With President-elect Donald Trump threatening to levy tariffs on all Canadian products, Canada’s reliance on the U.S. market has come into sharper focus. So has discussion about the need to diversify into other markets.

In Canada, about three-quarters of international merchandise exports flow stateside. In Alberta, that share is close to 90%.

Energy has long been at the top of the list where U.S. export concentration is high with 95% of Canada’s oil and gas exports* sent to the U.S. last year.

But recent progress on energy export diversification is being made. In particular, two key developments have boosted exports to Asia in recent years.

Crude Oil - Trans Mountain Expansion (TMX) pipeline

The latest trade data show Canadian oil exports to Asia have soared since the TMX entered operations in May 2024 from effectively zero to a monthly average of $515M between June and October.

By providing an outlet to new markets, the pipeline is helping reduce the discount on heavy oil, and the volatility of that discount. Past periods of pipeline constraints have resulted in the differential blowing out—like it did in late 2018.

As Bloomberg reported, TMX may also serve as a partial insurance policy against potential U.S. tariffs, though it may also mean the pipeline fills up more quickly.

Propane - Ridley Island, B.C.

Japan and South Korea have become major buyers of liquified petroleum gas (LPG), namely propane, from Canada.

Canadian liquified propane exports to Asia went from zero in 2018 to $1.6 billion in 2023, and are expected to increase further this year.

The surge comes after the start up of the first propane export terminal on Canada’s west coast in 2019 by AltaGas—the Ridley Island Propane Export Terminal (RIPET).

Early this year, AltaGas and Vopak announced a joint venture—the Ridley Island Energy Export Facility (REEF)—that will expand LPG exports further.

With this new capacity, Japan temporarily became Alberta's second largest export market in 2022 due to the jump in propane shipments (China once again took second spot in 2023).

LNG - Next up

Canada will make further energy inroads into Asia with the construction of liquefied natural gas (LNG) facilities on the West Coast. LNG Canada Phase 1 is scheduled to begin commercial operations mid next year and the Woodfibre LNG and Cedar LNG projects are under construction.

Bottom line: While the U.S. continues to be the dominant buyer of Canadian energy, Asian markets are becoming increasingly important. This export diversification provides a pathway for further export gains, improved prices, and can help Canada displace higher-emitting energy sources like coal in Asia.

*Includes oil and gas extraction and refined petroleum product industries.

As 2024 slides into our collective rearview mirror, our trivia questions for the rest of December are looking back at the most important economic trends of the year. Enjoy our 12 Days of Economic Trivia for 2024.

Answer to the previous trivia question: Despite a healthy rate of job growth, Alberta’s unemployment rate has recently increased mainly because of extremely strong population growth, leading to rapid entry into the labour force.

Today’s trivia question: The oil patch is a crucial driver of Alberta’s economy. The latest report from the Alberta Energy Regulator shows that oil production in October averaged 4.18 million barrels per day. What was the average 10 years ago in October 2014?