Fort McMurray: Economic centre of Canada?
Claudia Cattaneo Jun 5, 2012
Financial Post
Fort McMurray, economic centre of Canada? Torontonians and the rest of the country had better get used to the idea. The Canadian economy will increasingly spin around the northern Alberta oil town if an industry forecast that shows Canada’s daily volumes will more than double to 6.2 million barrels a day by 2030, largely from the oil sands, proves right.
Under the forecast, made public Tuesday by the Canadian Association of Petroleum Producers, Canada will climb to the No. 3 or No. 4 spot in the world as a major oil producer (from No. 5 currently), trailing only oil heavyweights Russia and Saudi Arabia and likely running neck and neck with the United States, depending on what happens to its tight-oil chase.
The growth ambitions represent a bold play for Canada at a time of global uncertainty and oil sands criticism
Canada will be the world’s fastest growing petro-state, with production expected to jump from today’s three million barrels a day.
The implication is that the Canadian economy will continue to tilt toward Alberta, with the rest of the country providing goods, services and labour to support its big spending oil sector.
Some may not like the power shift it represents, or what it does to the environment, or how it affects the rest of the economy.
Next to the turmoil faced by other countries, it’s a nice problem to have and represents a vote of confidence in Canada, since a lot of the growth will be bankrolled by foreign companies.
Another positive is that expansion plans are so ambitious they have outgrown Alberta’s capacity and need all of Canada to make them happen.
“What we have seen over the last five years has been a stretching out of the supplies that we get across the country for this industry,” said Greg Stringham, CAPP oil sands vice-president. “While this is our oil forecast, when you look at where we get our manufactured goods, the engineering services, the legal accounting services, it’s … not Western Canadian at all. It goes into Ontario, Quebec and a lot of the materials come as far as Atlantic Canada.”
“It’s something that is part of the total Canadian economy, and we have seen a lot of the manufacturing companies retooling toward the goods that we require.”
CAPP’s annual forecast shows more aggressive oil growth than predicted only a year ago, despite uncertainty in the global economy and weaker oil prices.
It’s the result of surging tight oil production made possible by new technology and a five-year extension of the forecast period, which captured many oil sands projects that were previously excluded.
The activity is concentrated in Western Canada, with oil production in Newfoundland’s offshore expected to lighten up as fields deplete. Out of the 6.2 million barrels a day expected in 2030, five million would come from the Alberta oil sands, 1.1 million from conventional oil in Alberta and Saskatchewan, and only 100,000 from offshore Atlantic Canada, a third of today’s production.
As overwhelming as it is, CAPP believes the forecast, based on input from members that produce 90% of Canada’s oil and gas, is realistic and based only on what the Canadian economy can handle, with the big risks coming from oil prices and oil demand.
Still, the forecast says there is an “urgent need” to expand pipeline infrastructure to Eastern Canada, Asia and the United States so new barrels find their way to consumers.
Efforts are being held back by green movement opposition to key proposed pipeline projects.
“The largest market for Western Canadian crude has traditionally been the U.S. Midwest, but future production growth requires Canadian producers to look to extend their reach and serve new markets,” CAPP says. “Avoiding constraints in transportation capacity to markets is essential to a well-functioning crudemarket and the potential for such constraints is currently one of the oil industry’s major concerns.”
The urgency seems to be fast-tracking plans to ship Western Canadian oil to Eastern Canada. The reversal of Enbridge Inc.’s Line 9 in Ontario is awaiting approval from the National Energy Board. TransCanada Corp.’s plan to convert part of its under-used gas Mainline to oil service is also being talked about. CAPP said TransCanada has proposed to move 625,000 barrels a day of Western Canadian oil to Montreal and potentially as far as the East Coast. Tankers could transport oil to Europe or Asia.
Producers are also pushing into two other markets — the U.S. Gulf Coast and Asia, where they hope to replace imports from places such as the Middle East.
The Asia Pacific Foundation of Canada and the Canada West Foundation are expected to call today for a Canada-Asia energy framework. One of their key ideas is to set up a public energy transportation corridor constituted by government, regulated as a kind of public utility and operated by the private sector as a way to deal with often conflicting interests in infrastructure projects.
The growth ambitions, and the many efforts to make them happen, represent a bold play for Canada at a time of global uncertainty and oil sands criticism. They will get the oil world’s attention.
http://business.financialpost.com/2012/06/05/fort-mcmurray-economic-cent...
