Debunking the Oil Myth --part 4:
Remarks by Gwyn Morgan, President & Chief Executive Officer, EnCana Corporation
The Canadian Society of New York and The Canadian Consulate General Borders Breakfast
'Dispelling The Middle East Oil Myth, Look North'
November 11, 2003, New York
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Speaking of oil, a recent survey asked Americans who they thought was their largest supplier of oil. The most frequent answer - Saudi Arabia. Second most frequent answer - Venezuela. The right answer - Canada.
This absence of fundamental knowledge about supply sources prompted EnCana to spearhead, with industry colleagues, the development of the Canadian Centre for Energy Information - and the launch of its website (centreforenergy.com). I've taken the liberty of having introductory promotional CD's made available to you today, and I encourage you to visit the website to find out "all about energy, all in one place"!
Access to adequate energy supplies is an enormous economic and security issue for the United States oil production from American sedimentary basins has been falling for years and there is no practical way to turn this around. And while imports from Canada have grown a lot, so have offshore imports, and current trends would make Americans more and more dependent on an increasingly unstable Middle East.
The fact is that both U.S. and Canadian conventional oil production has peaked, and there's no way to stop this decline. But there is one place in North America where oil production is increasing - the Alberta oil sands. And the potential is enormous. Just as Canada's natural gas exports are crucial to the U.S. further development of the Alberta oil sands offers both an important economic opportunity for Canada, and a big supply security advantage for the United States.
There are basically two ways of producing Alberta's oil sands. The first, and the one you may have heard about, are the huge surface mining projects where the oil-saturated sand is moved from the world's largest mines to processing plants where the oil is washed from the sand, and the sand put back where it came from. The other method, where EnCana is the leader, is what we call "in situ"; where we drill wells into more deeply buried oil sands and recover the oil through a highly technical thermal stimulation process. Both methods have enormous production growth potential.
Now, normally when someone tells you of all of the advantages they can offer you - in this case, supply security, there's usually a catch. So, the first thing that might be on your mind is how much more is it going to cost Americans for more secure Canadian oil than for imports from the rest of the world? The answer may surprise you.
Actually, Canadian producers are expecting to receive only the competitive price set in the international marketplace.
But there are some challenges.
Much of the Alberta oil sands production, particularly that produced by in situ methods is a thick "heavy oil" that needs special refining capability. The U.S. northern tier refining capacity for heavy oils needs to be expanded, or more oil can't flow. This means that the refineries need to be reconfigured to take more Canadian heavy oil. I believe that it's in the American interest to provide incentives to refiners to achieve this, since it is the biggest single constraint to capitalizing upon the Canadian oil supply security opportunity. The other thing that will be needed is expanded pipeline capacity. Companies such as Enbridge and Terasen Pipelines are ready to do this, but they will need regulatory support to streamline the necessary expansions.
These are crucial actions, but they are relatively simple in the context of what's at stake in an unstable world. Canada and the United States share a vital interest in their achievement.
In summary, Canadian energy exports are a model of a kind of economic co-operation which offers important strategic benefits. I believe that the Canadian producing provinces, the Government of Canada, the industry, and certainly Canada's largest energy company, EnCana, will meet the challenge and continue to build the world's most vital energy relationship.
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