|
Oil sands competition stiffens India latest to join line-up at Alberta’s door; could do land deal, partnership or takeover this year Gary Park For Petroleum News
Getting formal global recognition for its oil sands reserves was one thing, but that was little more than a nice warm feeling all over for the Alberta government.
What has happened in the last year gives weight to decisions by the U.S. Energy Information Administration and the International Monetary Fund to include 175 billion barrels of oil sands resource in the global oil supply.
More important is the growing belief that crude prices are unlikely to fall below US$60 in the foreseeable future and could spike this year at US$90, due to combined global unrest and the challenge by President George W. Bush for the United States to sharply reduce its imports from unstable nations in the Middle East.
On the same night that Bush delivered his State of the Union speech, former U.S. energy secretary Spencer Abraham said the U.S. recognizes that the oil sands will likely be the largest source of incremental supply growth over the coming years.
He said in Calgary the oil sands are an “incredible success story … you are to be admired for the incredible success that’s taken place here.”
Avery Shenfeld, senior economist with CIBC World Markets, said Alberta will eventually represent the largest contributor to global supply growth, supplanting Russia and Saudi Arabia. Doubts over the commercial viability of oil sands extraction and processing have dispersed in this new oil environment to the point where the EIA now estimates U.S. oil imports from Canada will climb over the next 20 years to 2.7 million bpd from 1.6 million bpd, according to data obtained by Reuters news agency.
By far the bulk of that increase will come from the oil sands, which are expected to yield 3 million bpd within 15 to 20 years, triple current output. U.S. won’t have exclusive access But any thoughts that the U.S. will have exclusive access to those volumes are fast being eroded by the interest China, Japan and India are showing in northern Alberta.
India indicated earlier in February that it may be on the verge of investing C$1.5 billion-$4 billion to buy leases, form partnerships or take over a production company — a bolder program than the meek entry last year by China into the oil sands sector.
M.S. Srinivasan, secretary for India’s Ministry of Petroleum & Natural Gas, told reporters his country’s state-owned oil companies are taking a close look at acquiring a stake in the burgeoning oil sands this year.
“The whole world is turning to Alberta,” he told an energy conference in Calgary. “Most countries are (looking for oil sands investment opportunities), including India.”
He told the Financial Post that one of the four largest Indian companies — ONGC Videsh, Indian Oil, Oil India and Hindustan Petroleum — “could invest $1 billion, or it could be two together. It’s a distinct possibility that if all four say they want in the sum could go to $4 billion.”
For India, the crucial need is to ensure that energy supplies do not impede its GDP growth, currently about 7 percent a year.
“We aren’t moving in small measures,” Srinivasan said. “Ideally we would like to have a partner, but if we can’t find one, we’ll keep all options open.”
As well as attending the conference, the Indian delegation — including Mani Shankar Aiyar, who was replaced as oil and gas minister in a Jan. 29 cabinet shuffle — met with Alberta Premier Ralph Klein as well as production and pipeline companies.
Alberta Energy Minister Greg Melchin welcomed the prospect of an investment from India provided it joins efforts to study options for processing heavy crude.
“As long as it doesn’t detract from the Alberta and Canadian objective, then that certainly could be satisfactory,” he said.
Melchin said he expects Alberta to become the world’s largest oil producer at some time this century.
Whatever else, the promised entry of India could provoke China and Japan to step up their involvement.
For all the advance hoopla, China barely scuffed the surface last year when Sinopec bought 40 percent of Synenco Energy’s Northern Lights project and CNOOC acquired 16.69 percent of the shares in start-up MEG Energy.
Engaging in competition with China does not trouble Srinivasan, who said a race by the two Asian economic powers for new oil supplies is “unavoidable”: and would not be unhealthy.
However, not everyone is persuaded that India is ready to acquire an oil sands stake.
Tom Collins, vice president of PricewaterhouseCoopers, said India’s strategy seems to favor “direct government-to-government negotiations,” rather than operating through independent or international oil companies. Japan has sent delegation Japan has been a minor player for 30 years through a project that now produces 8,000-9,000 bpd, but it sent a major delegation to Alberta in January to explore the prospects of becoming a customer.
Japanese government officials were joined by executives from Japan’s two leading refiners — Nippon Oil and Cosmo Oil — along with executives from Mitsubishi, Mitsui and Idemitsu Kosan in meeting with energy and pipeline firms.
“A lot of companies are interested in investing,” said a spokesman at Japan’s consulate in Calgary.
Trade Minister Toshihiro Nikai told reporters that Japan, which imports 90 percent of its oil from the Middle East, is eager to diversify those sources.
Its first opportunity could come from Enbridge’s Gateway pipeline, which has set an economic threshold of 400,000 bpd of shipper commitments, of which half would be earmarked for PetroChina, up to 100,000 bpd to California with the rest available to buyers in China, Japan or South Korea.
With France’s Total also setting an ambitious path in the oil sands, the U.S. faces stern competition for supplies.
The major U.S. commercial interests are currently dominated by Imperial Oil, Devon Energy and ConocoPhillips, all controlled by U.S.-based parent companies.
| 