Alberta’s economy is grower faster than projected due to strong growth in oil markets over the course of 2017, according to a new report by Bloomberg.
The four-percent growth rate that Alberta saw in 2017 trumps the projected 3.1 percent rate forecasted in the province’s latest budget report. Alberta says it has added over 70,000 new jobs since mid-2016 as the number of active rigs climbs week over week.
Still, unemployment hovers around eight percent, which weighs on tax revenues. The government initially said it expected to collect C$15.1 billion in taxes in the current fiscal year, but now the projections have dropped to C$14.7 billion.
Canada’s oil industry faces multiple headwinds on top of an oil bust that has changed the global industry over the past few years. Canadian producers are selling their oil at hefty discounts to WTI, not only because of the heavier sour variety they are pumping out of the oil sands, but also because of limited pipeline capacity that moves the oil out of landlocked Alberta—the heart of the Canadian oil industry.
Currently there are three pipelines in the works that will take more Alberta oil either to the U.S. or to the Canadian Pacific coast: Enbridge’s Line 3 Replacement Program, Kinder Morgan’s Trans Mountain expansion project, and TransCanada’s Keystone XL pipeline. Last month, TransCanada scrapped a pipeline project to ship oil to the Canadian East Coast.
In the best-case scenario for Canada’s pipeline capacity—that is, if all three remaining pipelines clear all regulatory hurdles—Canadian pipelines will have 52,100 bpd of excess capacity in 2020, and more than 656,100 bpd in 2022, according to estimates by Bloomberg Gadfly columnist Liam Denning. If Keystone XL doesn’t go ahead and Line 3 and Trans Mountain proceed, excess pipeline capacity in 2022 will be just 50,000 bpd.