Canada is accelerating plans to expand its oil and gas exports as trade tensions with the United States and the war with Iran expose the risks of relying too heavily on a single market or energy route.
The shift marks a significant change in Ottawa’s energy strategy. After years of debating how quickly to reduce dependence on fossil fuels, Canada is increasingly focused on expanding production, building export infrastructure and securing access to overseas buyers.
Prime Minister Mark Carney’s government is drawing lessons from Saudi Arabia, which built an alternative oil export route decades ago to protect its shipments against disruptions in the Strait of Hormuz. Canada now wants to develop similar strategic resilience, although its main vulnerability is dependence on the US market rather than a single maritime chokepoint.
The proposed Pacific Link pipeline, designed to transport up to one million barrels of oil per day from Alberta to Canada’s Pacific coast, is central to this strategy. Ottawa is fast-tracking approvals, with construction expected to begin next September, according to Energy Minister Tim Hodgson.
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Estimated to cost between C$35.2 billion and C$43.7 billion, the project would broadly follow the route of the existing Trans Mountain system and could double Canada’s west-coast export capacity.
The initiative reflects a growing recognition in Ottawa that energy security requires not only sufficient production but also alternative routes and diversified customers.
What Canada Can Learn From Saudi Arabia
Saudi Arabia’s East-West pipeline offers a model for protecting energy exports against geopolitical disruption.
Built following the Iran-Iraq War in the 1980s, the 1,200-kilometre pipeline connects the kingdom’s eastern oil fields to the Red Sea port of Yanbu. It was designed to keep crude exports moving if shipping through the Strait of Hormuz became impossible.
For years, the infrastructure functioned largely as insurance against a potential crisis. Its strategic value became apparent when the war involving Iran, the United States and Israel disrupted energy flows through Hormuz in 2026.
While several Gulf producers faced severe export constraints, Saudi Arabia could redirect a substantial share of its oil shipments through the Red Sea.
Canada’s circumstances differ, but the underlying lesson is similar: alternative export infrastructure can reduce the economic consequences of geopolitical shocks.
The proposed Pacific Link pipeline would provide additional access to Asian markets, allowing Canadian producers to reduce their dependence on US buyers without abandoning the American market.
However, the project’s large price tag raises questions about who should bear the cost of building infrastructure intended partly to protect the country against future crises. Ottawa expects taxpayers to finance most of the investment.
Why Canada Wants to Reduce Its Dependence on the US
Canada is the world’s fourth-largest oil producer, producing more than six million barrels per day in 2025. Much of its output comes from Alberta’s oil sands, and approximately 90% of its oil exports go to the United States.
The relationship has traditionally benefited both countries. Canadian producers have access to a large and established market, while US refineries, particularly in the Midwest, are equipped to process heavy Canadian crude.
But recent deterioration in bilateral relations has exposed the risks of this concentration.
The tariff dispute initiated during US President Donald Trump’s second term has reinforced Canadian concerns about relying on a single trading partner. Although energy has avoided the harshest tariff measures, the wider dispute has created uncertainty for businesses and policymakers.
Washington imposed 50% tariffs on $20 billion in Canadian imports in August after trade negotiations collapsed, prompting Canadian retaliation. Trump subsequently said a deal between the two countries was close.
Carney’s government is therefore pursuing diversification rather than a complete economic separation from the United States.
As Hodgson put it, Canada does not intend to trade less with its southern neighbour but wants to trade substantially more with other countries.
This approach resembles Europe’s efforts to diversify energy supplies following Russia’s 2022 invasion of Ukraine. In both cases, policymakers are reassessing whether longstanding economic relationships can become strategic vulnerabilities when political conditions change.
Asia Emerges as a Major Opportunity
The disruption of energy shipments through the Strait of Hormuz has increased the importance of alternative suppliers for major Asian importers.
Canada could benefit from this shift because it combines substantial energy reserves with political stability, an established regulatory framework and direct access to the Pacific Ocean.
Oil and liquefied natural gas shipments from Canada’s west coast can reach major Asian markets, including China and Japan, in roughly two weeks.
Existing infrastructure has already improved Canada’s access to these customers. The Trans Mountain expansion began operating in 2024, while the Shell-led LNG Canada export facility on the Pacific coast began operations in 2025.
Ottawa is also using tax incentives, regulatory changes and proposed infrastructure projects to encourage further investment.
Hodgson estimates that Canadian oil production could increase by two million to 2.5 million barrels per day over the next five to seven years. LNG exports could rise to 50 million metric tons annually by 2030, compared with approximately 14 million tons today.
These projections would represent a substantial expansion of Canada’s role in global energy markets. However, achieving them will depend on investment, infrastructure development, demand and the economics of new production.
Can Canada Deliver on Its Energy Ambitions?
Despite the strategic case for diversification, Canada faces significant financial and commercial obstacles.
Rory Johnston, founder of Toronto-based consultancy Commodity Context, expects a more modest increase in oil production of approximately 100,000 to 150,000 barrels per day annually over the next decade. He points to uncertainty over future oil prices and companies’ reluctance to commit substantial capital to new capacity.
Canadian crude also presents logistical and pricing challenges. Around three-quarters of the country’s oil is heavy, bitumen-like crude that requires dilution for transportation and specialised refining capacity. Such grades generally sell at lower prices than lighter crude, potentially affecting the returns on additional production and export infrastructure.
The proposed Pacific Link pipeline would also face questions over construction costs, environmental impacts, Indigenous rights and long-term demand for fossil fuels. Previous Canadian pipeline projects have encountered substantial opposition and delays.
These constraints make the government’s production targets uncertain, even as the strategic rationale for expanding export capacity grows stronger.
Energy Infrastructure Becomes a Geopolitical Asset
Canada’s emerging strategy reflects a wider shift in how governments view energy infrastructure. Pipelines, ports and export terminals are increasingly seen not simply as commercial assets but as instruments of national resilience.
Saudi Arabia’s East-West pipeline demonstrates how alternative routes can preserve export revenues and reduce exposure to a geopolitical chokepoint. Canada hopes that expanded Pacific access will provide similar protection against trade disputes and shifts in US policy.
The two cases are not identical. Saudi Arabia sought to protect shipments against disruption along a critical maritime route, whereas Canada wants to reduce its dependence on a dominant customer. Nevertheless, both highlight the strategic value of maintaining alternatives before a crisis occurs.
For Ottawa, the challenge will be balancing the cost of that insurance against uncertain future energy demand and the financial risks of large infrastructure investments.
If Canada can expand its export network and establish durable relationships with Asian buyers, it could strengthen its bargaining position with Washington while becoming a more significant supplier to global markets.
The larger lesson is that energy security depends on more than the resources a country possesses. In an increasingly fragmented geopolitical environment, the ability to transport those resources to multiple markets may prove just as important.
With information from Reuters.
