Providing coverage of Alaska and northern Canada's oil and gas industry
March 2010

Vol. 15, No. 13 Week of March 28, 2010

Alberta oil sands get a break

Ontario, Quebec shelve opposition, send delegations to buying-selling forum; EU backs down; industry leaders make stewardship case

Gary Park

For Petroleum News

The Canadian provinces of Ontario and Quebec are rethinking their public attacks on the Alberta oil sands and the European Union has bowed to Canadian pressure by agreeing not to erect trade barriers to oil sands-related products.

All good news in a week when industry decision-makers held an unparalleled Reuters-sponsored oil sands summit in Calgary.

The most important breakthrough occurred when the Ontario and Quebec governments sent delegations and urged business leaders to participate in an economic mission to Edmonton for a National Buyer/Seller Forum linked to oil sands investment.

This apparent change of heart comes after an intense period of attacks on the oil sands by Quebec Premier Jean Charest and Ontario Environment Minister John Gerretsen.

Alberta’s Premier Ed Stelmach and Energy Minister Ron Liepert said they hope this signals an acceptance by Canada’s two largest provinces that oil sands development creates thousands of jobs in their regions and billions of dollars in tax revenues.

“We’ve got to keep getting the message out to Canadians and investors around the world,” Stelmach said.

He told the forum that environmental attacks on the oil sands have been “wildly exaggerated by people and groups who have their own agenda.”

Ontario sent 35 companies and six regional economic development organizations to Edmonton; Quebec sent at least 17 companies, many from the clean technology sector.

Separately, a draft European Union paper on fuel standards drops all references to Canadian oil sands or tar sands, unlike drafts from last year, which assigned a greenhouse gas value to the oil sands of 107 grams per megajoule, much higher than any other road fuel except those extracted from coal.

That appeared to signal success for Canadian lobbying efforts, including a warning by Canadian Ambassador Ross Hornsby that draft EU standards to promote greener fuels are too unwieldy and would harm the market for oil sands production.

He cited research showing the oil sands’ carbon footprint was only 5 to 15 percent higher than most crude imports consumed in the United States.

“A separate category for oil sands … would amount to unjustifiable discrimination against the oil sands,” he wrote to Karl Falkenberg, head of the European Commission’s environment department.

Oil sands comments

Meanwhile, the gathering of the oil sands’ most powerful executives in Calgary yielded the following comments:

• Rick George, chief executive officer of Suncor Energy: “We’ve got to do a better job of telling our side of the story. Our environmental footprint in the same as the heavy oil produced in southern California. You deal with the facts and not fiction and not political rhetoric. If we are going to a carbon tax I am not necessarily opposed, but you must tax equally. The biggest emitter of CO2 is coal. You can’t just exempt coal.”

• Brian Ferguson, chief executive officer of Cenovus Energy: “We’re trying several different technologies (to reduce greenhouse gas emissions). One is to apply butane solvent into the steam to reduce the amount of steam that is required. The technology is proven in today’s price environment. But there’s (further possible opportunities) to use technological advances to drive down costs and drive down carbon dioxide emissions. The big thing that I’m focusing on right now is getting a really good understanding of (our) resource that we have at hand and how to move that forward in terms of net present value (by achieving 10 to 15 percent annual production growth).”

• Bruce March, chief executive officer of Imperial Oil: “We don’t have to make the choice between energy development of the oil sands and the environment. If we continue with the long track record of improvement … we can develop the oil sands responsibly, so we do not have to make that choice.” He said current cost estimates look acceptable for Imperial’s planned C$8 billion Kearl project, telling the summit they have dropped as much as 20 percent below pre-recessions levels.

• Chris Seasons, president of Devon Canada: “There’s a little bit of the pot calling the kettle black if California is talking about (imposing limits on oil sands production) without even looking at the oil derived from their own state. Getting off oil is not going to happen for some time. If you accept that you are going to have to have a good source of supply … I think Canada is a pretty darn good place to source your crude.” He said Devon sees as many as five projects producing 170,000 bpd from its newly acquired Kirby leases, but peak production from the first phase is still six years away.

• Lars Christian Bacher, president of Statoil Canada: “We see that some (capital) costs are dropping. We have also seen over the past year that it’s easier to hire employees and also keep them.” His company has pledged to cut CO2 emissions from the oil sands by 25 percent over the next decade and by 40 percent in 15 years.

• Jean-Michel Gires, chief executive officer of Total Canada: “We call it oil sands, not tar sands. Tar is a manufactured product, derived from coal. (Carbon capture and storage) is an interesting option, but it’s just another option. It’s not the solution. Interesting technological solutions are starting to exist, but they are still too expensive.” He said justifying a multibillion dollar price tag for an oil sands mine and upgrader needs oil prices above US$80 per barrel.

• Russ Girling, chief operating officer of TransCanada: “If you impose fuel standards that restrict (oil sands) imports, the cost of gasoline will go through the roof. The U.S. wants and needs (Canadian) crude oil for a long time.”

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