Canada’s ambition of becoming global energy powerhouse faces roadblocks

Met with a major stumbling block, Ottawa’s ambition to be a global energy powerhouse is taking a virtual detour — away from the Americas and interestingly via the fast growing Asian markets.

Faced with a potentially fatal delay on a multibillion-dollar oil pipeline carrying crude to the US, it was time for Canada to start looking east. “This does underscore the necessity of Canada making sure that we are able to access Asia markets for our energy products,” Canadian Prime Minister Stephen Harper told reporters on the sidelines of the Asia-Pacific Economic Cooperation forum.

“That will be an important priority of this government going forward,” Canadian Prime Minister said last weekend, noting he raised the issue of energy exports in his meeting with Chinese President Hu Jintao.

The US State department last week announced deferring the 2,700-kilometer TransCanada’s Keystone XL project that was to bring crude from the new oil sands expansions in northern Alberta to Texas, the hub of the American refining industry, for converting it into gasoline and other fuels. State Department said a final decision will be made later after conducting more studies on the environmental impact of the proposed pipeline. President Obama also publicly supported the decision, so as “to ensure that all questions are properly addressed and all the potential impacts are properly understood.”

The broader dilemma in the entire equation for Canada seems its economy remains caught between a close neighbor that doesn’t always share its priorities, and distant customers in Asia who want its natural resources but can’t easily get them.

Many in Ottawa were disappointed at the Washington decision. Top Harper government ministers also characterized the Keystone delay as a wake-up call. Speaking from Honolulu, Finance Minister Jim Flaherty told CTV’s Question Period: “We’ve got to go where the trade is,” adding that Canada needs to work harder to “emphasize” its trading relationships with Asia.

Natural Resources Minister Joe Oliver similarly told CBC-TV that diversifying away from the United States, particularly in energy, is “right at the centre of our thinking. … It is a major, fundamental strategic objective for Canada.”

And thus in the immediate aftermath of the US announcement, Canada further signaled the importance it placed on ensuring access to Asian markets by reversing an earlier decision that membership in the Trans Pacific Partnership was not necessarily in Canadian interests.

With an estimated 170 billion barrels, the oil sands of Canada are the world’s third-largest oil deposit, after Saudi Arabia and Venezuela. Harper and his Conservative government have said their goal is to turn the country into a global energy superpower.

For now, the United States is its only export market and last week’s Keystone XL delay laid bare the risks in that. Canada cannot depend just on one market, industry leaders echoed all around the vast country. Canada is already the biggest oil supplier to the United States, shipping more than 2 million barrels a day, much of it from oil sands. But the industry’s promise — and problem — are the projections that output from the tar sands alone could double to 3 million barrels a day by 2020 and jump to 3.7 million by 2025. The issue remains where to sell this growing output and indeed how?

The industry will move quickly to tap Asian markets in the absence of the pipeline, said Steve Laut, president of Canadian Natural Resources Ltd, which has committed 120,000 barrels a day of oil to Keystone XL.

Arab News