Saturday, November 12, 2011

Keystone XL vs owning the tarsands

Former U.S. ambassador to Canada David Wilkins calls it "catastrophic", FinMin Flaherty said "the delay may kill the project" so Canada will look into sending our oil to China via BC instead, and TransCanada Corp is "deeply disappointed". So goes the official reaction to the US State Dept decision to delay Keystone XL for further examination.

But the vast majority of comments from the public under these news stories boil down to this :
Why doesn't Canada do its own tarsands refining?
Why isn't Canada building its own refineries and keeping the jobs here rather than just shipping the raw material abroad?

The response from purported industry insiders under these comments runs as follows :
that no investors are willing to undertake building tarsands refineries because it would be very very expensive; not enough profit margin; that there would be considerable Canadian nimby, environmental, and FN opposition to building them leading to a protracted approval process of uncertain outcome; that Canada does not have the expertise to build them; that Canadian labour costs are too high.

I guess it's too obvious to include that multicorps and foreign companies operating in the tarsands likely want to optimize corporate control and profits by owning both ends of the supply line. 

 “We can route a pipeline through the Andes, over the Rocky Mountains, through the Everglades, through the Sand Hills”
 apparently we can't route one to eastern Canada.

Foreign ownership :

StatsCan : Total assets, operating revenues and operating profits under foreign control
Oil and gas extraction and support activities - 2009 
  • Assets - 35.9% under foreign control
  • Operating revenues - 51.1% under foreign control 
  • Operating profits : 41.3% under foreign control
"American-controlled enterprises continued to dominate the shares of assets, revenues and profits under foreign-control. These enterprises increased their share of both revenues and profits to 59.1% and 58.3% respectively." 
"In the oil and gas extraction industry, foreign-controlled enterprises increased their share of revenues to 51.1%. This occurred as revenues declined nearly twice as fast in 2009 for domestic enterprises as they did for foreign enterprises."
Looking through the producing members of the Canadian Association of Petroleum Producers, I notice nearly 20% of them list their head offices outside Canada, mostly in Texas. 20% doesn't sound like much but many of them are the bigs, including Koch, ExxonMobil, Shell. 
Meanwhile China's investment in the tarsands is up to what - $13-billion now? 
Leo De Bever is head of Alberta’s $70-billion pool of public sector funds, including pension funds, endowments, and the $15-billion Alberta Heritage Savings Trust Fund.
"My simple point is that you lose ownership, you lose control. Those who control the resource always have the incentive to dig it up as soon as possible,” Mr. De Bever said. 
Mr. De Bever said it would make more sense for Canada to accelerate the development of technologies to produce the oil sands, improving environmental impacts and efficiency, rather than accelerate extraction.
“That is where that tradeoff of digging up now versus digging up later comes in,” he said. “If you know that in a few years you can make it drastically more efficient, it makes the resource more valuable.”
“If you want a strong Canadian economy, to some degree large Canadian institutions have got to take it upon themselves to be not just passive investors,” said Mr. De Bever. “Doing the right thing is not part of my mandate. Doing the profitable thing is. But if  I can do the right thing and the profitable thing, I would do so.”
Sounds like a "no-brainer", doesn't it, Steve?


Michel said...

My brother - the optimization engineer - suggested that the reason that not all of the refining is done in Alberta is that when refined oil is transported via pipeline, a percentage of it will inevitably degrade outside of "specification". So the result would be having to refine the same oil a second time which is far from cost effective.

As to the question of its exploitation, NPR's Planet Money had a great podcast earlier this summer about the way Norway's handled its oil reserves to have them best benefit its people. I'm going to assume that Alberta's Progressive Conservatives don't have NPR on their iPod playlist.

As always, great blog post Alison.

kootcoot said...

"Sounds like a "no-brainer", doesn't it, Steve?"

One would think that Stevie's Canuckistanian Taliban would EXCEL at no brainers, considering that's what most of them ARE!

Alison said...

Thanks for that link, Michel.
Big fan of Norway's policy of pacing and their assumption that there is, you know, going to be a future.
Had not heard about pipeline oil degrading before. Today, even G&M articles only tangentially referencing KXL are followed by comments supporting homegrown refining.

Kootcoot : Another funny comment from Steve yesterday :
"I remain optimistic that the project will eventually go ahead because it makes eminent sense."
Possibly not the best timing to be reminding people of eminent domain.

West End Bob said...

Possibly not the best timing to be reminding people of eminent domain.

It appears kootcoot's response above to the "no brainer" phrase is particularly relevant here, huh ? ? ? ?

Anonymous said...

Harper doesn't have a lick of sense. He is the most embarrassing P.M. in Canadian history. Canadians don't like dictators either.

There is nothing in the tar sands that will benefit the BC people. Even if there was, we still wouldn't want the dirty tar anywhere near our province.

Harper and Campbell dismantled BC. Campbell thieved our assets and sold them. Campbell worked for Harper, not for his own BC citizens. He thieved from us to give to Harper. All Harper wants, is the money for his own selfish goals. His wars, jets, ships, a nuclear sub, armored vehicles, and billions needed for his Stalags. For what we don't know. The crime rate is down. Must be for the Canadians, who are going to turn on Harper. Dictators are always paranoid.

We want to keep our beautiful province. That's all we have left. Everything else is thieved and gone. We will fight for our province.

Anonymous said...

Look. All I (and most other Canadians) want is cheap gas and enough jobs to go around. Why are we selling our oil to the USA? We have all seen what happens to oil rich countries like Iraq. All of a sudden, they are "Evil", and "Terrorist" so the USA bombs them into submission. If this pipeline goes through, Canada will become the next "terrorist threat" to the USA and we will be history. There are dozens of oil refineries sitting idle here in Canada (Kamloops Gulf Oil Refinery). Why are we not refining our own oil and creating jobs for Canadians? Let the USA buy tanker trucks of gasoline from us at $7 a gallon!

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