Canada Looks to China As Key Investor In Oil & Gas

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One barrel of oil is comprised of around two tons of refined oil sands. (Photo: Stock.xchng)
One barrel of oil is comprised of around two tons of refined oil sands. (Photo: Stock.xchng)

ECONOMY

  • Canada in talks with China about investment in Alberta’s oil sands, consumption of crude oil
  • TransCanada’s Keystone pipeline project uncertain given heavy US opposition
  • SNC Lavalin awarded $650 million contract to build oil sands treatment plant in Alberta

Despite a volatile global economy, Canada is looking to China to boost its forestry and oil sectors as both an investor and customer.

Currently, Joe Oliver, Canada’s Federal Natural Resources Minister, is at the tail-end of a trip to China proposing Chinese investment in the growing oil sands in Alberta as well as consumption of crude oil circulating through Enbridge’s future Northern Gateway Pipeline. This pipeline would transport crude oil to Kitimat, B.C., via Edmonton, and then to Asia by tanker.

Oliver has high hopes for these potential business ventures, stating: “On the oil sands, our interests are aligned. China wants to diversify its sources of oil, and we want to diversify our markets.”

$11B: China's Committment To Canadian Energy Projects

China has already displayed an increased commitment to investing in Canada’s energy projects, particularly the Alberta oil sands, pledging or spending $11 billion in the past six years.

Regardless of the economic possibilities, the Northern Gateway Pipeline - particularly the western route through the Rocky Mountains - has already proven controversial, with warnings and severe opposition from environmentalists and dozens of First Nations groups, respectively. With the National Energy Board beginning public hearings on this proposal in January, a final decision may not be made until 2013.

However, Oliver is assured that, having already invested billions into the pipeline, China will not forfeit the opportunity of a solid energy source. “If we build it, they will come,” he says.

What Is The Future of Keystone?

The future of TransCanada’s Keystone pipeline project is more questionable. The 1,700 mile long pipeline would run from Alberta to Texas, spanning ecologically sensitive Nebraskan land, including the Ogallala Aquifer, one of the world’s largest fresh water reserves, yielding 30% of groundwater used for irrigation in the US. Nebraska has been quite vocal in its disapproval of the plan, with South Dakota also beginning to voice concern.

The US has decided to put the project on hold until 2013, after a thorough assessment of the pipeline’s environmental impact; pending research results, the US may also ask TransCanada to reroute the pipeline, causing further delay.

While TransCanada has assured concerned parties that it will take necessary safety measures with the pipeline, rerouting would be expensive and time-consuming.

Both President Harper and Joe Oliver have also expressed disappointment in the delay due to the chance of the $7 billion project decreasing in economic viability. Further, with the project in limbo the expected $5 billion in tax revenue, an extra 700,000 barrels of oil a day and 20,000 construction jobs are in question as well.

Big Win For SNC Lavalin

Amidst all the delays and controversy is a win for Canada’s energy sector: SNC Lavalin has won an over $650 million contract to build an oil sands treatment plant in the Fort McMurray region of Alberta.

The plant will treat over 150,000 barrels per day of raw material from the bitumen extraction plant. It should bolster the Montreal-based company’s packaging backlog, which declined by $1 billion to end at $4.8 billion in late September, and attract the attention of investors.

Key Statistics – Oil Sands Reserves

  • Over 140,000 square kilometers (nearly 55,000 square miles) in Alberta are covered by deposits.
  • One barrel of oil is comprised of around two tons of refined oil sands.
  • The typical extraction process employs large quantities of natural gas. The present oil sands industry uses approximately 4% of the Western Canada Sedimentary Basin’s natural gas production, a percentage that could rise to 10% by 2015.
  • By 2020, projected production growth in the oil sands would boost Canada to the top four or five largest oil producing nations worldwide.
  • According to Environment Canada, oil sands make up 5% of Canada’s greenhouse gas emissions, and 0.1% of greenhouse gas emissions globally; the organization foresees that oil sands will constitute 8% of the nation’s greenhouse gas emissions by 2015.
  • It is expected that production will reach 4 million barrels a day, quadrupling between 2005 and 2015.

By Christelle Agboka for
Christelle Agboka is a freelance journalist based in Kingston, Ontario, who covers business and economy news.

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