Oil Patch Insider

Is Alberta destined to become a world oil player?

Some think Alberta is destined to become a world oil player.

Others scoff at such a notion.

Consider the views this month of two experts.

Donald Coxe, global portfolio strategist for BMO Financial Group and chairman of Harris Investment Management, says a U.S. Securities and Exchange Commission ruling expected in June will be the making of the oil sands.

He is betting the commission will allow the oil sands deposits to be included in company reserves for reporting purposes, turning northern Alberta into the “focal point for one of the largest-scale competitions for energy resources we have ever seen.”

The outcome will be partly controversial and partly ugly.

But from an investor’s standpoint he recommended that those who hold only one oil stock should forget the royalty trusts, with those reserve life indexes of less than 10 years, and opt for oil sands producers who are sitting on 60 to 90 years of reserves.

Coxe said that if the SEC modifies its reserve rules it will add to the recognition of the oil sands by the International Monetary Fund and the U.S. Energy Information Administration and be crucial in opening the door for world oil giants to boost their price-earnings ratios if they have a stake in the oil sands.

But Coxe’s view that Canada will “face a new kind of importance” in the oil world is not shared by Faith Birol, chief economist of the International Energy Agency.

Birol said the influence of the oil sands will “increase significantly in the next years, but we do not think they will make a major revolution on the markets.”

He told the Financial Post the oil sands can keep the producing nations of OPEC honest when prices soar, but there are still unresolved economic questions hanging over the resource, such as the rising cost of natural gas which is a key part of the extraction and processing operations and the cost of transportation to distant markets.

However, Birol conceded that if oil prices remain at their current levels for several years that will give added impetus to oil sands expansion, although production will not replace Middle East oil.

If you’re looking for a third opinion, try Canada’s Finance Minister Ralph Goodale, hardly a neutral observer.

With his government in the thick of a federal election campaign, he told the Group of Seven finance ministers in London that Canada aims to “change the geopolitics of the world” by promoting the development of its 175 billion barrels of recoverable bitumen.

—Gary Park