The introduction of U.S. tariffs next week on Canadian fossil fuels won’t affect planned spending by oil sands giant Cenovus Energy Inc., but the company says the levies may prompt a “rebalancing away from the United States” when it comes to where it ships its product.
Donald Trump confirmed Monday that he will slap widespread tariffs on U.S. imports of Canadian goods March 4. Trump previously signed an executive order that would impose a 10% tax on Canadian energy products, along with 25% tariffs on all other goods.
Speaking on Cenovus’s fourth-quarter earnings call last Thursday, President and CEO Jon McKenzie said the tariffs could affect “so many of the variables that impact our cash flow,” including oil prices.
“But there’s also knock-on impacts on the price of condensate, the price of natural gas, which are all inputs to our business,” McKenzie told analysts.
Speaking before Trump’s announcement Monday, McKenzie added U.S. refining margins and foreign exchange rates could also take a hit as tariffs begin to bite.
“So when you look at the spectrum of all the things that impact our cash flow, it’s really not clear to us who’s going to pay which portion of the tariff, as well as what the overall impact would be to the company,” he said.
“If we are in a world, unfortunately, in March where tariffs do come, we will watch those price signals and react accordingly.”
That could include a pivot when it comes to where oil products transported along the Trans Mountain pipeline are exported, said Geoff Murray, Cenovus’ executive vice-president of commercial.
“I think we would see… a rebalancing away from the United States and the balance to head globally,” he said.
There has generally been a 50/50 split between California and Asia for deliveries of oil transported along the pipeline, said Murray.
“Without tariffs, that continues unabated. Should tariffs show up, that would obviously look to an economic reason for rebalancing,” he said.
“We expect that would obviously drive as much volume as possible through Trans Mountain, perhaps beyond the contracted capacity, provided that volume can find a home out the dock, and then it would preferentially head globally, rather than to California.”
Asked if the tariffs would affect Cenovus’ spending plans for 2025, McKenzie said the company had already limited its capital spending to “fairly modest levels” while completing a few major projects.
“I don’t think there’s anything on the tariff side that would change any of our operating plans this year or in the near future,” he said.
McKenzie highlighted milestones associated with a few of its projects in the fourth quarter, including the mechanical completion of the Narrows Lake pipeline.
The 17-kilometre line connecting its Narrows Lake oilsands reservoir to its Christina Lake main processing facility is expected to result in up to 30,000 barrels per day of additional production from the site, starting in mid-2025.
Cenovus also completed mechanical work on the concrete gravity structure and topsides for the West White Rose project off the coast of Newfoundland.
West White Rose, a multi-billion-dollar extension of the existing White Rose offshore oilfield, is now 88% complete and on pace to produce its first oil in 2026, McKenzie said.
On Thursday, the Calgary-based company reported its fourth-quarter profit and revenue fell compared with a year ago due to lower oil and natural gas prices.
Cenovus said it took in $146 million for the quarter ended Dec. 31, down from $743 million in the final three months of 2023. Revenue totalled $12.8 billion, down from $13.1 billion a year earlier, even though it increased production to 816,000 barrels of oil equivalent per day, compared to 808,600 a year earlier.
This report by The Canadian Press was first published Feb. 20, 2025.
