Don’t let them freeze in the dark

Intended for publication the week of July 5, 2009.

By Brian Zinchuk

Most people would agree it’s a good idea to have some money saved up for a rainy day. It’s increasingly become the habit of nations to do the same, except with oil.

China is building up its strategic petroleum reserves (SPR). Currently, the country keeps enough in reserve to keep it going for 30 days if it were cut off from imports. The plan is to build that reserve to 90 days, and they are on a massive tank-building endeavour to do it.

Other nations have been doing the same. India is working on its own. Ditto for the Philippines. European Union countries are required to have one. Denmark has recently created one. Poland is expanding its reserve to the 90 day mark. The UK is also a new entrant.

Japan, not surprisingly, is fastidious in having its own reserve, with 169 days of reserves between government and private storage.

The US has the largest strategic reserve in the world, with the capacity to backfill a 60 day loss of imports. They store all theirs as unrefined crude, in four mammoth underground facilities. Each uses salt domes deep underground, in a similar manner to how SaskEnergy stores natural gas in underground salt caverns.

Even oil exporters, like Iran and Russia, have been looking at the idea. Iran has one, and Russia is considering it. Don’t forget, Russia produces a similar amount of oil each day as Saudi Arabia.

And what about Canada?

Well, what about Canada? Do we have a cookie jar stuffed with black gold, just in case the world goes to hell in a hand basket?

….. No.

We have the second largest reserves in the world, when you include all the oilsands. But that’s not all that easy to get at. Nope, 47 nations have a strategic reserve, but we are not one of them.

Google “Canadian strategic petroleum reserve,” and the first response you get is a discussion paper asking if we need one.

In February, 2008, Gord Laxer wrote on the op-ed page of The Globe and Mail, “If Canada reversed the Montreal-to-Sarnia pipeline, which brings foreign oil through Southern Ontario, Western Canadian oil would flow to Quebec and reduce imports by almost a third. Taking the portion of Newfoundland oil that is currently exported and redirecting it to Eastern Canada would further reduce imports. In combination, the two measures would cut imports to about half of current levels. Canada would need about 38 million barrels in its reserves.”

He might know a thing or two about this, since the Globe notes, “Gordon Laxer is author of Freezing in the Dark: Why Canada Needs Strategic Petroleum Reserves, a report released by the Parkland Institute and Polaris Institute.”

 You see, we are building storage tanks – lots of them. But they don’t belong to the government, nor does the oil they will contain. Enbridge is undertaking a substantial build program at its Hardisty, Alta. Terminal, where Pipeline News recently paid a visit. But those tanks are meant to send oil down Enbridge’s numerous lines that point in a southeasterly direction, cut across Saskatchewan and cross the US border near Gretna, Man. The pipelines that go east from here are primarily gas lines.

To a layman, it doesn’t make much sense for Canada to export western Canadian oil and import middle-eastern oil to supply eastern Canada. Go too far down that path, however, and you start getting Trudeau-esque National Energy Program ideas. We all know how that went.

Even if we did decide the oil in that tank farm should be prioritized for Canadian use due to some form of emergency, NAFTA gets in the way of us restricting our exports to the US.

Perhaps we should have some sort of strategic reserves in eastern Canada. We don’t need to start monkeying around with long established trading patterns to do it. Build some big tanks along the east coast and fill them up. It might even give a bit of a boost to Western Canadian producers, and surely would make Newfoundland and Labrador happy.

As much as we like or don’t like easterners, making sure they don’t freeze in the dark should be a priority.

 

Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.