China's thirst for oil isn't being quenched by Albertan crude
Relations between Canada and 'the dragon' are at a 30-year low, expert says
Shaun Polczer, Canwest News Service
April 21, 2008
Despite Asia's insatiable thirst for oil, the prospects for oil exports from Alberta to the Far East are growing more remote by the day, a leading China expert said in Calgary last week.
"It looks like we're in hibernation. We're ignoring the dragon," said Dr. Wenran Jiang, director of the University of Alberta's China Institute, on the sidelines of the Canadian Energy Research Institute's annual oil conference.
Although China accounts for about 17 per cent of the global economy, Chinese investments in the oilsands amount to $300 million -- a tiny fraction of the more than $100 billion to be spent on increasing Canadian production over the next decade.
With growing animosity fuelled in part by conflicts over China's human rights record and protests over the country's crackdown on Tibet, Jiang said Canada's political leadership is passing up an opportunity to increase trade and influence between the two nations.
Increasingly, Chinese companies are choosing either to invest in friendlier countries or stay home.
"The political relationship is cool, probably the lowest in 30 years. There is very little movement," Jiang continued. "The problem is not that we have too much Chinese investment. It's that we have too little. The Chinese are not coming."
It's not that China doesn't need the oil.
If Chinese citizens were to use as much oil as Canadians and Americans on a per-capita basis, the country would consume Earth's entire production of about 80 million barrels per day.
"To understand the global energy picture, you have to understand energy in China," said Marwan Masri, CERI's president and CEO.
Sino-Canadian trade relations peaked around 2004 when Enbridge Inc. announced plans to build the half-million-barrel-a-day Gateway pipeline from Fort McMurray, Alta., to Kitimat, B.C., to facilitate tanker exports to Asia and California.
The project was unofficially abandoned in 2006 after the company failed to secure enough oil to fill the line.
At the time, Chinese officials expressed frustration over the unwillingness of Canadian producers to partner up with the state oil company in a production/refining venture that would see Canadian bitumen and heavy oil sent for processing in Asia.
Instead, producers such as EnCana Corp. signed high-profile deals with American refiners to send product to the U.S. while pipeline operators such as Enbridge and TransCanada Corp. announced major new projects to take Alberta oil south to the Gulf Coast.
In the interim, Enbridge has quietly revived Gateway. A footnote in its annual report, released March 31, says it is currently in "commercial discussions" with shippers to build the stalled project.
Enbridge spokeswoman Jennifer Varey refused to elaborate on what the discussions might entail but indicated the company has received enough third-party moral and financial support to move ahead with a regulatory application.
After the initial delays, the pipeline could be in service by 2012-14, she said.
"We're continuing commercial discussions, not just with China but with several other Asian countries," she said.
"There is certainly interest on continuing to work on Gateway. Obviously, for a project of this magnitude it takes quite a bit of support from various parties."
In 2005, Enbridge held an "open season" to gauge interest in building the pipeline. Varey said it would likely hold another, but she couldn't say when.
© The Vancouver Sun 2008
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