Many US oil executives and officials will be watching Canadian Prime Minister Paul Martin Jan. 14-23 as he swings through energy-hungry Asia, eager for deals in what everyone knows is a seller's market—and a growing one at that.
"Given its accumulated hard-currency reserves, China is likely to be an increasing source of capital as it seeks to secure the resources the Chinese people will need," Martin told the Canada-China Business Council last month.
Among other things, that means growing competition in the oil market.
US supplier
Canada ranks among the top suppliers of crude oil and petroleum products to the US.
Interest in Martin's visit to Beijing Jan. 20 will center on the potential for changes to that relationship.
China and Canada are expected to use Martin's visit to announce framework energy agreements leading to contracts between Canadian and Chinese firms for stakes in Alberta's lucrative oil sands.
The Canadians have been touting such a deal for months.
"What we're suggesting as China searches the world to find a secure and reliable supply of oil (is) they should be looking here," said Alberta's Premier Ralph Klein on a visit to Beijing in June 2004.
"We continue to impress upon Chinese oil companies that there are opportunities (in Alberta), that the only oil isn't in Venezuela, or Australia or Indonesia or Brazil, that there is a very safe and reliable source of oil here," Klein said.
According to OGJ estimates, Alberta's oil sands deposits make up the majority of Canada's total proved crude oil reserves of 179 billion bbl, the second highest in the world after Saudi Arabia (OGJ, Dec. 20, 2004, p. 18).
Canada's production from oil sands surpassed 1 million b/d in 2004 and could reach 3 million b/d within a decade. Some of that output, which was expected to flow to US markets, theoretically could end up fueling Beijing's booming economy instead.
One Canadian official tried to allay US concerns that might arise about possible new arrangements with China.
Murray Smith, a former Alberta energy minister who has been appointed the province's representative in Washington, DC, said a deal with China would not change much between the US and Canada.
Prized resource
Explaining that Canada might sell China some 1 million b/d out of total potential exports of 3 million b/d, Smith said: "Our main link would still be with the United States, but this [deal with China] would give us multiple markets and competition for a prized resource."
Whatever the outcome of discussions in Beijing, the mere possibility that China might become a major purchaser of Canadian heavy oil shows how a rapidly growing energy appetite has intensified competition for oil supply.