Pipe Dreams vs Pipe Realities: A Conversation with François Poirier, President and CEO of TC Energy
This week, our guest is François Poirier, President and Chief Executive Officer of TC Energy. While he is based in Calgary, François joined us from Houston, where he attended the CERAWeek Conference. TC Energy has one of North America’s largest energy infrastructure portfolios, including natural gas pipelines and electricity generation assets in Canada, the United States, and Mexico.
Here are some of the questions Jackie and Peter asked François Poirier: What are some of the top themes at CERAWeek, including the discussion on the infrastructure panel you spoke at? Do you expect the US will build pipelines and other large energy projects faster with President Trump’s emergency orders and fast-tracking? What is your outlook for North American natural gas demand, considering the proliferation of plans to build new AI data centres? President Trump would like to revive the Keystone XL oil pipeline; what are your thoughts on that project? Is there an opportunity to move more natural gas between Western Canada and Eastern Canada over Canadian territory using the TC Mainline? Do you see the potential to revive the Energy East pipeline? What did you learn from completing the Coastal Gas Link pipeline which connects natural gas from Northeast British Columbia to Canada’s west coast at Kitimat, and how did it compare to your recent project of building a natural gas pipeline in Mexico? Could you envision TC Energy investing in another LNG feed gas pipeline in Canada, and what would need to change for you to make this investment? How urgent is it for Canada to start taking action to accelerate LNG projects, considering competition from Alaska, Mexico, and other foreign suppliers?
Content referenced in this podcast:
- Wall Street Journal Opinion Piece “How to Make North American Energy Great Again” (Feb 3, 2005)
- TC Energy’s Mexico pipeline project ($4.5 billion of investment)
- TC Energy’s Coastal GasLink Project in Canada
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Episode 276 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. Welcome back. Well, the usual mania surrounding tariffs and election liberals, conservatives almost tied in the polls, so it’s going to be an exciting spring leading into summer and fall. No end of energy news. And I think what we want to do, Jackie, is go straight to the heart of energy discussions, which is CERAWeek, which happens every year in Houston at this time of year. We’re not on site, but we know many people who are and what better person to talk about what’s going on down there, but also talk about Canadian infrastructure pipelines and everything to do with energy. We’d like to welcome François Poirier, President and Chief Executive Officer of TC Energy. Welcome.
François Poirier:
Thank you. Glad to be here.
Jackie Forrest:
Okay, well François, it’s great. This is a perfect time to hear your opinion on these topics that everyone wants to hear about today. Maybe we’ll start off with the opinion piece you wrote in the Wall Street Journal titled How to Make North American Energy Great Again, that was February 3rd. We’ll put a link to it in the show notes. But you are warning that the economic opportunity and benefits of North American energy trade should not be forgotten. So tell us about the op-ed, why you wrote it, and what the reaction has been.
François Poirier:
Thanks for the question, Jackie. We have a bit of a unique perspective in that we have what I call incumbency or a significant presence in all three countries in North America. We move about 85% of the natural gas across Canada, about 30% in the U.S. and a like amount in Mexico. The point I wanted to make in the op-ed is that collaboration among the three countries in our view, will result in better outcomes for all three countries than each of us could accomplish individually. It’s really about helping the U.S. achieve its goals domestically, but we run and operate a continental energy system. Energy flows don’t know that borders exist, and when you look at what’s the most efficient way to transport an energy molecule from the point of production to the point of demand, quite often those are across borders in between those two points.
And so it behooves us all to be as efficient as we can. And through coordination, I think among the three countries we could see even more export of energy to the free and democratic world reducing dependency on Russian energy for example. And so that collaboration I thought was a really important point to make.
Peter Tertzakian:
Yeah, it’s a very common sense article. And the fact that you’re, as you say, a continental energy system provider from your unique perch, not only as CEO but also now at CERAWeek in Houston, tell us what the tone is. The op-ed and what you just said is very commonsensical, but is that commonsensical narrative resonating in Houston, which is almost, well the United States, which is ground zero of the trade war, that is sort of going counter to cross-border collaborations?
François Poirier:
There’s a little bit of an undertone of US first that’s coming from US policymakers, but at the same time an acknowledgement that the US cannot ignore or forget about its allies, which obviously include Canada. More so than anything, what I’ve taken away from the conference so far is there’s a very high sense of urgency about moving more quickly with the development of infrastructure to enable a greater access to affordable, reliable energy, not only in each of the three countries of North America but around the world. And that gets into a number of issues like what are the demand drivers for demand growth, what are the implications around regulation and permitting, et cetera, et cetera. But I would say that that theme of let’s create a sense of urgency here and get going has been the dominant conversation that I’ve been participating in.
Jackie Forrest:
And you did speak on a panel yesterday actually about that infrastructure scaling up or bottled up, that was yesterday afternoon with some other big mid-streamers that are operating in the US. I wonder if you can tell us a little bit about that conversation specifically, the Army Corps has a list of potentially 600 projects that will be fast-tracked. I don’t think that the full list is public yet, but this is based on executive orders that are really quite saying they’re going to use emergency orders and reduce environmental requirements. So yeah, comments on that panel, but also is this executive order going to result in things being done urgently in the US?
François Poirier:
So in the panel, we talked about ways to accelerate permitting success in achieving permits under the existing construct. And that was really about engaging communities on the ground. We treat a permitting process almost like a PR campaign or a political campaign. You have to have a good ground game to counter misinformation on the ground around the perils and risks of energy infrastructure. But then the conversation did pivot to what are the regulatory burdens and agency burdens on applicants. And the fact that you’ve really seen a pancaking over many decades of regulation that have made it quite burdensome for developers of projects to get their permits quickly. If you look at both the United States and Canada 20 years ago, it was quite commonplace to get a permit in 12 to 18 months. And that timeline has effectively doubled over that period of time. And so my perception or read of the executive orders, again, it’s to build that sense of urgency.
And this is probably the most energy literate incoming administration in the White House that we’ve seen in the last 50 years. And one of my takeaways of listening to the Energy Secretary and the Secretary of the Interior Burgum speak is they’re very outcome driven. So the executive orders in the near term will help clear the backlog, but there is also a need for legislation to make sure that the improvements are lasting, and that there’s confidence for capital to flow to fund projects because legislation is clear and things have gotten a whole lot more efficient again.
Peter Tertzakian:
I want to come to that capital flow and investment in a few minutes, but I want to come back to the White House and the executive orders with these legislation. So that’s at a federal level. Oftentimes, I’ve heard in the United States that the impediments to infrastructure is more at the state level, much as even here in Canada, the federal government says one thing, but then try and get anything done at the provincial level or across border is very difficult. Are those still impediments at the state level in getting energy infrastructure built?
François Poirier:
I would say in all three countries, Peter, there’s been a challenge by state level or provincial level governments who have different aims or perhaps different ideology around infrastructure, fossil fuel infrastructure to challenge the primacy of federal jurisdiction over infrastructure. We’ve seen that happen in all three countries. So the focus is as well, when we got into the conversation yesterday in the panel around how do we streamline regulation, the notion of the current delegation of the authorization of permits for water, for example, the section 401 permits in the United States that are delegated to the states to grant for construction projects, those have been used by state governments who wish to frustrate energy infrastructure development to delay or stop projects from actually proceeding. So it is a big area of focus, and that’s my point around legislation. I don’t think that this can be necessarily addressed with executive orders. We’re going to need legislation to clarify what rights are delegated to in the US states and in Canada, provinces around permits and understand what the impacts could be on the pay set, which we can develop and build our projects.
Jackie Forrest:
All right, François, so you’re saying that although the executive orders are there to completely de-risk the project, it’s better to have the legislation more clear. Let’s talk a little bit about your company’s been talked about a lot in terms of potentially new projects or reviving old projects. But before we get into that, maybe you can clarify for people that you have changed your direction towards natural gas and maybe that people aren’t aware that used to own oil pipelines, but that’s no longer the case.
François Poirier:
Yeah, so we went through a fairly detailed strategic review over about a two-year period and concluded that, and this is a phenomenon we’re already feeling even just on the gas side, there’s more opportunity for us to deploy capital than we actually have capital, human capital and financial capital. And so, one of the things about energy infrastructure is if you have incumbency, and I define that as think about it as a home field advantage where you have a competitive advantage where someone wants service, they are compelled to come to you first because you have a competitive advantage. That requires you to continually spend capital to maintain that advantage because your competitors are also working hard to improve the competitiveness of their service. So when you have incumbency in natural gas in all three countries, in nuclear in Canada as we have with Bruce Power and then in our liquids business in terms of exporting crude oil to the US Gulf Coast, there’s far more opportunity than we have capital to spend.
So as we looked at how do we allow each of the businesses to maximize their access to capital, it made sense to separate out our liquids business with its own mind and management and access to the capital markets. And the thesis has proven based on the stock price performance of both portions of the TC Energy company have performed very well. So that was really the rationale for it, and we felt that we could devote the entirety of our capital to gas and power and that our liquids business was going to get left behind. So that was the rationale for it.
Peter Tertzakian:
So we used to talk on this program not long ago, almost every week about data centers. Of course, and then we started talking every week about tariffs and data centers seems to have momentarily taken a backseat, but they’re far from gone in terms of being an issue. And as a natural gas provider and you mentioned natural gas power provider, talk about the expectations on the data center side if anything’s changed in the past couple months and what the buzz is at CERAWeek on that subject.
François Poirier:
Well, data centers have been a prominent topic of conversation at CERAWeek. One of the interesting pieces of data I learned this week is that the reliability requirements of a data center are 99.99%, four nines after the decimal point. That translates to being down only five minutes and 15 seconds per year.
So you can imagine that the reliability that data centers require from their source of energy is extremely high. And I think initially when data centers were thinking about developing their projects, goal always being to be as sustainable as possible, the presumption was that wind and solar and nuclear would be able to serve most of their energy requirements. And as the developers advance the projects and have become more energy literate, they’ve realized the importance of reliability. And nuclear is an excellent solution for data centers because it addresses each of the three matters of affordability, reliability, and sustainability, but is not available to data center developers of all sizes.
The amount of capital required to support economically a contract with a nuclear plant are very large. So natural gas is the perfect fuel type to balance all of those requirements for data centers. And as I said, it’s been a big topic of conversation here at CERAWeek. The deep seek news that came out a couple of months ago did cause many, I would say temporarily, to question whether or not the energy requirements of data centers would continue to be as significant as originally planned. But when you think about the energy requirements, about 70% of them are for cloud-based services. I’m not an AI expert.
Peter Tertzakian:
Like pet videos.
François Poirier:
So in other words, I think people have come around to the fact that the energy requirements will continue to be extremely high. And so in the United States for example, we’ve seen the number of data centers under development grow from 250 to 300 to 350 over about a one-year period. I don’t believe that all of those data centers will ultimately get developed because I think some of the developers are playing a probability game and developing multiple sites in the hopes of getting a subset of those to the finish line. But nonetheless, along with LNG exports, I believe data centers and the electrification of everything will be one of the largest sources of natural gas demand growth for the coming decade.
Jackie Forrest:
And these companies, Microsoft and Google, Amazon, they all have big reduction targets in terms of greenhouse gas emissions. And I think that was always the thing that they wouldn’t really want to use natural gas because of that concern. Is that still an issue?
François Poirier:
I would say the hyperscalers and all data center developers have come a long way in understanding the value proposition of natural gas and have come around to speed is a much bigger driver of their value proposition, speed to market, speed to in service than emissions. And that speed has, I think, trumped the need to manage emissions to zero in terms of their strategic priorities. And as I said, natural gas because of its emissions profile is very efficient. And it’s become, in my view, for those who can’t sanction or support a nuclear plant, it’s become the fuel of choice.
Peter Tertzakian:
All right, well we want to cross the border and talk about Canadian issues, and what better way to cross the border than maybe to get your thoughts on the Keystone XL Oil Pipeline. I know that you’ve spun out the liquids business to South Bow, but give us your sense on this proposal. Even I think President Trump is in favor of reviving the Keystone XL Pipeline. How do you handicap that or how do you think about that?
François Poirier:
Well, I would say I view Keystone XL as a proxy for more flow of oil from Canada into the US Gulf Coast. I don’t believe that it necessarily has to be the specific right of way that Keystone XL had proposed. In fact, when President Biden revoked the permit, we automatically lost all of the state permits that we worked very hard to achieve before we commenced construction on KXL. So we would effectively, or any developer for that matter, would effectively be starting from scratch.
What I think makes the most sense is to follow existing rights of way. You’ll see South Bow and Bridge and any other crude oil pipeline developer leverage the existing rights of way they have. That tends to deliver a more predictable regulatory path. And from a project execution standpoint, if you’re going on an existing right of way, you’re already operating in, you know the ground, you know the soil conditions, you have relationships in the communities. So I would expect with respect to export of Canadian crude to the US, to see the developers leverage the rights of way they have. And I do expect that there will be more capacity developed over time to supply the US Gulf Coast market. The fundamentals are quite compelling. Western Canadian Select is attractively priced and the refineries are configured to process the heavy oil that comes from Alberta.
Jackie Forrest:
Yeah, unfortunately though the Americans want to tariff that oil as it comes over the border, which isn’t a great incentive for sending it that way, which has ignited a huge conversation here in Canada, that along with threats of being annexed to actually find new pipelines that will take us to other markets and maybe even creating more energy security in Eastern Canada because Ontario and Quebec are very reliant on oil, 100% reliant on oil for Ontario, at least coming through the United States, transiting through the United States. Even though it may be Canadian oil ultimately that is delivered, it’s not coming through Canadian territory. And then for gas, although we have the TC main line and we’ll get to that, a lot of gas actually transits through the United States into Ontario and Quebec as well, maybe about half of their consumption. And by the way, for everyone’s background, you are based in Canada and you are Canadian, right?
François Poirier:
Yes, I’m based in Calgary, and I am Canadian.
Jackie Forrest:
Okay.
François Poirier:
And a proud Canadian at that.
Jackie Forrest:
We know that TC used to be called Trans Canada, but you’ve rebranded as you’re a multi-country organization now. But let’s talk about the TC main line. That pipeline transits from Western Canada. Part of it goes under the border, but there’s a piece that goes over top of the Great Lakes and delivers gas into Ontario. And I think many of our listeners know that that was proposed to be part of that capacity to be switched over to oil to be the Energy East project that was going to deliver oil into Ontario, and then there’d be a Greenfield piece that would take oil all the way out to New Brunswick.
That pipeline today is actually underutilized. I do want to correct something for the record. I misspoke about the TC main line a couple of episodes ago where I said it was half empty. That was accurate, maybe pre-2020, but I do know you’re flowing about five Bcf per day at this moment and the total capacity is six Bcf. So there is room there, but maybe not as much room as before. But I guess the question for you is this main line, could it be flowing more gas on the Canadian side and is there potential to revisit the Energy East Project with that pipeline as well to move oil to Eastern Canada?
François Poirier:
So our main line is actually five lines from the Alberta border heading east. And think about it as a telescope, right? There’s about five lines that run part of the way through into Saskatchewan, and then it’s down to four and three and two. And then ultimately only one line that runs into Quebec and into TQM which is a 50/50 partnership between ourselves and Energir. So when the concept of Energy East was first proposed, it was to convert one of the, at the time six lines, from natural gas service to crude oil and the other four or five lines would continue to provide gas service, which they do today. Interestingly, over the last 10 years, natural gas demand has grown so significantly that we’re using most of our existing lines for natural gas service and it’s unlikely that there would be a strong economic case to repurpose one of our natural gas lines to crude oil service.
And we can talk a little bit more about Energy East in a moment. So that’s really been the driver of the reduction in service or transportability on the Canadian mainline. And then it’s been ramping up again as demand has increased. For the first time in about a decade, we’ve been spending significant capital on compressor stations and the like on our mainline to increase service again. So Jackie, you mentioned that capacity is six Bcf a day and we’re at five, that’s an average volume throughout the year. There are many months during the year, whether it’s heating or cooling season where we’re running full, and we’re fully contracted actually for the entire six Bcf of the pipeline. Five is the average when you include the shoulder months when demand isn’t as significant.
Now we do have an additional line, line two, which has been de-rated. It’s sort of there on hold for whenever we need it back, and it would require some amount of incremental capital to put back in service and meet increasing demand for service. The good thing about that is that that’s a very efficient use of capital, and my expectation is that we will be deploying that capital to increase the deliverability and capacity on the mainline at some point in the next five years or so.
Jackie Forrest:
So one reason why we lost a lot of flows on the mainline back in history was because it was more expensive to transit gas through the mainline than some of the competing alternatives coming through the US. Is that still the case? Is there a financial barrier that needs to be addressed or do you think that we could see more gas flow through the mainline with the current construct in terms of the tolls and things like that?
François Poirier:
There’s definitely a strong commercial case or business case for us to move more gas through our mainline. I would say, Jackie, the impetus for the reduction of throughput of the mainline back in the 2010s was really before fracking dramatically increased the productivity of the Western Canadian Basin. If you remember the term, the death spiral of the mainline when production was falling, the Basin was sort of starting to reach maturity. And now with technology, the Basin is very vibrant, very cost competitive and growing again. So in terms of providing Western Canadian producers with attractive netbacks which is market price minus the transportation cost, and the mainline is very competitive and we simply have to prioritize where we allocate capital in the near term based on how it makes more sense.
Peter Tertzakian:
So here’s a fun fact. In my library, I actually have an original typewritten copy of the TC Mainline story and how it was financed and put together so happy to share that. In fact, maybe I’ll take a photo and you can put it up with the podcast. So you also get to see the demand side. I mean, you just talked about the supply side and the gas fields that we have and the Montney and how the technology is creating some really low-cost supply here, some of the lowest in certainly North America. But you’re also getting a sense as a transporter of the energy to get a read on the demand side in Canada. And so what are you seeing in central Canada? I mean, we hear stories about that even with the construction of new nuclear and things like that in Ontario, for example, that with data centers and with just general energy demand growth, that natural gas and natural gas-fired power is going to become more needed. Is that a fair assessment?
François Poirier:
Very much so, Peter. We see over the next decade or so, 15% increase in natural gas demand within domestic Canadian markets driven by industrial demand growth in Alberta as well as power generation in Ontario and Quebec. Let’s not forget about LNG export growth, however. And I think this is the really interesting upside opportunity for Canada as a country. The Western Canadian Basin is very, very efficient. Elasticity of production is very high, and egress is really the main constraint for the Basin’s daily production to grow.
I could see 10 or even 15 Bcf a day of gas being exported through LNG to world markets off the west coast of Canada. And I think the demand’s going to be there. So it’s a really exciting opportunity for us. I kind of feel like this opportunity passed us by 15 years ago. We were at the start line with the United States. Around at the same point, we are just now expecting LNG Canada to go into service and be the first LNG facility off the west coast. And the US is the largest exporter of LNG in the world. And I feel like we’re very fortunate that the opportunity has now come back around to us.
Peter Tertzakian:
Yeah, because they can’t address the Pacific Basin nearly as well as we can and the Asian markets, because we’re a lot closer if you look at the globe to certainly Japan, Korea, China, even into Southeast Asia. So actually maybe we can be a fast follower. And just for context, you said we can be 10 to 15 Bcf per day. I agree. LNG Canada one is two.
Jackie Forrest:
Under two.
Peter Tertzakian:
Just under two.
Jackie Forrest:
Yeah, under two. And the Americans right now are, I think we talked about this, 16 Bcf per day of feed gas already. We didn’t even get off the starting block here yet, but hey, I do want to talk because you’re very involved with the Coastal GasLink, the pipeline that is delivering gas to the LNG Canada phase one. But before we get to the topic of that, you said you would come back to the Energy East pipeline. I want you to address, is there the potential for the Energy East Oil pipeline again?
François Poirier:
Yes. I’m not the best person to talk about how the Quebec, Ontario and New Brunswick refineries feel about their dependency on the US for supply. That’s a fairly modest amount in aggregate in my view when you think about global oil flows. It would be very expensive to build a greenfield pipeline from Alberta all the way to New Brunswick with drop-off points in Quebec and Ontario. And in my opinion, uneconomical, even if you assume that it’s permittable. And I’ve got the battle scars from trying to sanction Energy, East. Quebec in particular was a very vocal opponent of the project at the time. It’s true that nationally and even in Quebec, support for pipelines has increased. But I don’t think any publicly traded corporation that’s profit minded would be comfortable sanctioning such a project with the permitting risk that would be associated with it even if it were economical. And that’s really always been my starting point. I don’t believe that it would be economical to build such a line.
Peter Tertzakian:
Yeah, I think the numbers I’ve heard thrown around is at least $30 billion to do that.
François Poirier:
I think you’re light, Peter.
Peter Tertzakian:
You’re light, okay. And maybe that was just if we actually converted the main line only, and going completely greenfield would be a lot more expensive. Again, going back to the history of the oil pipelines and why we didn’t build it, it was always an argument about economics. Oh, it doesn’t make any economic sense, doesn’t make any economic sense. And this has been going on since the 1950s. And I guess from a national perspective, is it all about economics? I mean there is how much are you willing to pay for energy sovereignty? And most energy infrastructure projects of this magnitude in other countries are paid for by the state because the state wants that sense of security and sovereignty over their vital energy supplies. So I guess for the nation, it’s really a question of how much are you willing to pay over and above pure economics and capitalism to actually have that kind of thing.
And that’s a conversation for another podcast. But at some point, we need to be thinking about beyond economics in this country and think about ourselves as a nation. And maybe it’s not an oil pipeline, it’s expanding the gas, getting the five out of six and get full utilization of the main line. There’s power line infrastructure that we seem to be having difficulty building even across borders of individual provinces. So I think we have to get beyond economics. And I’m just philosophizing here as a Canadian, and it is a subject for another day, but I just thought I’d throw that in. I’m done with my soapbox.
Jackie Forrest:
So that gets to a great topic, which is you just had this experience with the Coastal GasLink. So you talk about all the regulatory risk that you face in Canada for building these projects, which makes it hard for a public company like yourself. There’s too much risk there really to go behind these projects. So you just did Coastal GasLink. The project was higher than initially expected. First of all, it was a very challenging project. I think it’s about 700 kilometers going over two mountain ranges. And while you had support from some stakeholders or most stakeholders, there was also a lot of opposition to the project on the ground. I think the price tag was around double what it was initially expected to cost. So just tell us what you take away from that experience and what Canada needs to do to get you to… We talk about the potential for more LNG, but we need more pipelines. And what do they need to do to attract you to build another pipeline in Canada?
François Poirier:
The permitting process on CGL took about 10 years and then three and a half year construction process on top of that.
Jackie Forrest:
Wow.
François Poirier:
We had blockades along the way. We are very supportive of indigenous rights holders exercising those rights. We want them to do it peacefully and lawfully. And the blockades did cause us to start and stop construction on a couple of occasions. Demobilizing and re-mobilizing large personnel during a construction project is very expensive. It was not an efficient process. We found the BC regulator actually quite constructive to work with, which was very helpful. But getting to the point where there was clarity that the BC regulator had jurisdiction over the project took quite some time. So in the case of development of a pipeline, time is the essential ingredient. And opponents of pipelines have learned that delaying a project over and over again can not only dramatically increase its cost, but it can also result in a proponent deciding not to proceed with the project as was the case with Energy East. Lesson learned there is that we need a much more streamlined process.
I often say, and it’s a bit kitschy, but uncertainty is the enemy of investment, and we roughly 6 billion of capital to spend each year to deploy in growing our pipeline infrastructure. And the very first question we ask ourselves in our assessment is what do we think the odds are of getting our permits in a timely manner with a reasonable set of conditions and in a cost-effective manner? And that is the starting point of our assessment of the viability of a project as we look for all of our projects competing for capital internally. So it’s all about certainty of timelines and clarity of rules. I would say that one of the, and this is controversial a little bit, but I’m pleased to say it publicly, making the ultimate decision on a permit, an order and counsel politicized the permitting process.
In the NEB, we had a very credible regulator, for most of TC Energy’s 70 years in existence was the final decision-maker on permits. And when you invite cabinet review of projects, it just makes it impossible to predict whether or not your project is going to get through, and the cost of achieving a permit and developing a pipeline has gone from tens of millions to hundreds of millions of dollars. And so it’s very difficult for us to have the confidence to advance a project unless we have a really high sense of comfort that the permitting is going to be successful.
Jackie Forrest:
I’m glad you brought that point up though, because I don’t think it’s controversial. It’s a fact. The fact that your project could just be canceled at the whim of a politician four years in the future when you can’t even predict what the political landscape will be at that time, especially when we know oil and gas infrastructure is a controversial topic in this country, that scares capital away. We have to get rid of that.
Peter Tertzakian:
And the question is how do you do that? But maybe before we get to how do you do that? Let me ask you, do you think it’s a new day now post-Trump inauguration and all the tariff wars and the elbows up, Canada first, all that kind of stuff? Is it all talk, do you think? Or is it a new day? Are you willing to test the system again?
François Poirier:
This is a new day, and this is our time. Here’s an opportunity for Canada to compete for and win LNG demand internationally. We have a great opportunity. We have a great resource. We’ve now demonstrated that we can build pipelines from the Western Canadian Basin West, and we have LNG project developers who are willing to deploy capital on the west coast of Canada. The west coast of North America has a ten-day shipping advantage to the US Gulf Coast to Asian markets. It’s basically half the transit time, which is a significant cost advantage. And you can’t permit an LNG project off the west coast of Washington, Oregon, or California.
So this is where on the theme of collaboration, continental collaboration that we started with, this is where Canada and Mexico can play a significant role in helping provide energy security to the free and democratic world. And it’s an opportunity that is there for the taking. I’ve heard anecdotally, I’ve not seen data to confirm this, but US LNG projects generate 400 billion a year in revenue for the country’s economy. That’s at 16, 17 BCF a day. Imagine if we had even half of that, what it could do to the Canadian Treasury and addressing structural deficits in our economy, funding hospitals, schools, and just increasing GDP per capita across the country. So it’s a great opportunity for us.
Peter Tertzakian:
Or actually even just preventing the erosion of GDP per capita, which is sort of like, I just want us to prevent the erosion first and then start thinking about growing.
Jackie Forrest:
We can’t waste this opportunity though because there is competition here. Last week, Donald Trump in his State of the Union talked about this Alaska LNG project. We know Mexico is going to start up an LNG export facility off their west coast. We cannot think that we can just sit back like we have for the last decade and mull these things over. There’s competitors taking that market share, and it’s not an infinite market. There is a lot of other countries like Qatar doing that. So I think we have to recognize that we’re in a competitive situation. I know you just built a project in Mexico. You said you have 6 billion a year to spend, and you spent four and a half billion in Mexico building a gas pipeline. How did that compare to trying to do it in Canada?
François Poirier:
My goodness, I do want to touch on Alaska for a moment before I answer that question, Jackie. I would say that I heard a lot about Alaska this week. And I would say that from a standing start today, we have a three to five year advantage in Canada over Alaska. So to your point, we cannot waste this opportunity, and it will fall away with time because I believe there is a strong political impetus and support for Alaskan LNG at the White House and in Southeast Asia in terms of improving their relations with the United States. With respect to Mexico, the irony is we had personal endorsement of President Lopez Obrador, personal endorsement of the energy minister, personal endorsement of the governors of the three states where Southeast Gateway Project will make landfall. We got our permits in record time, and we built the project 13% below budget and we’re scheduled to go in service a couple of months early. I can’t think of another project in Canada or the United States where we’ve had the same level of support frankly.
And it’s because in Mexico, the benefit of the project is not incremental as infrastructure is in Canada or the United States. The benefit is transformational. We’re delivering natural gas to states in Mexico that have never had access to affordable, reliable energy in any form. And so they’re very excited about the economic impacts that will come with the project. The government of Mexico recognized that. And we formed a partnership, the very first public-private partnership in the eighty-year history of the state-owned electric utility CFE. They’re about a 15% owner in the pipeline. And so in Mexico’s desire to improve the quality of life of its citizens and achieve its socioeconomic goals, they see foreign direct investment as an important lever to pull to achieve that. And in their eyes, Southeast Gateway is the poster child that they want to show the world foreign investors can come to Mexico and succeed.
Peter Tertzakian:
Yeah, that’s great. I’m going to come back to Canada because, and my question of is it a new day? You said yes, I agree with you. It is a new day. It is a big opportunity. The time is now. You’ve described the ingredients that are necessary, which we’ve talked on this podcast, which is we need certainty of timeline, clarity of rules, taking politics out of it. So are you ready to potentially test our system again?
François Poirier:
I am. I am.
Peter Tertzakian:
And just see and try again with whatever new government that comes into power post-Federal election, and see if we can try and emulate with sort of the all-in mentality of what you just described in Mexico.
François Poirier:
Absolutely. The political desire has to be there. Look, if you look at Germany went from concept to putting in a service, a regasification facility in nine months, and we reverse engineered that process. And the distinguishing feature in that process was extremely strong and effective political leadership. So it is possible, but we need leaders that are prepared to spend the political capital to make sure it happens, provide developers with the certainty they need, and provide capital providers with that same certainty.
Peter Tertzakian:
Yeah. Well that was an amazing discussion. François Poirier from TC Energy, you’re the president and chief executive officer. Please come back, and we’ll talk more as you try and test our system and as this energy story evolves over the course of the year and beyond. Thanks again.
François Poirier:
My pleasure. Really enjoyed it.
Jackie Forrest:
Thanks, François. And thank you to our audience. If you enjoyed this podcast, please rate us on the app that you listened to and tell someone else about us.
Announcer:
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