Bay Street oil stock bull says Carney, Poilievre easing private-sector jitters on building new pipelines

One of the biggest oil and gas bulls on Bay Street sees a potential end to Canada’s long stalemate on building new export-focused energy pipelines.

Eric Nuttall says a political shift on the issue is underway ahead of Canada’s next federal election that could help de-risk billions in private-sector spending needed to make new links to foreign markets a reality. The fund manager at Toronto-based investment firm Ninepoint Partners says the catalyst is, of course, U.S. President Donald Trump’s trade war.

“It’s really difficult to describe just how betrayed I think most Canadians feel,” Nuttall told Yahoo Finance Canada in an interview prior to Prime Minister Mark Carney’s call on Sunday for a snap election on April 28. “It has really cemented the necessity for Canada to build out more pipeline capacity to circumvent the United States.”

“Even those who doubted the long-term outlook for oil, the provinces that generally speaking were anti-energy, even they’re coming around to the need to build out more egress.”

Carney has pledged a quicker approach to energy infrastructure than his predecessor, Justin Trudeau. For example, he says federal regulators will be required under his leadership to wrap up their reviews of projects in the national interest within two years, versus the current five-year timeline.

“The day is not far away where Canadian energy stocks will trade at a material premium to U.S. companiesEric Nuttall, partner and senior portfolio manager at Ninepoint Partners

This echoes the years-long push by Conservative Leader Pierre Poilievre to streamline regulatory paths for new pipelines, natural gas plants, and critical minerals mines. Poilievre recently met with Quebec Premier François Legault about a natural gas pipeline proposal blocked by the province in 2021. Last week, Legault suggested Quebec’s opposition to new fossil fuel pipelines is softening due to Trump. That’s a big shift from a few years ago, when he said Quebec is not interested in supporting “dirty energy.”

At the same time, Carney has not confirmed his intention to follow through with Trudeau’s plan for an industry-specific emissions cap on Canada’s oil and gas sector, a policy fiercely rejected by Conservatives and top executives at producing companies.

“[Carney has] made building the energy pipeline central to his platform. So I’m optimistic that we’re finally going to be able to get something done after a decade of apathy towards the subject,” Nuttall said.

“From my conversations with Pierre Poilievre, he would pledge to guarantee a very reasonable review timeframe so there is no massive uncertainty and a need to spend hundreds of millions of dollars just to get to the point to know whether the project may or may not get approved. I think it really has to start with a new government.”

Moving oil out of Western Canada via pipelines to overseas markets has been an elusive goal for the industry, which relies on exports to the United States. Several major oil pipeline proposals have failed in the past decade.

Energy East project would have carried oil from Alberta to New Brunswick. There was also Northern Gateway (Alberta to B.C.) and Keystone XL (Alberta to Oklahoma). All three faced fierce environmental opposition prior to cancellation.

The only recent project to enter service in Canada has been the expansion of the Trans Mountain (TMX) pipeline from Edmonton to the British Columbia coast. Since its completion last May, the project has eased the industry’s reliance on U.S. refineries by boosting exports to markets in Asia.

Last month, Trans Mountain said it expects more interest from oil and gas producers to ship on its system in the face of U.S. tariffs. According to data from ship tracking firm Kpler, about 51 per cent of exports from the pipeline leaving Vancouver were destined for Asia, primarily China, in 2024. The rest went to the United States.

Last month, a poll by the Angus Reid Institute found most respondents supported the revival of Energy East and Northern Gateway.

However, the companies behind these failed projects say they’re not prepared to invest.

“We would need to see real legislative change at the federal and provincial government levels that specifically identifies major infrastructure projects like Northern Gateway as being in the national interest and therefore legally required,” Enbridge (ENB.TO)(ENB) CEO Greg Ebel said on a Feb. 14 conference call with stock analysts.

TC Energy (TRP.TO)(TRP), the company behind Energy East, spun off its oil pipeline business last year into a new company named South Bow Energy (SOBO.TO)(SOBO). TC CEO François Poirier says he plans to continue focusing the bulk of company spending on American projects.

“Right now, we see the highest risk-adjusted returns being in the United States,” he told analysts on his company’s latest quarterly conference call, also on Feb. 14.

Earlier this month, Energy and Natural Resources Minister Jonathan Wilkinson appeared to throw cold water on the idea of building new oil pipelines.

“People are getting way too ahead of themselves on the oil conversation,” he told the Globe and Mail newspaper. “Everybody’s sort of running around saying, ‘Oh my God, we need a new pipeline, we need a new pipeline.’ The question is, well, why do we need a new pipeline?”

To Nuttall, this is no surprise.

“This is a man who said that demand for oil was going to be peaking in 2024, and the demand for natural gas was going to be peaking by the end of the decade,” he said of Wilkinson.

“Given that the past 10 years have been such a road of misery from private companies, it’s completely understandable that there’d be profound hesitancy to go ahead with any new project,” Nuttall added.

“I think private companies would have to see certain pieces of legislation getting outright eliminated, mainly [Bill] C-69, which creates profound barriers and financial obstacles, like having to run a gender-based analysis on the construction of a pipeline.”

Commodity Context founder Rory Johnston says Western Canadian supply growth is on track to fill the 590,000 barrels per day of new capacity added by TMX’s expansion within the next couple of years.

“It would be prudent for Canadian politicians to begin shifting their current concerns towards the structural, and entirely predictable, threat of renewed egress insufficiently coming down the pipe,” he wrote in a recent analysis for subscribers.

“While Canada may have dodged a near-term bullet to crude exports destined for the U.S., this situation serves to only emphasize the continued challenges associated with current pipeline infrastructure.”

Known for riding out 2020’s brutal sell-off in oil and gas stocks as COVID-19 sent benchmark oil prices briefly into negative territory, Nuttall is unapologetically bullish today on where he sees the sector headed next.

“The day is not far away where Canadian energy stocks will trade at a material premium to U.S. companies as people realize that U.S. shale companies have an inventory problem,” he said.

“This is not a sunset industry. Demand for natural gas and oil will grow for many decades to come.”

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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