Canada’s oil imports from Saudi Arabia have been rising steadily for the past five years, according to Statistics Canada trade data reviewed by CBC News, and a festering diplomatic spat with the kingdom appears not to have had any significant impact on Canada’s appetite for Riyadh’s crude.
The total volume of Canadian imports from Saudi Arabia has increased by 66 per cent since 2014, with imports rising every year during that period.
Last year, Canadian companies spent $3.54 billion importing 6.4 million cubic metres of Saudi oil, up from 5.9 million cubic metres worth $2.5 billion in 2017, before the dispute started in August 2018.
In January 2019, for example, oil imports from the kingdom were 607 million cubic metres, up from 559 million cubic metres a year earlier. And although monthly imports gyrate significantly — a normal trend in the oil business, according to analysts — the long-term trend is unmistakable.
“Over five years, imports from Saudi have increased,” said David Hughes, a former research manager with the Geological Survey of Canada and president of Global Sustainability Research, a consultancy in Calgary. In January 2019, Saudi oil accounted for roughly 10 per cent of Canadian consumption, up from about eight per cent in 2017, he said.
Saudi Arabia is the second-largest source of foreign oil for Canada, after the U.S.
‘Not a diplomatic question’
Observers are divided on what rising imports from Saudi Arabia should mean for Canadian policy.
Human rights groups say Canada should not be propping up the Saudi regime by purchasing its oil, following the recent executions of 37 people, the killing of journalist Jamal Khashoggi, a bloody war in neighbouring Yemen and a host of other abuses.
Energy industry officials say rising imports strengthen the case for building pipelines from Alberta to Eastern Canada, where most Saudi Arabian imports are currently sold.
Environmental groups say more pipelines won’t actually cut dependency on Saudi Arabia as Western Canadian oil can’t be easily processed in eastern refineries, and investing in green energy is the best way to reduce dependency on autocratic, oil-rich states.
Other analysts say the imports aren’t related to politics at all, and are based simply on privately owned Canadian refiners wanting the right the kind of oil at the cheapest price.
“Oil is the most freely traded commodity in the world,” said Jim Krane, an energy expert at Rice University’s Baker Institute for Public Policy in Texas. “For a Canadian refiner, it’s an economic or a chemical question, not a diplomatic question.… They aren’t buying it based on the relationship between Ottawa and Riyadh or human rights violations in Saudi Arabia.”
Deteriorating rights situation
Saudi Arabia’s embassy in Ottawa did not respond to requests for comment.
While the war of words between Canada and Saudi Arabia has died down since last summer, the dispute continues. Canada has not apologized for calling for the immediate release of detained women’s rights activists, as Saudi Arabia has demanded.
Ottawa hasn’t had an ambassador in the kingdom since Dennis Horak was expelled last year and the Saudis have not rescinded their pledge to stop buying Canadian grains or reinstated flights to Toronto.
“Saudi Arabia’s human rights record … has, in many deeply troubling ways, deteriorated considerably in recent years,” said Alex Neve, secretary general of Amnesty International Canada.
“It is incumbent upon the Canadian government to ensure that business relationships do not cause or contribute to human rights violations in any country, including Saudi Arabia.”
Petroleum accounts for about 70 per cent of Saudi export earnings and half of its gross domestic product, according to the Organization of Petroleum Exporting Countries (OPEC), meaning oil exports are the lifeblood of the kingdom’s economy and its system of absolute monarchy.
‘Additional pipeline capacity’
A spokesperson for the Canadian Association of Petroleum Producers (CAPP) said increased imports from Saudi Arabia buttress the call for more pipelines to increase market access for Western Canadian crude.
“Right now, our pipeline network is fairly extensive but it doesn’t extend to the East Coast,” said Mark Pinney, CAPP’s manager of markets and transportation. “There are some refineries Canadian producers are not easily able to reach…. Additional pipeline capacity is the answer to a lot of things.”
While oil imports from Saudi Arabia and the U.S. have increased, total Canadian imports have been falling since 2016, he said.
Imports are down overall because of the reversal of Enbridge’s Line 9 pipeline, allowing more crude from Alberta’s oilsands to be easily moved to refineries in Ontario and Quebec, said Pinney.
He said the industry is “frustrated” over slow progress in building new pipelines that would allow domestic producers to compete to supply Eastern Canadian markets, potentially displacing future imports.
Between 2015 and the end of 2018, he said, total Canadian imports fell by 13 per cent.
Canada is the fourth-largest producer and fourth-largest exporter of oil in the world, according to the National Research Council, and 99 per cent of Canadian oil exports go to the U.S. It’s not uncommon for countries to be both exporters and importers of crude, analysts said.
Most Saudi oil exports to Canada go to refineries in Eastern Canada, specifically the Irving refinery in Saint John, and facilities in Quebec, said David Hughes, the consultant.
That refinery is specifically geared to handling light oil from the Middle East, rather than the heavy crude from the oilsands, said Hughes. Reconfiguring it to process Alberta oil would cost around $1 billion, he estimates.
Irving did not respond to interview requests.
It’s unclear if the company would want to spend that money, even if Canada’s pipeline network was extended to the Atlantic provinces, as the now-cancelled $15-billion Energy East Pipeline aimed.
“Irving Oil in Saint John [where the formerly proposed Energy East pipeline would go] have been clear that they would not sign binding contracts to take the oilsands oil,” said Tim Gray, executive director of the Toronto-based campaign group Environmental Defence.
Most of the Albertan production proposed for the pipeline would have been exported, he added, urging Canadian companies to speed up the switch to renewable energy.
“Oil imports can and will be offset by successful efforts to electrify our economy,” Gray said. “This means that electric cars, home heat pumps and industrial processes using clean electricity can cause a rapid decrease in the need for foreign oil.”
This story originally appeared on CBC