Chinese energy companies wait to hear fate of Northern Gateway pipeline

VANCOUVER — Chinese energy companies, at one time eager to see the Northern Gateway pipeline completed quickly so they could access the Alberta oilsands, are now taking a longer and more patient view, according to a China expert.

The big three — PetroChina, Sinopec and China National Offshore Oil Company (CNOOC) — have shown interest in Northern Gateway, but also frustration with the slow pace of project approval, said Wenran Jiang, a professor with the University of Alberta's China Institute.

First introduced in 2003, the project is in the midst of a regulatory review slated to end in 2013.

"In the beginning, the (Chinese companies) asked a lot of questions of Gateway. When is it going to be built? How fast will it be (built)? However, over the years, how (China) defines energy security has relaxed a little bit," said Jiang.

While the Chinese state-controlled companies initially wanted access to the oil, now the companies are content to invest in the Alberta oilsands, as they do in other areas of the globe, in an effort to increase global supply, said Jiang.

"Then they will buy oil wherever it is convenient and is most economical in terms of shipping and price," he said.

Chinese oil companies have invested about $10 billion recently in the oilsands, but it's just one part of China's global oil investment strategy, noted Jiang.

Chinese state companies also have invested tens of billions of dollars in South America, Africa, Russia, Australia and the Middle East.

Jiang said the question is less about Chinese desire or demand for access to Alberta oil, but whether Canada wants to diversify its market for oil, which is almost solely dependent on the U.S.

The Northern Gateway project represents that prize.

For Canadian companies, it means new markets for the largest reserve of oil in the world outside of Saudi Arabia.

It also means a predicted higher price for Canadian oil. Market diversification would bring an estimated $28-billion increase in net incremental revenue to the Canadian industry in the first 10 years, said a report filed by Enbridge with the National Energy Board.

However, some in Alberta are questioning the wisdom of pumping oil, and jobs, out of the country.

The Alberta Federation of Labour wants oilsands bitumen to be refined in Alberta.

"It would be irresponsible for us to build more pipelines that send high-quality jobs out of the country to places like the United States and China," said Gil McGowan, the federation's president.

The federation — representing 29 unions and 145,000 workers — also opposes TransCanada's Keystone XL project to the United States.

McGowan estimates upgrading and refining the Northern Gateway oil in Alberta would create 50,000 direct and spinoff jobs.

The oil companies that have signed up as interveners in Enbridge's $5.5-billion Northern Gateway is a who's-who of the North American industry.

ExxonMobil, Imperial Oil, BP, ConocoPhillips, Natural Resources Canada and Husky Energy are among the two dozen oil companies that have the right to address the regulatory hearings that begin Tuesday in Kitimat, B.C.

In documents filed with the National Energy Board on Wednesday, several corporate backers of the pipeline were revealed for the first time. They are Cenovus Energy Inc., MEG Energy Corp., Nexen Inc., Suncor Energy Marketing Inc., and Total E&P Canada.

Imperial Oil spokesman Pius Rolheiser said the company supports the Northern Gateway project, but also Keystone XL to the U.S. "Access to export markets in North America and beyond remains a critical factor for the projected growth in non-conventional resources like the oilsands," said Rolheiser.

The Canadian Association of Petroleum Producers (CAPP), also an intervener in the pipeline regulatory review, emphasizes that Canada needs access to markets other than the U.S.

"There is significant growth in Asia — China, Japan, Korea and even interest from India. We are really positioned in Canada as being one of the closest suppliers to them, even compared to the Middle East and Australia where China is currently sourcing energy supply," said Greg Stringham, CAPP's vice-president, markets and oilsands.

The Paris-based International Energy Agency forecasts China and India will account for 45 per cent of the increase in global primary energy demand to 2030, with both countries more than doubling their energy use over that period.

Three Asian companies have signed on as interveners: SinoCanada Petroleum Corp. (a subsidiary of China's Sinopec), Korea's Daewoo International Corp. and Japan Canada Oil Sands Ltd.

SinoCanada officials could not be reached for comment, but Sinopec has confirmed it is one of the supporters that provided a portion of the $100 million to develop the Northern Gateway project.

Ottawa Citizen, Wed Jan 4 2012
Byline: Gordon Hoekstra

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