Minister hawks Canada as "energy superpower" at international summit
When Exxon Mobil’s vice president of strategic planning found out Vancouver would host the 2013 Pacific Energy Summit, Bill Colton was surprised to say the least. The Texas-based oil executive hardly considered a mid-sized, Pacific Northwest city to be a global energy powerhouse. But strange things have been happening to the global energy landscape, and Canada has landed in the middle.
Colton is one of dozens of invited energy leaders, academics and politicians from Pacific Rim countries, meeting in a downtown Vancouver hotel this week to discuss the rapidly changing global energy scene. The fourth annual summit has attracted oil company vice presidents, ministers and academics from Japan, Indonesia, South Korea, China, Philippines and the US to discuss Asia’s energy needs and to promote environmental stewardship.
Canada: an "energy superpower"
The summit has been held in Tokyo, Jakarta and Hanoi. This is a first for North America, and Canada wasted no time unfurling its sales pitch.
“Canada is an energy superpower. If there is a type of energy you are interested in, we’ve got it,” said Ed Fast, Canada’s minister of international trade told a morning plenary. “Our commitment is to use every tool at our disposal, to continue to open up new markets for Canada’s exporters and that includes trade promotions.”
The Pacific Energy summit is a result of a seismic shift in energy use and demand in North American and countries across the Pacific. In the US, cheap domestic natural gas is displacing coal as the major electricity generating fuel for the country. The US is scrambling to find new markets for coal coming out of massive deposits in the mid-west. The American natural gas glut is also directly affecting Canada, which has long relied on the US for markets. Demand for Canadian oil and gas is dwindling, so Canada too is searching for new customers.
From China to The Philippines, Asia driving demand for oil and gas
Overseas, economic growth and a burgeoning middle class in many countries like China is driving demand for more energy. The Philippines would like liquefied natural gas (LNG) to reduce its coal consumption so the government’s energy minister is in Vancouver, meeting, and trying to figure out if LNG would work in the Philippines.
For oil and gas companies, accessing the Philippines, or any developing Asian country, is a laborious task. Many countries have trade impediments or barriers that create countless tariffs, rules, taxes and regulations that frustrate business. The most onerous is the fact many countries control their state oil and gas company – and free markets and fair rules are not an ingrained virtue.
“There is a common theme here,” said summit organizer Richard Ellings of the National Bureau of Asian Research, “of tension between market forces and government’s attempting to secure for their energy security and for a variety of domestic reasons, trying to control prices, supply and so on."
"Often the market runs into these incredibly difficult politics. There is something inherently unstable and conflict orientated when national oil companies, which are components of nation states, are the primary actors.”
North American business is making it clear what they would like to see.
“Free markets and rule of law,” Exxon’s William Colton told a session on Tuesday morning. “You really need to have a thriving free market and free trade rules to facilitate the movement of all these energy supplies around the world. By Rule of Law, I am talking about basic business fundamentals; sanctity of contracts, fiscal stability – what are the taxes going to be, and reasonable regulations.”
Colton lauded Canada for its approach to opening up the markets. He referenced Canada’s “One project: One review” policy as evidence of a government facilitating investment. Colton says when his company is investing up to $30 billion in a project, “we want to know what the deal is; what are the taxes; what are the regulations and will our contracts be honoured.”
Several hundred conference delegates spent this week discussing the economics 100 of a new energy marketplace centred on the Pacific: cooperation, integrating energy and environmental policies and finding the right price for LNG markets.
But like the selection of a Pope, most of the real work takes place behind the scenes – over coffee and dinners.
As officials wrestle with the details of building a new energy marketplace, what isn’t in dispute is a slight decline in greenhouse gas emissions (GHG) from countries switching to natural gas. In the US, lower sulfur mid-West coal being used to generate electricity, tough vehicle emissions regulations and tighter rules on mercury and air toxics have contributed to a 7.7 percent reduction in GHG’s since 2006. Chevron has long recognized the explosive growth in natural gas and is investing heavily in Australian and Canadian LNG plants. Exxon is also a major player.
“Our outlook provides a tremendous growth opportunity for natural gas,” Colton said. “We see more than any other fuel source in world the greatest growth in natural gas. We think that natural gas demand across the world will grow by 65 per cent by 2040.”
Getting gas and oil to Asia
Tapping into that lucrative market, Canada announced on Wednesday a new trade mission to China and Japan. A dozen Canadian business executives will join trade minister Ed Fast during visits to Shanghai, Hangzhou and Tokyo. This follows similar marketing blitzes to the US by a number of Canadian cabinet ministers. Selling LNG and oil, however, is only part of the battle. The other is actually getting that product to tidal water.
A new report from CIBC economists Avery Shenfeld and Peter Buchanan says Canada lost $35 billion last year due to infrastructure and pipeline bottlenecks such as the large scale protests fueled by environmental concerns that have stalled the Enbridge Northern Gateway pipeline.
“Canada continues to face a notable long-term challenge shipping its oil to market. The failure to invest in needed transport infrastructure could still prove costly for Canadian producers, governments, and the economy, to the extent that investment plans are delayed or scaled back,'' says the report.
The government is waiting for a recommendation from the National Energy Board’s Joint Review Panel on the Northern Gateway project that would bring Alberta bitumen to the BC coast. And Kinder Morgan is planning to double capacity on its oil pipeline from Alberta to Vancouver. However, both of those projects face serious environmental and aboriginal concerns that could delay the projects for years or stop them completely in their tracks.