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Canada aims to diversify exports amid US trade tensions

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Carney government seeks projects to boost Canada's energy

status

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By Amanda Stephenson

CALGARY, June 10 (Reuters) - The U.S. relies on Canadian

oil imports, despite comments to the contrary by U.S. President

Donald Trump, Cenovus Energy ( CVE ) CEO said on Tuesday.

Trump has threatened on-again, off-again tariffs on Canada's

oil, of which nearly 4 million barrels per day are exported to

the United States. Canada is the world's fourth-largest oil

producer, and fifth-largest natural gas producer.

Trump has previously said the U.S. does not need to import

goods, including oil and gas, from Canada.

Canada's Prime Minister Mark Carney, who won a minority

government in April on a wave of anti-Trump voter sentiment, has

said the country's old relationship with the U.S. based on

steadily increasing economic integration is over.

Jon McKenzie, who heads oil sands company Cenovus and chairs

the Canadian Association of Petroleum Producers industry group,

said trade tensions between the two nations have highlighted the

need for Canada to diversify its exports.

But he said that need does not take away from the fact the

two countries' energy systems are inextricably linked.

"What hasn't changed is energy economics and energy physics.

The reality is we are hardwired into the U.S. system," McKenzie

said at an energy conference in Calgary, Alberta.

Canada depends on U.S. refiners to buy the vast majority of

its exported oil, while landlocked U.S. refineries in the

Midwest are configured to process the grade of crude that Canada

produces.

McKenzie said Canada has the opportunity to grow its oil

output in the coming decades, and added the country's new

government needs to recognize Canada's co-dependence with the

U.S. and seek to improve that relationship.

"We need to make sure that we don't act viscerally when

we're threatened, and that we act intelligently in our long-term

interest," he said.

As part of its response to the U.S. tariff threat, Carney has

pledged to identify and fast-track projects of national interest

aimed at helping Canada become what he calls a conventional and

clean energy superpower.

McKenzie said the oil and gas sector does not want the

federal government to pick winners and losers by deciding which

projects to fast-track.

He said the industry instead wants to see broad regulatory

reform that will remove barriers to investing in oil and gas

projects.