Dirty Little Secret
With Alberta oil producers facing uncertain prospects south of the border, many are pinning their hopes on the Asian market – and two multibillion-dollar pipelines set to carry crude to B.C.’s west coast ports. But are we ready for massive oil tankers off our shores?
A global recession, the like of which hasn’t been experienced for generations, is wreaking havoc on Alberta’s oil sands. In the last few months, oil sands developers have shelved or delayed billion-dollar projects designed to take gooey bitumen from the oil sands and turn it into synthetic crude oil. The price of crude oil plummeted from $US147 a barrel last summer to about $US35 by mid-February, and the global financing pool has virtually dried up. Add to that ominous noises coming from the U.S., Alberta’s only export market, about “dirty oil” (considered environmentally unfriendly because of the large energy and water resources required to separate oil from sand), and it would appear that years of boom are turning to bust.
But all this gloom has done nothing to dampen the enthusiasm of a couple of major pipeline companies that see opportunity in the downturn. Despite the slowdown, Canada’s oil-production future still lies primarily with the tar sands, and if the Americans decide that oil is too “dirty,” then Canada will need to sell it to someone else. And that means pipelines to the west coast and oil tankers to whomever else in the world needs oil (think Asia). All of a sudden, it seems, everybody wants to ship oil through B.C.
There’s a $4.5-billion proposal from Enbridge Inc., dubbed the Northern Gateway Project project, to build a pipeline that will carry 525,000 barrels of oil a day from Alberta to a deepwater tanker terminal at Kitimat, from which point oil would be shipped to markets all across Asia. China, Japan, Korea and even India import oil – and Kitimat’s north coast location makes for a relatively short tanker ride to Shanghai. Kinder Morgan, also lured by the Asian promise, has its own proposal to build a 400,000-barrel-a-day pipeline to Kitimat and plans to expand its existing crude oil pipeline – which runs from Alberta to Burnaby’s Westridge Terminal – from 300,000 barrels a day up to a potential 700,000 barrels a day. Some of that oil is refined in Vancouver for the local market, some is piped through to refineries in Washington state and an increasing volume is loaded onto tankers for shipment to California and Asia.
While not every piece contained within these two companies’ proposals will be built – at least not in the next decade – they do represent a combined West Coast oil shipment capability of more than 1.6 million barrels a day. By comparison, Alberta produces 1.2 million barrels a day from the oil sands now, with the Canadian Association of Petroleum Producers (CAPP) projecting that this number will climb to two million a day by 2013 and three million a day by 2018. “As we grow, it has become a very important question strategically as to what should we do with that oil,” says Greg Stringham, CAPP’s vice-president of oil sands and markets.
For company executives, the decision to build has little to do with current economic – or political – conditions. “There’s a very strong interest in developing new and secondary markets for Canada’s petroleum resources, and that’s what lies at the heart of the project,” says Steve Greenaway, Enbridge’s vice-president of public and government affairs. “It’s the opportunity. Some people might want to point to the recent American election, but frankly our project started long before that. Everyone understands it’s time to do it. There’s a discount we pay for only having one customer. It’s only through developing new markets that we can curtail that discount.”
Jock Finlayson, executive vice-president of the Business Council of B.C., echoes Greenaway’s thinking: “All the projections from the [International Monetary Fund], Goldman Sachs and international agencies point to a world economy that will be more Asia-centric. Part of that will be a hearty appetite for all forms of energy, including hydrocarbons. From a Canadian viewpoint, having the infrastructure to sell into that market is crucial.”
Save over 50% off the newsstand price with a subscription to BCBusiness Magazine
