Oilpatch plans more refining in U.S.
Shaun Polczer, with files from Chris Varcoe, Calgary, Calgary Herald
Published: Tuesday, June 19, 2007
Two of Canada's biggest petroleum producers are eyeing more refining ventures to send oilsands south of the border for processing, further fuelling a political debate over moving raw bitumen -- along with jobs and investment -- to the United States.
Canadian Natural Resources' president Steve Laut said Monday that new pipelines to the United States will allow greater opportunities for companies to export additional crude to the Gulf of Mexico.
"The (U.S.) refiners really want more heavy oil," he said on the sidelines of the first day of the Canadian Association of Petroleum Producers' investment forum.
An oil refinery
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"I expect the refiners will make something happen."
Earlier this year, Calgary-based EnCana partnered with ConocoPhillips to supply refineries in Illinois and Texas with Alberta oilsands and chief executive Randy Eresman said his company would consider more deals with big U.S. refiners to process oilsands.
"We could consider a deal with another party, whether it's in Western Canada or in a refinery in the U.S.," he said. "Everything is on the table."
Alberta producers are increasingly looking to move raw bitumen into the U.S., citing high production costs in Canada.
But the idea is sensitive in Alberta, as political leaders look to increase processing in the province.
"We want value-added, meaning we want as many jobs in the province of Alberta," said Guy Boutilier, Minister of International, Intergovernmental and Aboriginal Relations, and the MLA for Fort McMurray.
He said there is no magic answer to the issue, but keeping taxes low is one way to continue refining oilsands in Alberta.
"There is bitumen leaving Alberta, there always has been, and we recognize that. But the majority of it we want it to continue to be (processed) here in Alberta," Boutilier said
In September, before being elected premier, Ed Stelmach said Alberta should stop energy companies from moving the raw product stateside to ensure the province fully captures the value of its massive oilsands resource. "We don't need to worry about Ottawa raiding our resources if we are just going to give it away ourselves," he said at the time.
The government has now embarked on a review of its royalties and tax rates to ensure Albertans are getting their fair share. The deadline for submissions is Friday and the panel is expected to report by Aug. 31.
Energy Minister Mel Knight said Monday that his government would to look maximize its value from the oilsands. "What we're keyed on is getting balance and we will strike the right balance," he said at McDougall Centre.
Former premier Peter Lougheed added his voice to the mix earlier this year, arguing that shipping unrefined products to the U.S. robs Albertans of the true value of its non-renewable resources.
"We should not be sending the raw bitumen down the pipe," he said.
Liberal Leader Kevin Taft said the government must take steps to ensure Albertans, as owners of the resource, maximize value from the energy boom. It's estimated Canada's oilsands production will triple by 2015 as more than $100 billion worth of proposed investments flood into northern Alberta.
Taft argued the government should consider charging a higher royalty rate to producers moving the commodity south, while offering a cheaper rate to companies that process bitumen at home.
However, he said the Tory government has no plan and allowed the existing market to become overheated, driving up inflation and giving companies an incentive to export the product.
"These companies have a moral obligation to give priority to Alberta and to Canada," he said. "I'm not in favour of bitumen going to the U.S. just holus-bolus for upgrading."
Energy analysts say the sector is eyeing the southern market to handle more unprocessed bitumen because it offers the best prices for petroleum producers.
"As volumes are ramped up, we are going to see more and more going to the States," said Vince Lauerman, head of Geopolitics Central Inc, an energy consulting firm in Calgary. "The U.S. government has made it clear to the Canadian government and Canadian producers that they want to see all oilsands production to head down to the U.S., rather than go off to Asia and in particular, China."
For EnCana, the ConocoPhillips deal has already been profitable; it contributed about $160 million to the company's bottom line in the first quarter.
Martin Molyneaux, who heads Calgary-based FirstEnergy Capital Corp.'s research department, said refining joint ventures "only make sense" for Canadian producers to take up growing heavy oil and oilsands output.
Striking a deal is cheaper than building a refinery from scratch and provides a lower cost entry into the market. In addition, the value of refining assets has "exploded" in the past 12 to 14 months. Canadian producer Husky Energy Inc. bought Valero Energy Corp.'s Ohio refinery for $1.9 billion in May.
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© The Calgary Herald 2007 |
