Canada pays heavy price

Lack of markets outside of North America costs producers; foreign investors want diversified customer base, ‘true world price’

Gary Park

For Petroleum News

The high cost to Canada’s oil and natural gas producers of not having access to markets outside North America has been hammered home once more by PricewaterhouseCoopers, PwC.

Reynold Tetzlaff, national energy leader at PwC’s Calgary office, said producers are losing about C$18 billion a year because of their inability to tap into world crude and LNG prices.

He told a forum sponsored by PwC that foreign investors are torn between their desire to enjoy the benefits of developing Canada’s oil and gas resources and a sense of frustration.

“They didn’t invest in Canada so that Canada could continue to send oil and gas at a reduced world price into the U.S. Their expectations are that Canada will be able to diversify its customer base and receive a true world price,” he said.

With fierce opposition building against efforts, such as Enbridge’s Northern Gateway project, to start shipping oil and gas from the British Columbia coast to Asia, offshore investors are “looking elsewhere … and they’ve got opportunity elsewhere,” Tetzlaff said, echoing a familiar warning.

He backed that statement by referring to several recent headlines: Japan obtains secure oil supply from Saudi Arabia. China is building a refinery and the feedstock will come from Venezuela. China is also looking at Colombia for a potential heavy oil source.

Given the options that are available, Canada needs to get its infrastructure “sorted out to capitalize on world demand,” he said.

Although he counts on the U.S. remaining the big consumer of Canadian oil, Canada must ship more crude to eastern refineries to displace imported foreign crude and to the Pacific Basin, Tetzlaff said.

Delivering an added prod, Robert Johnston, director of global energy and natural resources with U.S.-based consultant Eurasia Group, urged the Alberta government to provide whatever help it can to facilitate agreements with First Nations.

He said the B.C. government might also take on a larger role with Kinder Morgan’s proposed Trans Mountain pipeline expansion than with Northern Gateway because of the local opposition to an enlarged Trans Mountain operation in the Vancouver port.

Johnston also endorsed a role for the Canadian and Alberta governments to work with other provinces, the private sector and First Nations to develop a coherent Canadian energy strategy that would reduce the confusion in Washington, D.C., created by the different views from the Canadian government, Ontario, Quebec and Alberta.

“It’s important that an energy strategy be used to try to bring everybody to the same page, at least in the areas where there is common ground,” he said.