by Guillaume Lavallee
12-09-05
The oil rush has come to western Canada, with the United States and China jockeying for position in what is potentially the world's biggest source of petroleum, known as the Alberta oil sands.
The potential of the oil sands has been known for decades, but with energy
prices soaring and heightened fears of a global supply crunch, a growing number
of producers from around the world are stepping up efforts to find ways to
explore and extract oil.
The oil sands -- deposits of bitumen, a heavy black viscous oil that needs extensive treatment to be converted into an upgraded crude oil -- contain 175 bn barrels of "proved reserves," the largest in the world outside Saudi Arabia. For an oil-hungry world, the Alberta sands represents the best opportunity for boosting supplies, some analysts say.
"Can you name me another country in the world that can increase its oil
production right now?" asks Greg Stringham, vice president at the Canadian
Association of Petroleum Producers.
Extracting oil from the sands costs as much as $ 12 per barrel, making it more costly than crude from other sources. But industry officials say a market price of more than $ 25 a barrel will allow oil from the sands to be profitable. Canada's total oil production is about 2.5 mm bpd, of which 80 % is exported to refineries in the United States. Canada supplies about 16 % of US exports, and 10 % of all US petroleum.
As producers find new ways to extract and treat the bitumen, Canada could
diversify its exports -- and China is among the countries in line. China's
interest in Canada's oil is seen as one of the reasons for the visit of
President Hu Jintao, who wants an expanded trade with Canada.
Industry officials say Canada is likely to boost oil production to about 4 mm bpd, thus providing an extra 1.5 mm barrels to a global economy thirsty for more oil. Chinese oil firms as well as others, including France's Total, are seeking partnerships with their Canadian counterparts as they bid for rights to sands -- found in an area of 140,800 sq km (54,000 sq miles) of primarily northern Alberta.
PetroChina is in talks with Canada's Enbridge meanwhile on the construction of a
pipeline that would transport some 400,000 bpd from Fort McMurray, Alberta, to
the Pacific coast, for an estimated cost of C$ 2.5 bn ($ 2 bn).
Wenran Jiang, a political scientist at the University of Alberta, said China
and Canada have mutual interests in cooperating in the oil sands exploitation.
Both however are aware that China's ownership of a strategic asset is a
politically sensitivity topic.
"All the major oil companies of China have offices in Calgary but they keep a
very low profile," Jiang said. "They are aware of the Canadian debate about
strategic and national security implications and they don't want to provoke
anything so there are working in a discreet manner," Jiang said.
The United States does not want to be left out of the action either. US Treasury Secretary John Snow recently visited the oil sands area, with Vice President Dick Cheney scheduled to follow.
"Now, the world is finally cut on to the fact that yes, these are actually
developable," said Alberta Energy Minister Greg Melchin. "It's a track everybody
is interested in, including the United States."
"The United States has clearly begun to see this picture," said Sherry Burns,
chief economist at BMO Nesbitt Burns.
"The global geopolitical implications are very important. Canada's role in the
global economy and in the political sphere is about to increase dramatically in
importance. It's nice to have a world-class bounty that the two largest economic
powers desperately need."
Source: AFP