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Canada - July 11

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Canada flexes its muscles in scramble for the Arctic

Ed Pilkington, The Guardian
It is not the kind of militaristic statement expected of the peace-loving Canadians. In front of a choreographed line-up of 120 sailors in their summer whites at a naval base outside Victoria in British Columbia, the prime minister, Stephen Harper, gave a warning to other nations with their eye on the potentially oil-rich Arctic.

"Canada has a choice when it comes to defending our sovereignty over the Arctic," he said. "We either use it or lose it. And make no mistake, this government intends to use it."

...Mr Harper's message, and the belligerent style in which it was delivered, are a sign that the Arctic, the vast ice-covered ocean around the North Pole, is hotting up - both literally, through global warming, and metaphorically as a political issue. With Canada, Denmark, Russia and the United States all having claims on the region, together with those of Iceland, Norway, Sweden and Finland, international tension in the region is mounting.

There was no dissembling in Mr Harper's speech. "The ongoing discovery of the north's resource riches, coupled with the potential impact of climate change, has made the region a growing area of interest and concern," he said.

As the statement implies, two areas of international competition lie behind the Canadian prime minister's actions. The first is that the Arctic region is rich in natural resources. It is thought to hold up to a quarter of the world's undiscovered reserves of oil and gas, which as the established fields in the Middle East and elsewhere run dry will become increasingly valuable and sought after. There are also known to be major deposits of diamonds, silver, copper, zinc and, potentially, uranium. It also has rich fish stocks.
(11 July 2007)


Canada's oil boom has legs, IEA says

Shawn McCarthy, Globe & Mail
Surging demand in the developing world and oil-addicted consumers in the West will ensure at least five more years of tight petroleum markets, maintaining the boomtown momentum of Canada's oil patch, the industrial world's energy watchdog predicts.

Unlike in the past, sharply higher oil prices have not dampened global demand, nor brought on sufficient new supplies of crude oil to offset declines in more mature fields, the International Energy Agency said yesterday.

"Despite four years of high oil prices, this report sees increasing market tightness beyond 2010," the IEA concluded in its medium-term forecast, released yesterday. The agency increased its five-year forecast for global oil demand from the one released six months ago, and reduced its expectation for more supply from non-members of the Organization of Petroleum Exporting Countries.

As a result, the energy agency is forecasting "substantially higher cash returns to shareholders" of global oil companies, whether those owners are governments or private investors.

Peter Tertzakian, chief energy economist with Calgary-based ARC Financial Corp., said the IEA outlook was extremely bullish for Canadian oil and gas producers, and underscores the ever-increasing appetite for oil sands production, even as costs there soar.
(10 July 2007)


The Round-Up: July 11th 2007

Stoneleigh, The Oil Drum: Canada
Wall Street's ratings agencies are starting to abandon their efforts to hide the real market value of the debts that are ironically still marked as assets in the books of countless institutional investors. To say unpleasant surprises will be revealed would be a tragic understatement. Credit markets are tightening in anticipation, and spreads are set to widen dramatically.

Hedge funds and banks are heavily exposed to the derivatives market, and losses will be colossal and widespread. Increasingly, pension funds look to be the biggest losers of all. The key-word will be 'leverage' - cheap credit borrowed to make 'easy' profits, that will now lead to hard losses.

On the energy scene, Americans are concerned about rising costs, labour constraints and environmental issues in the Alberta oil sands. Combined with increasing Canadian domestic energy demand, this could reduce energy exports to the US just as it was looking to Canada to fill its looming energy supply gap.

Resource ownership and control in Canada continue to be hot issues at the national, provincial, and territorial levels. Alberta looks to carbon trading and Ontario will have to get through a hot summer with a reduced electricity supply.
(11 July 2007)


U.S. Looks to Canada for More Oil

Russell Gold, Wall Street Journal
The future of the U.S. oil industry arrived last year in Cushing, Oklahoma, moving along at three kilometers an hour.

It was the first crude from the Albertan oil sands to reach as far south as the giant Cushing pipeline hub, one of the locations where global oil prices are set. To get there, the crude traveled through a pipeline that for decades carried oil in the opposite direction.

...Currently, the U.S. pipeline grid is set up to import oil into the Gulf Coast. Some of that oil is sent north by pipeline or barge to refineries in the country's Midwest region. But global supplies are increasingly unreliable, as shown by Exxon's and ConocoPhillips's decision last month to leave Venezuela, a major crude supplier to the U.S., rather than give up lucrative projects there to a nationalization wave. Canada is a reliable exporter, free from the political turmoil that racks much of the oil-producing world.

"It's a big expansion of Canadian supplies into the U.S.," says Shirley J. Neff, president of the Association of Oil Pipe Lines. "There is no way a pipeline company will make an investment if it doesn't see a long-term supply source and a market that needs to be served over the long term."

Alberta's massive, gunky oil-sands deposits -- which yield a heavy oil that is dirtier and more difficult to turn into gasoline -- are about the same size as Saudi Arabia's but cost more to process and turn into fuel. The oil sands currently produce about 1.2 million barrels a day, but are expected to churn out 3.7 million barrels a day by 2020. Much of this new supply is expected to be exported to the U.S. However, rising costs and labor constraints could hamper production, and rising internal Canadian demand could affect export levels.

Producers are very interested in capturing more U.S. markets for Canadian crude. Although exact figures aren't compiled, the amount being spent on Canadian oil-sands development, new pipelines to bring the crude to the U.S. and to retrofit refineries is expected to top $15 billion a year through the middle of the next decade. This easily exceeds the amount being spent to build the U.S. ethanol industry, according to London-based consultant New Energy Finance.
(9 July 2007)


LNG pipeline approved for Quebec

Lisa Schmidt, Calgary Herald
Petro-Canada and Trans- Canada Corp. have been given the regulatory green light on a proposal to build a $1-billion liquefied natural gas terminal in Quebec, the first in that province.

The companies said Wednesday the Quebec and federal government had approved the project, to be located at Gros Cacouna, about 200 kilometres east of Quebec City on the south shore of the St. Lawrence River. ..

"Certainly it looks like we're good to go at Cacouna at the offloading and regasification side of it," said Martin Molyneaux, an analyst with FirstEnergy Capital Corp. in Calgary. "The question now is getting the gas to there."

Petro-Canada has been negotiating with Russia's OAO Gazprom, the world's largest gas producer, to obtain supply for the plant, estimated in 2004 to cost $660 million. Both companies have financial flexibility that could allow them to proceed with the project without necessarily lining up a supply contract, Molyneaux added.

"Do they go naked on this thing and have no contracted source of supply and just go forward on the premise that if we build it, they will come, or how close are they to getting some kind of gas supply contract deal done?" ..
(28 June 2007)
See also PetroCan may delay LNG plant without supply deal.-LJ

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