LNG part of Petro-Canada’s crystal ball

Gary Park

Petroleum News Calgary correspondent

Petro-Canada, immersed in grappling with the economic viability of its Alberta oil sands plans, is pursuing long-life liquefied natural gas assets as part of its long-term strategy. Chief Executive Officer Ron Brenneman said the Calgary-based integrated oil company has set a goal of becoming a “player in the whole (LNG) value chain, from upstream through marketing.”

Its current focus is on the Atlantic basin, which produces about 700 million cubic feet per day of LNG, much of it destined for U.S. buyers.

“We understand the distribution system, we understand the players and the pricing mechanism,” said Brenneman. “We feel we can bring something to the table there.”

He said Petro-Canada could add to its toehold in the rapidly expanding LNG development in Trinidad and Tobago, starting with an expanded presence through an upcoming exploration round.

As well, the company could take a role in a regasification plant, which could “provide some opportunity openings for accessing some of the upstream supply pieces,” he said.

Following its successful takeover last year of Germany’s Veba Oil & Gas, Petro-Canada is eyeing other global prospects, including assets in Venezuela and low-cost Middle East oil, Brenneman said.

Having already decided that costs are too high to increase its natural gas operations in Western Canada, Petro-Canada is still unsure about restarting its plans for a multi-billion dollar oil sands program.

He said a review, including the fate of an upgrader at its Edmonton refinery site to process raw bitumen, will be released before Christmas.

Brenneman painted a gloomy picture, suggesting that huge budget overruns in the oil sands sector have dramatically altered projected returns on capital to the point where they would be fortunate to match the cost of capital.

“Even to get to cost-of-capital returns, you’ve got to have a lot of things going for you,” he said, referring to a quality oil sands reservoir, easy access to favorably priced transportation and the right technology.

Brenneman said flatly that overruns in capital costs are now a fact of life in the oil sands.