Canada hears the whip cracking on oil, gas exports

Gary Park

For Petroleum News

Canada has little more than a decade to overcome the obstacles to building crude oil pipelines to the British Columbia coast or producers in Western Canada will experience the same price of price collapse that has crippled the North American gas sector, said Lorraine Mitchelmore, president of Royal Dutch Shell’s Canadian unit.

“It’s become even more urgent than in the past that we get access to tidewater, meaning access to Asia,” she told a conference sponsored by the Canadian Council of Chief Executives.

Although the Asian demand for Western Canadian crude could extend far into the future, right now supply is the key, she said.

“We’ve seen it happen in gas. In the span of three years, our market has virtually dried up,” Mitchelmore said.

“So you could possibly see the same thing happening in the oil business, with tight oil,” she said. “So there’s going to be a lot of pressure. There is quite a complex marketplace right now with the light oil coming on. And that could put a lot of downward pressure on the prices of our heavy crudes as well.”

Mitchelmore gave Canada little more than the current decade to start oil and LNG exports to Asia, given the rate at which its competitors are moving ahead.

“In gas, look at what Australia is achieving. Our oil sands investment pales in comparison to LNG investment in Australia. It’s less than half. And then Russia is building infrastructure to get to Asia,” she said, adding she was worried Canada could find itself on the fringes as a bit player unless it takes advantage of its opportunities.

Rick George, the retired chief executive officer of Suncor Energy, echoed Mitchelmore’s thoughts.

“If you look at the gas coming out of the Middle East and the gas coming out of East Africa — these are massive volumes and the buyers are well aware of these reserves. So it’s our opportunity. If we don’t move on gas and oil there’s a very god possibility we’ll miss that opportunity,” he said.