Canada's tar sands emerging as an energy heavyweight
By SYED RASHID HUSAIN
Published: Feb 5, 2012
ARAB NEWS.
The energy world is in a transition. It is undergoing a major metamorphosis. New energy frontiers are cropping up and the global energy map is changing fast. Of these new emerging global energy centers, the landlocked province of Alberta in Canada, with its rich resource base, stands out in more than one ways. Many say Calgary, its most important city, is the Dhahran of tomorrow or at least the equivalent of it.
And there are reasons behind it. Tar sands have been there for ages. People knew of it. One could recall Dr. Fadhil Chalabi, the trusted, longtime lieutenant of Ahmed Zaki Yamani, telling this correspondent, more than a decade back, in his cozy office at Knightsbridge in London, at the Centre of Global Energy Studies, of the possibilities the tar sands offered to the world. Yet not much was being reported then about this source — technology being an impediment.
But rising prices, the growing global energy thirst and the emerging new technology, made this revolution possible. Today tar sands are very much a reality — a significant aspect of the emerging global supply base. And this is underwriting the realization of the long held dream and aspiration of Canada as an energy heavyweight in the global sense. And Calgary is the focal point of this emerging phenomenon!
And it was in his background that one went to Calgary last week — to smell he atmosphere — even if for a day. The moot point was the meeting with Peter Howard, the president and the CEO of Canadian Energy Research Institute (CERI) and Jon Rozhon, the editor-in-chief of the CERI journal, Geopolitics of Energy. CERI is the prime Canadian energy think tank. Interestingly Howard's predecessor, Marwan Masri, is also actively involved with the King Abdullah Petroleum Studies and Research Centre (KAPSARC) initiative.
And virtually all the issues impacting the energy world today, from geopolitics to the proposed embargo on Iranian crude exports, the virtual demise of the Peak Oil theory, the changing energy landscape, came under discussion that morning. And CERI is working on an exciting project — scenario planning-presenting before the industry leaders in a closed door session — three scenarios possible in the mid to long term.
The issue of creating markets to the growing Canadian crude output is under focus all around. And the subject could not have failed cropping up under discussion last Wednesday too. With the Obama government deciding to put the Keystone XL Pipeline on hold — at least for some time to come — the issue remained what other options Canada could really think of. Indeed there are markets. The Chinese are eagerly interested in getting a slice of the Canadian crude resource. The issue however, is how. The mechanics and the logistics — appear a major challenge — if not an impediment.
And the impediment is not just a technological one. In fact earlier the morning, while enjoying the coffee during the exciting and the intellectually stimulating breakfast meeting at the Calgary Petroleum Club with Matthew Piatek and Jihad of CERA in Calgary, there was a mention of this issue too. Various permutations and combinations were at work. However, there was a distinct hint of politics behind too. Would Washington watch Ottawa silently build and develop other export markets? Under NAFTA agreement wasn't Ottawa bound to keep the interest of the group members (read the US) ahead of any other consideration? The question — pure and simple was: Would Ottawa have the liberty to develop other export routes — as some in Canada are currently contemplating?
Already there is an ongoing discussion — and discussion — on the issue. As the global oil demand rises, and as Canadian producers look to diversify their energy markets, alternative means to move bitumen to the west coast is emerging as a real need. Expansion of the existing Trans Mountain Pipeline and increased rail shipment are being proposed as ways to expand transportation — not only of bitumen but of other hydrocarbons such as LNG and intermediate petrochemicals — to British Columbia ports — for exporting out to the energy starved China and other emerging markets.
Whether the fluid is bitumen, synthetic crude oil (SCO), natural gas, diluents, refined petroleum products or petrochemical products, they all have one element in common: A constraint of accessing the demand markets outside of North America via Pacific coast in BC. To establish greater transportation access to the BC coast, various options therefore needed to be weighed.
Enbridge Northern Gateway Pipelines Project running from Bruderheim, Alberta, to Kitimat, British Columbia has been one option under focus in recent months. The eastbound pipeline would import natural gas condensate and the westbound pipeline would export crude oil to the new marine terminal in Kitimat where it will be transported to Asian markets by oil tankers. The major target, the destination for the crude brought by the proposed pipeline, is indeed China. And this not only provides some strategic depth to Canadian crude export strategy, it also makes it less reliant on its currently only market — the US.
But would Canada be able to achieve this? Or more realistically, would the Big Brother next door, allow it to do so? Does it have the liberty to move ahead on additional export routes? All these are questions making rounds in Calgary these days. And the answers are not easy and straight forward to arrive at. There are just too many considerations.
The question became all the more pertinent in the aftermath of the US decision to defer the Keystone XL Pipeline project — enabling additional crude exports to the US. And that is now on hold — propelling Prime Minister Harper and his senior aides stressing in open that the resource rich country would look at other export options too — rather aggressively. After all Ottawa was not betrothed to Washington!
And in fact a special December issue of the journal, Geopolitics of Energy, exclusively focused on a one day conference held by the Woodrow Wilson Center, where the theme under the hammer was; is the proposed Keystone XL Pipeline in America's national interest? Arguments and counter arguments, debating the long term, strategically important goal of energy independence versus the adverse environmental impacts of the project were discussed in detail.
Yet despite all this debate, argument and counter argument, one thing remains certain - Washington cannot and would not hold on to its current stance on the Keystone XL Pipeline project for too long. For its own strategic concerns, ultimately it will have to give in; allowing the pipeline project to proceed in one form or the other. Yet, as barter — Ottawa may have to remain engaged — rather betrothed — to Washington — probably and presumably — at least in the near term.
