Public to pay for green policy: Lau
Husky CEO blunt about passing on government-mandated higher costs
Jon Harding, Financial Post
April 20, 2007
http://www.canada.com/nationalpost/financialpost/story.html?id=3ba6045c-...
CALGARY - John Lau, president and chief executive of Husky Energy Inc., fired off a warning yesterday to Alberta and Canadian legislators circling the oilsands: Consumers, not oil companies, will bear the brunt of government policies that add costs to the massive energy developments.
"As a producer I see, or I hope, that the government is not too excessive, but any fees will be gradually passed to the consumers," Mr. Lau said after the company's annual shareholders meeting in Calgary.
"If the [Alberta] government increases the royalty, then explorers and production companies will look at that basis and whatever it is, it will be shared with consumers."
Mr. Lau's comments were the first from among leaders of Canada's five large oil and gas integrated companies -- those that produce and refine oil and then sell gasoline and diesel to motorists -- since a host of proposals began to emerge targeting the oilsands as a large emitter of greenhouse gas.
Mr. Lau said new policies such as the federal green plan, which is due any day, or the Alberta government's oilsands royalty review, which begins on Monday and ends in late August, will not stand in the way of Husky's aggressive plans to expand output over the next several years from Alberta's oilsands.
Husky hopes to produce about one million barrels of heavy oil a day by 2020, with more than half of that coming from new projects in the oilsands region of northeastern Alberta, including Husky's Sunrise project, which Mr. Lau said could be built in the next three to five years and would eventually churn out 300,000 barrels a day.
The Alberta government recently introduced legislation to reduce greenhouse-gas emissions from the 100 facilities that account for about 70% of the province's total emissions. The new rules require those companies to cut emissions intensity by 12%, starting July 1. Otherwise, they must buy credits from companies that have met the target, or pay $15 per tonne into a technology fund.
At a time of high oil prices, the sector's largest players are awash in profit, as Husky's first-quarter financial results showed this week. But despite soaring costs that have affected the oilsands business, some in Alberta are blaming aggressive development plans for the province's runaway inflation.
Many in the oilsands sector fear the royalty review could mean a change for the regime, introduced more than 10 years ago, that lets companies pay a 1% royalty rate until they recover their capital investment, at which point the rate jumps to 25%.
"From Husky's point of view, we are cautiously optimistic that the government will not damage growth," Mr. Lau said. "As Alberta Premier [Ed] Stelmach mentioned before, he is not going to put on the brakes."
Meanwhile, Mr. Lau said the company will try to increase its stake to 15% from 12.5% in the troubled Terra Nova offshore Newfoundland oil project and he denied Husky wants to wrestle the role of project operator away from Petro-Canada, which has a 33.99% interest in Terra Nova.
"We don't have enough percentage to challenge at this stage and it depends on the other partners," Mr. Lau said.
"I want to work together with Petro-Canada, I don't want to upset them," he said.
Terra Nova became Canada's third offshore project when it went into production in 2002, it has a capacity to produce almost 150,000 barrels of oil a day but has struggled amid a litany of mechanical breakdowns.
Terra Nova is in the Jeanne d'Arc basin about 35 km southeast of Hibernia, Canada's second offshore oilfield, and only a few kilometres from Husky's White Rose project, which reached production in 2005 and has operated with great success.
The two projects --Terra Nova and White Rose, in which Petro- Canada owns a 27.5% interest -- should work together to cut costs, Mr. Lau said.
