By Chris Varcoe, Edmonton Journal, Postmedia News, May 30, 2011
We need fossil fuels, Alberta delegation to Shanghai told
Alberta government and business leaders who sat down with Chinese energy executives this week were told tens of billions of dollars in new oilpatch investment will flow in the coming years -if export capacity issues in Canada are improved.
Finance Minister Lloyd Snelgrove said Sunday that senior officials from Chinese stateowned oil firms anticipate future investment will dwarf -potentially tripling -what they have already spent in Canada's energy sector in recent years.
In the past 18 months alone, Chinese oil companies have pumped more than $13 billion into developing crude oil and natural gas prospects in Western Canada.
However, future spending is contingent upon Canada building new pipeline capacity to transport oilsands -such as the $5.5-billion Northern Gateway project planned by Enbridge Inc. -and natural gas to the West Coast, where liquefied gas could be shipped by tanker into the Chinese market, he said.
"They said the critical part to them was having access to the product and now it's stranded in the North American market. They believe we need the Gateway pipeline ASAP," the finance minister said in an interview.
"It's absolutely massive amounts of dollars when you look at it ... Between bitumen expansion and the liquid natural gas opportunities they've got, you're probably talking in excess of $20 billion over the next 10 years from one of the companies -and the others all talked about investments -so it's enormous. It's huge dollars."
The high-level meetings were part of a trade mission to China organized by Calgary Economic Development to promote tourism and investment.
Officials with the state-owned oil companies weren't available for comment, but China's Ambassador to Canada told an Alberta audience recently that "China-Canada co-operation in energy has become a highlight of our economic relations."
Chinese state-owned oil producers "play by the rules of global competition. . . . Therefore, they deserve equal treatments as other foreign companies," Zhang Junsai said at an Edmonton address earlier this month. "With a population of 1.3 billion, China is a major energy consumer. We need fossil fuels."
The issue of growing Chinese oilpatch investment is a complex matter that touches upon energy geopolitics and foreign investment, as well as First Nations' rights and environmental concerns in Canada.
China's economic expansion is expected to fuel a 75 per cent rise in the county's energy demand by 2035, according to the Interna-tional Energy Agency, and a surge of capital flowing into Alberta.
Most of the money already invested has targeted the massive oilsands reserves of northern Alberta, although EnCana Corp. signed a $5.4-billion natural gas venture in February with PetroChina.
The Fort McMurray area is home to the world's second-largest proven crude reserves, and oilsands output is projected to reach as much as five million barrels a day in the coming years, up from about 1.5 million barrels last year. To secure such growth, though, the industry needs massive amounts of capital.
A Canadian Energy Research Association study recently predicted the oilsands will require $253 billion in capital for necessary construction.
To diversify Canada's export options for bitumen, the Alberta government and some producers are aggressively backing efforts to expand pipeline access to the West Coast, such as the Gateway project that has stirred up opposition from environmental groups and some First Nations.
Much of the line route crosses traditional First Nations territory in British Columbia that is subject to treaty negotiations.
The proposed 1,170-kilometre pipeline would run from the Edmonton area to a port in Kitimat, B.C., and is now under federal review.
"First Nations people are concerned about a pipeline going through their property," said University of Calgary professor Bob Schulz of the Haskayne School of Business, who is on the China trip and has been following the project's development.
"Each band has a separate territory and it's like going through separate countries."
There are also potential environmental issues with having new pipelines cross the area, as well as the movement of crude oil tankers off the Pacific Coast.
Ed Whittingham, executive director of the Pembina Institute, said governments and industry should have to produce a clearly defined development plan for all oilsands projects before approving unneeded infrastructure.
"We still have concerns with the pace and scale of development and what that means for increased pressure on ... land, water, air impacts -not to mention the climate," he said. "If they put in a new pipe, then obviously you want to fill it and we're worried that's going to drive production increases."
Enbridge officials involved in this week's Beijing meetings said they've met with Chinese oil executives in the past and discussed the implications of Gateway proceeding, but this was the first time they'd heard hard dollar figures attached to how much extra investment could flow if the line is built.
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