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Alberta warns Kyoto could drive capital, companies from Canada Preliminary findings project loss of 70,000 energy industry jobs, extra C$3 a barrel on oil sands operating costs and C$6 billion in annual losses for Alberta Gary Park PNA Canadian Correspondent
Canada’s role as the largest exporter of oil and gas to the United States hangs in the balance as the federal and Alberta governments clash over whether Canada should formally ratify the Kyoto Protocol on reducing greenhouse gas emissions.
A preliminary report by the Alberta government, obtained by Petroleum News Alaska the last week in November, warns oil and gas companies will flee Canada, 70,000 industry-related jobs will be lost and the costs of oil sands production will climb if the terms of Kyoto are implemented.
Alberta, which is due to release a detailed economic assessment by mid-December, estimates the cost of meeting the greenhouse gas emission targets would be C$6 billion a year for the petroleum-driven Alberta economy.
The government report calculates oil sands operating costs would rise by about C$3 a barrel, at a time when advances in technology, including lower emissions of carbon dioxide, have allowed Suncor Energy Inc. and Syncrude Canada Ltd. to set their sights on C$15 a barrel and less and helped to attract more than C$50 billion of potential new investment.
Investment would flee south The preliminary findings, presented to Alberta cabinet ministers, also warn of a flight of investment capital to Mexico, Venezuela and Saudi Arabia, Canada’s major competitors for a share of the U.S. energy market, which are exempt from Kyoto.
“We don’t believe Canada should ratify Kyoto” unless it can obtain credit for exporting “clean” energy such as natural gas and hydroelectric power, Alberta Environment Minister Lorne Taylor said.
“How suicidal does the federal government want to be in the destruction of the Canadian economy?” he asked.
“Mexico is our competitor for natural gas and Venezuela is our competitor for heavy oil, so if it is too expensive to develop those resources here, companies will simply move there,” said Taylor. “What will happen is carbon dioxide production will also move ... and that’s what is so ridiculous” about the federal government’s insistence that it will ratify Kyoto, he said.
Industry concerned Pierre Alvarez, president of the Canadian Association of Petroleum Producers, carried the industry’s concerns to the federal government the last week in November.
He told reporters the industry does not want to see foreign firms, especially those from the United States, pull back from planned multi-billion-dollar investments in Canada, or have Canadian companies move their capital to other countries.
Alvarez noted that Canadian-based companies have boosted their overseas investment to C$3 billion this year from C$500 million in 1994.
“We now have large Canadian independents who are capable of playing on an international field and Canada has got to be competitive,” he said.
Calgary-based Nexen Inc. (formerly Canadian Occidental Petroleum Ltd.), which produces 118,000 barrels a day in Yemen (more than half its total output), is ready to reallocate its investment to other parts of the world if Canada becomes uncompetitive, said president and chief executive officer Charlie Fischer.
He said the industry in Canada can’t afford to lose its competitive edge against the United States, which has refused to sign on to Kyoto.
Nexen, which is a 7 percent partner in the Syncrude Canada consortium and has just announced its participation in a new C$2 billion oil sands project, will do a “lot of rethinking” if it is faced with an extra C$3 a barrel on its operating costs, said company senior vice-president Roger Thomas.
Signs of political divisions While Prime Minister Jean Chretien says he is confident Parliament will formally ratify Canada’s participation in Kyoto by next June, there are growing signs of a rift within the federal cabinet.
In late November, Natural Resources Minister Ralph Goodale and Industry Minister Brian Tobin said in public speeches that the overall costs of reducing greenhouse gas emissions will be a key ingredient in deciding whether or not Canada will sign on.
A study in October by Tobin’s department estimated the cost of compliance for Canada at about 1.5 percent of national gross domestic product, or about C$15 billion a year.
Goodale told a news conference Nov. 30 that the concerns of Alberta and the petroleum industry merit serious attention if Canada is to have both a healthier environment and solid economy.
He said oil sands production is “extremely valuable” to Canada and a key source of security of supply for the United States. “We need to make sure that the strong level of activity in the oil sands continues,” he said.
The depth of the political divisions surfaced in late November when Chretien and Alberta Premier Ralph Klein shared the same microphone as part of a Canadian trade mission to Texas and California.
“We cannot agree to the Kyoto Protocol as it now stands,” said Klein, arguing the emissions reductions would hit Alberta disproportionately.
“We have the intention of ratifying,” Chretien responded. “We have to talk with the provinces before we ratify it, but our goal is to ratify.”
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