 1 January 2020. The yard has noted that a number of owners with modern ships that still consume relatively large amounts of fuel, such as large tankers, are exploring exhaust gas scrubbers as one of the solutions.

N-KOM has already been booked for scrubber retrofits for a series of very large crude carriers belonging to a major Greek tanker operator. The yard expects that the remainder of 2018 and the whole of 2019 will be a busy time in terms of scrubber retrofits.

Nakilat’s expanding outreach

It has also been a year of significant developments at Qatar Gas Transport Co Ltd (Nakilat), the Qatari shipowning and marine services partner in the N-KOM operation. Established in 2004, Nakilat remains the essential transportation link in the supply chains developed to ensure the delivery of LNG exports from Ras Laffan to markets worldwide. The company’s outreach extends to more than 90 receiving terminals across 26 countries.

The 210,000 m3, 2009-built Al Sadd, one of the 31 Q-flex size LNG carriers in the Nakilat fleet

In March 2018 Nakilat expanded its joint venture partnership with the Greek shipping company Maran Ventures Inc to include two additional LNG carriers, boosting the number of vessels jointly owned by Nakilat and Maran Gas from 13 to 15 vessels.

Nakilat reports that strategic alliances with renowned partners have been fundamental to the company’s success. Furthermore, opportunities to grow its international presence in this manner, to capitalise on growing global energy demands, are under continuous review.

In this respect, Nakilat’s pursuance of a presence in the floating storage and regasification unit (FSRU) niche market achieved success in June 2018, when a landmark agreement was signed with Excelerate Energy of the US. The establishment of a joint venture company between the two parties gave Nakilat a 55% stake in one of Excelerate’s FSRUs – the first such vessel to join the Qatari shipowner’s fleet. Nakilat states that this deal marks the beginning of its growing involvement with the FSRU sector, with the promise of further outreach to developing LNG markets.

Nakilat now either fully or partly owns 65 LNG carriers, four large LPG carriers and one FSRU. NSQL, the company’s in-house ship management affiliate, now manages and operates 18 vessels, comprising the four LPG carriers, six Q-max size LNG carriers and eight Q-flex LNG carriers.

Nakilat’s 70-ship fleet includes 14 Q-max and 31 Q-flex LNG carriers, the world’s largest such vessels. The cargo-carrying capacity of the Nakilat LNGC fleet totals over 9M m³, making it the world’s largest such fleet, with about 12% of the overall capacity. The fleet transports more than 60% of Qatar’s LNG exports.

Qatar is reviewing a possible expansion of the LNG liquefaction capacity at Ras Laffan, from the current level of 77M tonnes per annum (mta) to 100 mta by the early 2020s.

Irrespective of that decision, Nakilat will continue to extend its outreach and LNG regasification, power generation and small-scale LNG are among the areas the company will continue to explore for possible opportunities to expand its business portfolio. However, should the project to expand Ras Laffan output to 100 mta get the green light, both N-KOM and Nakilat can look forward to a significant incremental jump in business activity.

Oil firm Nexen Petroleum UK has said its partners have given it the nod to extend the life of the North Sea’s biggest producing field.

Nexen, owned by the China National Offshore Oil Corporation, also said the Oil and Gas Authority (OGA) had approved the Buzzard field phase two development.

In November, Nexen’s UK managing director, Ray Riddoch, said production from Buzzard would be prolonged by up to 10 years as part of a £500-million-plus project.

A number of contracts have already been awarded to the supply chain, while work on the front-end engineering design was completed in June.

irst oil is expected in the first quarter of 2021.

Operator Nexen owns 43.21% of Buzzard, the largest UK North Sea oil discovery in the past two decades.

Its partners are Suncor Energy (29.89%), Chrysaor (21.73%), Dyas (4.7%) and Oranje-Nassau Energie (0.46%).

Nexen is working on the project with a host of oil field service companies including AGR Well Management, Baker Hughes, a GE company (BHGE), COSL Drilling Europe, Subsea 7 and Worley Parsons.

They have formed an integrated team which is based at Nexen’s office in Kingswells, Aberdeen.

The team is going after additional reserves with a subsea development in the northern part of the Buzzard field.

Buzzard, which lies 60 miles north-east of Aberdeen, was discovered in 2001 and produced first oil in 2007.

The latest figures of the OGA show the field is producing more than 140,000 barrels of oil equivalent per day.

A production and water injection subsea manifold will be installed and tied back to the existing Buzzard complex.

A new module will also be added to the complex for processing and export.

Last week, Subsea 7 said it had won a contract worth between £38-£115m to build and install a three mile pipeline bundle and provide a heavy lift vessel for transporting and installing a new topside module.

BHGE has been chosen to supply a range of subsea infrastructure and topside control systems.

Zvonimir Djerfi, Europe president, BHGE, said the formation of the integrated team was a prime example of companies taking an unconventional approach to collaboration and project development.

The GCC as we know it today would not be the same were it not for the discovery of oil in the region in the early years of the last century.

Now, new data has surfaced that predicts the GCC will break its dependence on fossil fuels by 2050, emerging in the new decade with an economy whose fate is no longer tied to the fickle fluctuations of oil prices.

The question remains, however: How effective will the GCC’s attempts to wean off hydrocarbons be, and which non-oil sectors will be able to keep it afloat?

Speaking to Arab News, New York-based firm Fitch Solutions shared information from their latest report covering global trends through to 2050. Their data shows that countries in the GCC like Kuwait, UAE, Saudi Arabia and Bahrain will achieve their goal of a diversified economy by 2050 following their acts of reform.

Initiatives like Dubai’s Vision 2021, Saudi’s Vision 2030, the implementation of VAT, and the lifting of the ban on women driving are all heralds of this long-awaited change. As it currently stands, the UAE is ahead of its neighbors, having announced their reformatory Vision 2021 for Dubai back in 2010. According to Trading Economics, 40% of current UAE exports come from oil and natural gas, the lowest in the region.

Other countries, however, such as Kuwait and Oman still have a lot of ground to cover, with the Kuwaiti oil sector accounting for 40% of the country’s GDP, 90% of total exports and 80% of state revenues, according to Trading Economics.

These Gulf nations cannot afford to rely solely on oil anymore, as the recurring drop in oil price has shown. The 2014 oil price crash gave these rich countries a pang of reality. During that year, the price of a barrel dropped from around $115 in June 2014 to under $27 in February 2016, according to CNBC.

Are other sectors enough to support the entire region?

The possibility of oil running out has always existed.

Sooner or later, these countries will need to take action. The question remains, however: could non-oil sectors truly support a region that has been so reliant on fossil fuel revenues?

Tourism and hospitality staples of the region’s economy

In recent years, the UAE has continued to nurture and grow its tourism industry. Dubai International Airport (DXB) was not named the world’s busiest airport for no reason. Passenger numbers at the airport topped 43.7 million in the first half of 2018, according to a traffic report issued last month by operator Dubai Airports, up 1.6% from the same period last year.

Dubai, for example, has been seeing a hotel construction boom in anticipation of Expo 2020.

Foreign investment is key

These countries are also looking outside their borders for investment opportunities. Saudi’s Public Investment Fund (PIF) currently has stakes in several major companies abroad, such as $72 billion ride-hailing company Uber and future-oriented Tesla.

The PIF’s investment in Uber is reported to be worth $3.5 billion, according to the New York Times. The fund’s latest investment has been in Tesla, reported at a 5% stake. The fund has also staked a $400 million sum in American augmented reality startup Magic Leap.

The country has been intent on investing in technology companies they believe will have a key role in the future of economy as well as mankind.

Inward FDIs are also key, with the UAE and Saudi currently at the forefront of the GCC.

The future is green

Saudi is also looking at green energy ventures. Earlier this year during March, Saudi Arabia and the SoftBank Group Corporation announced a $200 billion solar energy project, set to produce 200 GW by 2030. Saudi’s vast open deserts permit a project of this scale, and this new project will produce an excessive amount of energy that will eclipse Saudi’s needs. This means that the kingdom could become one of the world’s greatest exporters of solar energy, distributed using mass batteries.

It seems that 200 hundred years later after it was first invented, we are still relying on age-old technology such as the battery.

The UAE has some solar plans of its own. Its Mohammed bin Rashid Al Maktoum Solar Park in the desert south of Dubai spans 16.2 km². By 2030, it will have a capacity of 5,000 MW, offsetting 6.5 million tons of CO2 emissions and generating enough energy to power 800,000 homes, Smithsonian Magazine reports.

Bahrain’s prospects are not as ambitious just yet. The country has set a target of 10% of total energy consumption to be met through renewables by 2035, doubling the 5% goal by 2025, Electricity and Water Affairs Minister Dr. Abdulhussain Mirza has said.

The GCC prepares for a future with blockchain

The rise of cryptocurrencies and blockchain has already sent ripples through the region’s banking sector. For the GCC to survive without oil, it will be instrumental that these countries adapt and embrace these upcoming changes.

The National Bank of Abu Dhabi has become the first bank in the MENA region to introduce real-time, cross-border payments on blockchain, Medium reports. The bank has formed a partnership with Ripple.

Saudi’s central bank has also signed a deal with Ripple for an upcoming project.

Freight transportation industry in GCC needs an update if it will survive

Freight transportation and logistics (T&L) is a critical industry in the GCC, yet revenues have been on the decline in recent years. Pricewaterhouse Coopers (PwC) analysts blame this on the GCC lagging behind the technological advancements of T&L industries abroad.

If the GCC’s T&L industry is to catch up and survive post-oil, they will need to adopt digitization practices to update their services to a more demanding international clientele.

• Shares in Interserve slumped as it revealed debts of £614.3million 
• Half-year sales fell from £1.64billion to £1.5billion while it made a £6million loss
• Bosses said revenue from Qatar was down £31.2million over last year 
• Interserve’s work in Qatar includes some work on World Cup projects 

Troubled outsourcer Interserve has blamed the blockade against Qatar for some of its woes as it swung to a loss and debts spiralled.

Shares slumped as it revealed debts of £614.3million – more than six times its market value – a near-60per cent increase on last year.

Half-year sales fell from £1.64billion to £1.5billion while it made a £6million loss compared to a £24.9million profit during the same period last year.

Bosses said revenue from Qatar was down £31.2million over last year as a trade blockade against the country by its neighbours delayed contract awards and made getting supplies harder.

Interserve’s work in Qatar includes some work on World Cup projects, other construction projects and support services. It is not building stadiums for the 2022 tournament.

Interserve employs 80,000 around the world and about 25,000 in the UK, with sales of around £3.7billion. Its work includes security, probation, healthcare and construction services, as well as cleaning the London Underground and managing army barracks.

It has been struggling financially since last year partly due to losses on a waste project in Glasgow, and issued two profit warnings late last year.

In January it emerged Interserve was being monitored by the Government amid fears of a repeat of the collapse of builder and outsourcer Carillion.

Its shares have fallen nearly 70per cent since last year, slumping further yesterday, valuing the company at around £96million. Operating profits for the first half rose by £11.5million to £40.1million.

Chief executive Debbie White, 56, has spent £32.1million on financial advisers including PwC before reaching a rescue deal with creditors in March.

She said trading during the first half had been in line with expectations and the business was on a better footing to move forward. She added: ‘Whilst there remains a significant amount of work to do, we have energy and momentum.’

The escalating trade battle between Canada and Saudi Arabia highlights the need for more pipelines to move oil and natural gas around the northern nation to improve its energy security, according to the Canadian oil industry’s largest trade group.

“Geopolitical tensions, whether they be with our largest trading partner, the U.S., or with other countries, illustrate the opportunity we have to improve energy security within our own borders and to expand our exports to global markets to ensure we are getting the best price for our products,” Brunnen said in an emailed statement.

Despite sitting on an ocean of oil, Canada still buys $300 million per month of Saudi crude

As Saudi Arabia aggressively severs ties with Canada, the two countries’ trade relationship hangs in the balance. On one hand, Canada will lose out on Saudi foreign students, military contracts and sales of wheat and grain. On the other, Saudi Arabia will lose the billions of dollars it earns every year by selling oil to Canada.

For years, it has been an oft-repeated Alberta grievance that these imports exist at all. Despite sitting atop an ocean of proven oil reserves, Canada continues to spend a small fortune every year buying oil from a country that executes homosexuals, flogs dissidents and has a nasty habit of funding Islamic extremism.

Below, a quick guide to why Canadians are still gassing up their cars with Saudi crude.

Over the last 10 years, Canada has spent $20.9 billion on Saudi crude
Between 2007 and 2017, Statistics Canada figures show that Canada imported a total of $20.9 billion of Saudi Arabian petroleum oils. For context, this is almost precisely what Canada spends on its military per year. It’s also way more than the expected $15.7 billion cost of the Energy East pipeline. On average, in recent years, Saudi Arabia supplies about 10 per cent of Canada’s oil imports. Canada, in turn, is responsible for buying roughly 1.5 per cent of total Saudi oil exports. What’s more, Saudi Arabia is climbing the leader board of countries that Canada’s relies upon for its foreign oil. As recently as 2010, Saudi Arabia ranked as Canada’s fifth largest supplier of foreign oil (behind Algeria, Norway, the U.K. and Kazakhstan). Now, Saudi Arabia is second only to the United States.

Right now, all the Saudi oil is coming through a single New Brunswick refinery
All of the Saudi oil imported into Canada in 2017 and 2018 came through New Brunswick, which only has one oil import facility: The massive Irving Oil-owned Saint John refinery. Between January and June of this year that refinery has imported $1.8 billion of Saudi oil — roughly $10 million per day. The amount of U.S. oil entering the refinery, for comparison, is equivalent only to about $3.8 million per day. Unlike most Canadian refineries, Saint John has no access to a pipeline; every barrel of oil it processes either comes by tanker or train. (The oil train that caused the Lac-Mégantic rail disaster, in fact, was headed to the Saint John refinery). “We source crude oil from all over the world for our refinery in Saint John, N.B.,” a spokesman for Irving Oil told the National Post in 2016. And whenever someone is seeking out the cheapest product from the world market, it’s not unusual that a lot of it is going to come from oil-rich Saudi Arabia. It’s like turning to the world market to buy the cheapest possible t-shirts: Chances are that they’re going to come from Bangladesh.

Alberta and Saudi oil aren’t necessarily the same thing
On paper, Canada could become energy self-sufficient tomorrow. Every day we produce about 3.9 million barrels of oil per day, and use less than 2 million barrels. A study this year from the Canadian Energy Research Institute even calculated that energy self-sufficiency might reduce emissions. But think of oil like whiskey: There are many different types and qualities. A bourbon connoisseur probably isn’t going to be happy with a bottle of Old Crow and a Manhattan isn’t going to taste the same if it’s made out of Scotch. Similarly, Alberta oil is not interchangeable with the stuff coming out of Saudi Arabia. Andrew Leach, an energy economist at the University of Alberta, even said that comparing the two is like comparing apples and oranges. “Saudi crude and WCS (Western Canadian Select) doesn’t overlap much in terms of their markets,” he told the National Post. For one thing, most eastern Canadian refineries cannot process bitumen, the thick tar-like hydrocarbon that comes out of the Athabasca Oil Sands. Almost anybody can process Saudi Arabian crude, but only an elite fraternity of the world’s most complex refineries can turn Alberta bitumen into gasoline. To get to the east coast, Canadian bitumen also has to be shipped overland from more than 4,000 kilometres away, significantly adding to its total costs (Saudi Arabia is 10,000 kilometres away from the Canadian east coast, but tanker shipment is cheap). It’s also why Western Canadian Select, the industry name for most oil sands bitumen, sells at such a steep discount to more conventional oil types coming out of Saudi Arabia. In June, for instance, WCS sold at an average of USD$52.10 a barrel, compared to USD$67.87 for West Texas Intermediate (WTI), an oil category priced similarly to most Middle Eastern oils. “The oil Alberta produces is simply of a lower quality than … WTI, and is located farther away from customers,” writes the Alberta government in an online briefing note describing the WCS “discount.”

Even with a pipeline, it’s not a guarantee that refineries would buy Canadian
The cancelled Energy East pipeline, of course, would have pumped Saskatchewan and Alberta petroleum into New Brunswick. Politicians touted the pipeline as a way to supplant foreign suppliers such as Saudi Arabia. “We believe this nation-building project would have benefited all of Canada through new jobs, investment, energy security and the ability to displace oil being imported into Canada from overseas,” Alberta premier Rachel Notley said upon the project’s cancellation. However, refineries are no different than a driver cruising gas stations looking for a fill-up: They seek out whoever has the best price and buy accordingly. If Alberta can’t sell its oil on the Atlantic Coast for a lower price than Saudi Arabia, refineries aren’t going to buy it — particularly if they can’t process it. “Getting product from Western Canada, while conceptually sounding like a good way to push out Saudi oil, doesn’t fix everything,” said Jason Parent with the Canadian oil industry analyst Kent Group. As of press time, WCS is currently selling at an incredible $30 discount over more conventional oil types. While this would likely be enough to entice Atlantic buyers, the discount isn’t always so competitive — particularly if Saudi Arabia is actively trying to overproduce and drop oil prices in order to kneecap the Canadian and U.S. oil industry. This is part of the reason why Canada never built a pipeline to the east coast in the first place. A west-to-east pipeline was indeed considered soon after the discovery of oil in Alberta in the 1940s, but it was soon scrapped. “Eastern provinces did the math and found it cheaper to import foreign oil by tanker, rather than bother with the extra cost of domestic supply,” said Peter Tertzakian, director of the Calgary-based Arc Energy Research Institute. However, even if the business case is a little complicated, Tertzakian still advocates a pipeline as something Canada should do for strategic reasons. “We could be completely self sufficient if we wanted,” he said. “It’s just a question of how much we are willing to pay for it.”

Canada can’t really hurt Saudi Arabia’s bottom line
The easiest way for Canada to cut off Saudi Arabia imports would be simply to buy more American oil. It’s about the same price, it doesn’t require specialized facilities and considering that they already buy so much of ours, there’s a certain justice to it. The U.S. also has an excellent human rights record compared to the Saudis. But while such a move might assuage Canada’s moral compass, the practical effect would be almost nil. It’s a seller’s market for oil right now. Production of U.S. shale oil is slowing down, Iran is being hammered by sanctions and petroleum demand continues to tick upwards all over the world. All this means that if Canada could successfully prevent a drop of Saudi oil from ever entering our borders again, it’s unlikely that Riyadh would ever notice. Any oil tanker turned away at Saint John could simply set course for New Jersey. Unlike Canada, Saudi Arabia sells a product that is easy to transport and that can be processed by almost anyone. Said Andrew Leach, “Saudi oil will still sell at the world price.”