12 Mar /13

What is next for Alberta oil?

The Canadian Athabasca oil sand field has attracted the interest of international E&P companies from the moment it began production in 1967. Now, almost fifty years after the firs bitumen mine in Alberta went operational, the field hosts more than forty surface mining and in-situ projects that are led by countries and consortiums from more than a dozen different countries. And the attraction of the Canadian El Dorado is far from over as more than a dozen projects are already on the drawing boards or have passed regulatory scrutiny. Just in December of last year Canadian Prime Minister Harper approved the foreign takeovers of two major domestic players in the oil and gas sector. The China National Offshore Oil Corporation (CNOOC) acquired Nexen Energy, operator of the Long Lake Project in the Athabasca field that produces 72,000 barrels of bitumen per day, for an estimated US$15.1 billion. At the same time, Harper also green-lighted a US $6 billion deal that gave Malaysia’s state owned Petronas control of Progress Energy Resource and thereby granted them a major foothold in the rapidly growing natural gas fields of western Canada.

These sizeable investments by Asian state-owned energy giants are just the latest stage of a seemingly ever-growing appetite of Asian investors for North American energy. According to figures published in the Alberta Oil Magazine, Asian investment in the Canadian oil and gas sector in 2012 accounted for more than US$23 billion. In the last decade, Chinese assets also account for a third of all foreign investments in Canadian oil sands. Without a doubt, Chinese SOEs have trillions of dollars they are looking to put to work in profitable and sustainable energy projects like the Canadian oil sands. For Canadian politicians and economists, these Chinese trillions, however, represent a complex dilemma. On the one hand, Canada has not enough investors of its own to ensure the development of its energy resources to its maximum potential. The money from abroad is therefore a welcoming help in developing the entire Canadian energy sector into one of the most efficient and technological advanced in the world. It would allow Canadian operators to iron out the current problems in the supply chain (pipeline bottlenecks, crude oil prices etc.) and make the Canadian market even more competitive on a global scale.

While most experts agree that foreign investments are vital to the continued success of Canadian oil sand projects, the high-profile takeovers of Canadian companies by foreign conglomerates also have reignited a deep-seated unease among Canadians about foreign companies gaining too much control over a strategic national resource. Some fear that heavy foreign investments will ultimately cause Canada to lose control over its most precious reserve and slide into a dependency with the international conglomerates now controlling oil production in Alberta and other places. A testament to this growing awareness of rapidly increasing foreign ownership, and that it is not taken lightly among officials, is Prime Minister Harper’s announcement that foreign SOEs will only be allowed to acquire control of Canadian oil sands companies on what he termed “exceptional basis” and SOE investments exceeding $330 million in asset value will be scrutinized to determine whether they meet the government’s net benefit standard.

If this new regulation will actually change the number or the nature of foreign investments will have to be seen. What is clear is that the next phase of Canada’s energy policy has already begun, and this one has a distinctly international flavor to it.

EVS Translations is a specialist for all oil and gas translations. Its particular focus is the translation of documents related to the exploration, extraction, refining, and delivery of petroleum and gas products.