Cheney joins the oil sands pilgrimage
U.S. Vice-President will visit Alberta as a secure energy supply leapfrogs up the list of U.S. priorities.
By BARRIE MCKENNA Wednesday, August 17, 2005
http://www.theglobeandmail.com
WASHINGTON -- It might be the lofty price of oil, the emergence of China as a voracious consumer of a scarce resource, or perhaps the fly fishing.
But U.S. Vice-President Dick Cheney is coming to Alberta, and a visit to the oil sands is high on his agenda. The trip slated for next month is being billed as a mix of business and pleasure for the former oil executive and acknowledged White House energy guru.
He's expected to tour one of the major oil sands projects in Fort McMurray, meet Deputy Prime Minister Anne McLellan, speak to a gathering of the conservative Fraser Institute in Calgary, and steal away to an undisclosed location for a little hunting and fishing, according to Canadian and U.S. officials.
Mr. Cheney would be the highest-ranking member of the Bush administration to make a pilgrimage to the oil sands -- home to the largest reserves of crude outside Saudi Arabia.
U.S. Treasury Secretary John Snow was there in early July at the invitation of Canadian Finance Minister Ralph Goodale, and returned apparently impressed by the scope of existing production and its potential for the future. Officials are also trying to convince U.S. Energy Secretary Samuel Bodman to come have a look.
The visits mark the culmination of a long and aggressive campaign by Ottawa and Alberta to convince Americans that the oil sands are no longer a costly pipe dream. They're real and they represent one of the emerging sources of crude for a world anxiously wondering where they'll get the increasingly expensive commodity.
"With billions of barrels of potential oil there, people are starting to stake out their ground," said Frank Verrastro, a former oil executive, top government energy official and now director of the energy program at the Center for Strategic and International Studies in Washington.
"The visit is a recognition of the strategic importance of the resource and the bilateral relationship with Canada."
For its part, Canada may be looking to exploit the leverage it has while oil prices are high.
It could help Ottawa to make headway on other intractable trade issues, such as softwood lumber, Mr. Verrastro suggested.
The trip also comes amid growing angst in the United States over the security and dependability of its oil supply.
Canada has mounted a sometimes frustrating education effort to convince skeptical U.S. policy makers that Canada, not Saudi Arabia or Venezuela, is the leading supplier of crude to the United States.
Government and industry officials complain that it has taken years to get the U.S. government to publicly recognize Canada's crucial place as the leading U.S. supplier of not just oil, but also electricity, natural gas and uranium.
The invitation to Mr. Cheney was issued by Alberta Premier Ralph Klein, who has known Mr. Cheney for years, when he visited the White House two years ago. Mr. Klein jumped the gun by telling reporters at last week's premiers conference that Mr. Cheney was coming.
Mr. Cheney's staff, led by Lewis "Scooter" Libby, have so far refused to confirm the trip is a go. But they are apparently working on the final schedule, which they plan to release shortly.
Canadian officials acknowledged that the dramatic spike in oil prices and growing curiosity about China's rival interest in Western hemisphere oil reserves may have piqued the U.S. administration's recent interest.
"Sure, China has been on their minds," a Canadian official said.
"That's why we're promoting Canada as the largest and most secure energy source."
The potential of the oil sands is hardly a mystery in the international oil industry, which has kicked off a multibillion-dollar international investment boom. Most of the major global oil producers already have investments there.
The Chinese and Total SA of France are the latest to buy in and some German companies are apparently sniffing around. Total is paying $1.35-billion for Deer Creek Energy Ltd. and the company plans to spend $15-billion more in Canada over the next decade. Meanwhile, China Petrochemical Corp. has struck a deal with Calgary-based Synenco Energy to buy 40 per cent of the Northern Lights oil sands project, and state-owned China National Offshore Oil Corp. (CNOOC) recently took a share in a Canadian oil sands project through its purchase of a 16.69-per-cent stake in MEG Energy Corp.
Rumours are rife that CNOOC, after being rebuffed in its bid to buy U.S.-based Unocal Corp., may start looking in Canada for oil acquisition targets.
"We'll use what we need in Canada, but the extra we'll sell," said Greg Stringham, vice-president of the Calgary-based Canadian Association of Petroleum Producers. "The closer the customer, the better, because that reduces the cost of transporting the oil."
Mr. Stringham, who's been deeply involved in the industry's U.S. outreach, said Canadian producers are anxious to get the message out to the broadest possible audience that the oil sands are a large and rapidly growing source of supply.
But getting larger quantities of both oil sands' heavy and synthetic crude to market will require new investments in pipelines and specially fitted refineries south of the border, he said.
"This kind of visit provides the visibility for us that we are viable and we are big," Mr. Stringham said.
Mr. Verrastro of CSIS, a Washington think tank, said there are two ways to look at the planet's finite oil reserves. One is the "bathtub" theory, which suggests that the development of reserves anywhere, by anyone, is good because it boosts supply.
But it the real world, near supplies are worth more than more distant and less secure reserves.
"The importance to us of Canada and Venezuela is that they are short-haul suppliers," he said. "The infrastructure is there, the supplies are there and it's easy to ship in a matter of days, not weeks."
Oil producing countries in the Western hemisphere are waking up to the fact that they have a strategic commodity and new players such as China are "changing the rules of the game," he said.
"Conversion of the vast Athabasca oil sands reserves in Alberta to productive capacity has been slow, but at current market prices they have become competitive...The unconventional is increasingly becoming conventional."
Alan Greenspan, U.S. Federal Reserve Board Chairman, speaking at an oil industry conference in San Antonio, Tex., on April 5.
"I hadn't realized, until these briefings I've had, just how vast these facilities are and what potential they have for the future."
John Snow, U.S. Treasury Secretary, after touring an oil sands facility near Fort McMurray, Alta., on July 8.
"[The oil sands] are certainly attractive to our friends in China. If there was ever a wakeup call for us to get to the front of the shopping line, the time is now."
Pat Wood III, former chairman of the U.S. Federal Energy Regulatory Commission, speaking to reporters in Washington on April 14.
"We appreciate the fact that Canada's tar sands are now becoming economical, and we're glad to be able to get the access toward a million barrels a day, headed toward two million barrels a day."
President George W. Bush speaking to reporters in Waco, Tex., after meeting Prime Minister Paul Martin and Mexican President Vicente Fox, on June 23.
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