Canadians are seeing the consequences of our declining energy sector as another major foreign investor has given up on the Canadian market.
The latest firm to leave Canada is Kinder Morgan, which sold its Canadian operations last week for US$3.3 billion.
The sale of Kinder Morgan Canada brings the total amount which foreign firms have divested from Canada to nearly $40 billion, which will equal about 1.6% of Canada’s total GDP this year.
“If they thought things were getting better in Canada, they might hold on, but they don’t see things getting better,” said Laura Lau of Brompton Corp.
“The pipeline situation is getting worse; everything is getting worse.”
The deal will see Pembina Pipeline Corp. of Calgary buy all of Kinder Morgan’s assets in Canada.
Kinder Morgan is one of several foreign energy firms to divest from Canada in recent years, with firms such as Royal Dutch Shell and ConocoPhillips shrinking their investments or leaving Canada entirely.
The exit of Kinder Morgan from Canada has been predicted since the federal government bought the much-maligned Trans Mountain pipeline expansion from the company earlier this year.
The project was purchased for $4.5 billion by the federal government after seemingly endless legal barriers made many fear Kinder Morgan would cancel the expansion in its entirety.
“When they sold Trans Mountain, there wasn’t much left, and it was just a matter of time for them to exit Canada completely,” Lau said.
“But definitely another foreign company exiting Canada doesn’t send a good signal.”
Purchased by the Canadian government in May of 2018, construction on the Trans Mountain pipeline expansion project is finally set to restart in the next month, in time for the federal election.
Low oil prices in recent years and laws which make building energy infrastructure nearly impossible have driven firms away from the Canadian market, largely to the United States, with the industry calling the situation a “competitive crisis.”
Since 2016 only one new pipeline project has been submitted to the National Energy Board for review and approval, while 14 have been submitted in the United States.
With uncertainty about current and future pipeline projects at an all-time high, it is unlikely foreign investment in Canada will increase in the near future.