[lbo-talk] Canadian Oil and China

Leigh Meyers leighcmeyers at gmail.com
Thu May 26 07:22:12 PDT 2005


Is it "peak oil" yet?

The dragon’s thirst for Canadian oil

Canada is one of the most energy-rich countries in the world, while China needs greater amounts of energy to sustain its growing economy.

By Wenran Jiang (25/05/05)

http://www.isn.ethz.ch/news/sw/details.cfm?ID=11350

April marked a small leap forward in China's energy relations with Canada. China National Offshore Oil Corp. (CNOOC) put down US$150 million for a one-sixth stake in MEG Energy Corp., an upstart oil sands company. This is China's first major investment in Canada's vast oil sands industry. Two days later, PetroChina International Co. Ltd. signed a memorandum of understanding with Canada's giant pipeline company Enbridge Inc., promising cooperation in the $2.5 billion Gateway pipeline from Alberta to the West Coast that may supply China with 200,000 barrels of crude a day once completed. China's large energy corporations are predicting more such deals but at a "much bigger" scale. These developments followed the first official visit by Canadian Prime Minister Paul Martin to China last January. The two countries signed the Canada-China Statement on Energy Cooperation in the 21st Century, promising to work closely in the areas of oil, gas, oil sands, energy efficiency, environment, and related ventures. Canada is one of the most energy-rich countries in the world, while China needs greater amounts of energy to sustain its growing economy. The two countries appear to be complementary in their respective energy situations, and the potential for cooperation seems unlimited. But such a proposition, attractive as it is for the future, has not been demonstrated in the history of their bilateral energy relations. Looking ahead, there are still hurdles to be overcome that require both sides to take proactive measures.

Much thunder, little rain in past efforts As the second largest oil consumer in the world after the US, China's state-controlled energy companies have reached out to every corner of the world, searching for more energy and resources, and signing deals worth tens of billions of dollars. But until recently, there was little achievement in China-Canada energy cooperation. Looking back, Beijing and Ottawa seem to have always been trying to achieve some kind of cooperation in the widely defined energy sector. Major agreements, statements, and initiatives in the past ten years have included: High level mutual visits by prime ministers and other senior ministers and provincial leaders expressing strong interests in developing closer energy relations with each other; The sale and construction of two Canadian CANDU 6 nuclear reactors in Qinshan, outside Shanghai, was completed under budget and ahead of schedule in 2003; Proposed energy-related projects also include energy efficiency in building; reduction of CO2 emissions from coal-fired utility boilers; renewable energy diversification; transfer of small hydro technology; solar energy for rural electrification in Western China; sustainable cities initiative; and urban rehabilitation and conservation Despite these efforts, there has not been much progress in bilateral energy cooperation over the years with the exception of the two nuclear reactors. And overall trade figures do not particularly demonstrate tangible expansion in this area. There has been much talk and little action as far as larger federal initiatives in the energy sector are concerned. So far China is yet to purchase any significant quantities of Canadian oil. In other areas in the above list, the achievements are limited considering the huge potential for trade, investment, technological exchanges, and other joint ventures.

Canada huge oil sands catch China’s attention However, Canada's huge oil sands may have finally caught Chinese attention. According to the latest estimates, Canada's oil reserve stands at 176 billion barrels, second only to that of Saudi Arabia, and 50 percent more than Iraq. [1] Such an upgrade in ranking of resources is due to a reclassification of the status of Alberta's oil sands to the economically recoverable category. Today, Alberta produces more oil from oil sands than from conventional reserves. Although the cost of extracting oil from sand is higher, at about $12 per barrel compared to roughly $4 per barrel for conventional recovery in the Middle East, it is still a profitable operation when the world oil price hovers in the $45-55 range.

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http://www.isn.ethz.ch/news/sw/details.cfm?ID=11350



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