Oil sands ready to resume growth, says Dhaliwal

Canadian cabinet minister confident that Kyoto Protocol won’t scuttle projects; analysts support claims that added costs are ‘manageable,’ industry on guard

Gary Park

PNA Canadian Correspondent

Kyoto’s clouds over the Alberta oil sands are starting to disperse, although the Canadian government is unable to offer any assurances about the costs of the climate-change treaty beyond 2012, when the first phase of implementation is concluded.

However, Natural Resources Minister Herb Dhaliwal, after meeting with energy industry executives in Calgary January 22, said he is confident that as Kyoto’s impact becomes better known more projects will be advanced than stalled or cancelled.

“Although Kyoto has some impact, it does not have an impact that will cause projects to be cancelled,” he said, despite TrueNorth Energy Corp’s decision in mid-January to shelve its C$3.5 billion project and Canadian Natural Resources Ltd.’s hesitation in proceeding with a possible C$8 billion venture.

Canadian Natural expects to decide by early February when it will spent C$200 million this year, or defer its Horizon project.

Dhaliwal said he is certain more projects will be announced. “They’ve all said, ‘Look (the Kyoto Protocol) is manageable,” he said. He has some support from analysts for that view.

FirstEnergy Capital Corp. said the promised federal caps on the costs of greenhouse gas emissions mean the accord will have a “relatively low impact on oil sands producers.”

A Dundee Securities Corp. analyst Barbara Betanski, in a research report for clients, said there is no evidence that the economics of the Syncrude Canada Ltd. operation, the world’s largest source of synthetic crude, are “significantly constrained” and estimated the consortium will faced a rise of 23 cents per barrel in its operating costs based on expected production of 460,000 barrels per day in 2008.

Suncor Energy Inc. had earlier projected its costs at 20 cents to 27 cents per barrel, which company officials have described as “manageable.”

She forecast that as costs are better defined companies will start investing in the oil sands.

Long-term planning urged

“It is critical that attention to short-term action does not crowd out the serious thought and debate that is still required on long-term strategies that make sense for Canada,” the board said.

It wants the long-term obligations provided in “fine detail,” but Dhaliwal said offering that certainty won’t be possible until international discussions get under way.

So long as doubts persists, Canada’s major energy industry and business groups are ready to protect its interests against any unfair enforcement of Kyoto through the Canadian Coalition for Responsible Environmental Solutions, which was established last year to advance made-in-Canada alternatives.

In particular, there is unhappiness that the final federal draft of the climate change plan exempted the auto manufacturers from a list of heavy industries required to lower their greenhouse gas emissions.

Government sources have said that vehicle-assembly plants were dropped from the list after intensive lobbying of cabinet members by a sector that employs about 50,000 Canadians.

But Dhaliwal has insisted that auto makers will meet the Kyoto commitments “one way or another.”