By an OGJ Online Correspondent
CALGARY, May 21 -- Ottawa and oil industry leaders are responding enthusiastically to plans by the Bush administration for a continental energy policy in which Canada would play an expanding role.
Canada is already the top exporter of natural gas to the US, with exports of 3.5 tcf a year, or 15% of US needs, and the third-largest crude supplier, at 1.4 million b/d.
But it is the huge Canadian potential in both oil and gas which Washington sees as a key element in the Bush blueprint to solve US supply problems.
The Canadian energy storehouse includes:
300 billion bbl of recoverable reserves of bitumen in the oil sands of northern Alberta, with 2.5 trillion bbl in place. Conventional oil resources in the Arctic, western Canada, and the East Coast offshore are estimated at 51.4 billion bbl.
There is also huge natural gas ultimate potential, estimated at 175 tcf in the Arctic, 89 tcf in other frontier areas, 329 tcf in Western Canada, mainly in Alberta, and 63 tcf off the East Coast on the Grand Banks and Scotian Shelf.
Canadian Prime Minister Jean Chretien said the US demand for Canadian oil, natural gas, and electricity will provide a "fantastic opportunity to launch Canada into a period of unparalleled prosperity."
In a speech to the Canadian Association of Petroleum Producers (CAPP) Chretien promised to "take full and quick advantage" of US energy needs. He has appointed a cabinet committee on energy to speed resource development to meet continental energy demands.
Chretien also made it clear that Canada continues to oppose plans to drill in the Arctic National Wildlife Refuge (ANWR) on the grounds that it could affect Caribou herds that migrate from Alaska through the Yukon and are an important food source for native populations.
Reactions
Chretien urged the US to consider oil sands development as an alternative. More than $30 billion (Can.) in development is planned or already under way there.
Federal Energy Minister Ralph Goodale said Canada plans no major changes in policy because a solid policy is already in place.
"Our policy is based on three fundamentals -- a market-based approach; efficiency, timeliness and fairness in the regulatory process; and, thirdly, full respect for the principles of sustainable development where the environmental considerations are right alongside economic considerations," he said.
Alberta Energy Minister Murray Smith said the Bush plan will translate into billions of dollars in investment, jobs, and export opportunities for the province, which is Canada's major hydrocarbons producer.
"There's no question that new investments in the short run could well be in the billions of dollars. They (the US) want diversity of supply, they want security of supply, and they want it at a reasonable price," Smith said.
"We will be taking the plan to Alberta to go through it line by line and we will finalize what we think are some investment opportunities in resource development, and opportunities in our service industry." Smith said.
CAPP Vice-Pres. Greg Stringham said US plans represent an opportunity for the Canadian oil and gas industry.
He said it is clear that the US needs additional energy from other countries, including Canada, and the Bush policy supports development of resources in the Arctic, western Canada, and the East Coast offshore.
Gwyn Morgan, president and CEO of Alberta Energy Co. Ltd., said the US plan is a potential windfall for the Canadian industry. He compared it to the 1965 auto pact between the two countries.
"The continental auto trade has done more for Canadian jobs and prosperity than any other single measure," Morgan said.
"Continental energy offers the same potential. When I think of continental energy, I say in principle, bring it on."
Morgan said if the Canadian industry can resolve some issues around taxation and access to land, it is fully capable of supporting the energy needs of the US market.
Patrick Daniel, president and CEO of Calgary-based Enbridge Inc., said he is broadly supportive of the policy outlined by Washington. Enbridge operates the longest crude oil and liquids pipeline system in the world to markets in central Canada and the US.
"I feel quite positive about the policy in general terms. I think it is very encouraging that we have individual countries thinking broadly in terms of continental trade issues and energy supply," he said.
Daniel said it is very important that the Canadian and US governments discuss how they can expedite energy policy in terms of regulatory review and consistent policies and approaches to make it happen as quickly and efficiently as possible.
Eric Newell, chairman and CEO of Syncrude Canada Ltd., Canada's largest oil sands producer, said the policy will give a major boost to development that is already under way.
However, Newell said Ottawa must act to streamline regulations, make the industry more attractive to international investors, and develop human capital and infrastructure in Canada's northern aboriginal communities.
A shortage of skilled manpower and jurisdictional issues related to various stakeholders in Canada's Yukon and Northwest Territories are potential challenges to implementation of the Bush energy plan in the Arctic.
The Petroleum Services Association of Canada (PSAC) recently forecast that a record 18,205 wells will be drilled in western Canada this year. But it warned that a lack of skilled labor is a potential deterring factor in the drilling effort, and it is now taking measures to address that problem in the short and longer-term.
Husky Energy Inc. recently announced it is deferring a major oil sands development because a superheated demand for skilled labor has bumped up estimated project costs.
Pipeline issues
Producer groups in both Alaska and Canada's Mackenzie Delta are completing feasibility studies on plans to develop natural gas reserves and pipe them through the Canadian territories to Alberta and markets in the US. Pipeline routes from Alaska and the Delta could be routed via Canada's Yukon Territory or the adjacent Northwest Territories.
The Yukon government supports a line from Alaska through its territory following the route of the Alaska Highway. The Northwest Territories government supports a line from the Delta and the Beaufort Sea to Alberta. Ottawa has maintained a careful neutrality between the competing pipeline ambitions of the territories and is concentrating on streamlining its regulatory machinery to deal with any pipeline application which may develop.
In addition to the competition between the territories, First Nations or aboriginal peoples in the North now have increased jurisdiction over their lands and will demand and expect a slice of the pie and a say in how development proceeds.
A model may be the Fort Liard natural gas region of the southern Northwest Territories, where First Nations groups have established corporations that handle much of the contract work in the area. Development is on hold while Ottawa and aboriginal groups resolve jurisdictional issues.
Ambitious plans in the 1970s to ship gas from the Canadian Arctic foundered on inadequate economics, environmental issues, and opposition from aboriginal groups. The imperatives of US energy needs now weigh in favor of Arctic development actually taking place, however.
