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Opinion Overheard: Asia’s View of Alberta, Tar Sands and Pipelines
Opinion Featured | The Tyee | August 16, 2011
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"The small Canadian oil companies have been windfalls for us. They won't work with the majors. They don't trust them. And they don't know anything -- they want to export bitumen to Asia!"
The East-West Center is a U.S. government-funded think tank that has been promoting cooperation with Asia for half-a-century. I'm the only Canadian at a Honolulu workshop about the financial picture for Asian shipping and energy companies. We're in a coffee break, and dozens of Korean, Chinese and Japanese executives and academics are diligently exchanging business cards.
The voice that attracts my attention belongs to the chairman of a Singapore-based consulting firm that operates at the highest levels of the global oil and gas industry. He's talking about Alberta's tar-like crude oil, so incredibly thick that it has to be mixed with natural gas condensate before it will flow through pipelines.
As I listen in, I hear from the consultant a startling analysis of how Asia values Alberta tar sands oil, why the Keystone XL Pipeline from Alberta to Texas is critical to Asia, and why the much contested Northern Gateway pipeline from Alberta through to British Columbia's northern coast is being pushed so hard even though Asia doesn't really need it.
Key refineries are on the Gulf
The insights begin when I wander over to the consultant, sipping my Java and trying my best to appear nonchalant. I ask: "Why shouldn't the Canadians ship bitumen to Asia? Isn't it a good idea to develop alternative markets?"
Full Color Discover Series
"Not in this case," he replies. "The Gulf of Mexico coast is the only place in the world with any significant capacity for handling bitumen. That's because it has refineries equipped to handle heavy oil from Venezuela. If the Asians buy any bitumen from Canada, they'll insist on a very steep discount, because they'll have to ship it to the Gulf of Mexico, too."
He chuckles. "But we don't tell the Canadians this straight-out. We write a report for them."
"Cut and pasted from other reports?" I suggest with a smile.
The consultant pauses, and looks at me hard, then winks.
"But what about the Northern Gateway?" I ask, using the industry name for the proposed 1,200 kilometre-long twin pipelines between Fort McMurray, Alberta, and Kitimat, B.C. "Enbridge is a major player. Surely they would realize that there's no market in Asia?
"Enbridge is a pipeline company, not an oil company," he replies, taking an even closer look at me. "They've promised to find a market, and nothing more. They don't care if it's at a discount."
"So you're saying that Northern Gateway doesn't make economic sense," I studiously repeat.
He nods emphatically. "If the Canadians were smart, they'd build the capacity to refine all their bitumen at source, so as to ship a much more valuable product to Asia and elsewhere. But there are only a handful of upgraders in Alberta -- and their capacity is actually going down."
Northern Gateway's real purpose
I press him further. "But surely Northern Gateway isn't just about Canadian oil companies being taken for a ride? I thought that Northern Gateway was designed, at least in part, to put pressure on the U.S. State Department to approve Keystone XL."
Keep reading this article on The Tyee
Tagged with: pipeline, enbridge, northern gateway, china
