Will Chavez’s death spoil oil sands’ party? – by Claudia Cattaneo (National Post – March 6, 2013)

The National Post is Canada’s second largest national paper.

Barely five years ago, when Canadian pipelines could do no wrong and Canada was the darling of the United States’ oil industry, a joke making the rounds at Enbridge Inc.’s expanding Houston base was that Hugo Chavez had been named Employee Of The Year.

“He’s done a lot to help us,” Stephen Letwin, who was in charge of Calgary-based Enbridge’s U.S. operation, said at the time.

Indeed, it was thanks to Venezuela’s nationalization policies under Chavez that companies such as Enbridge were expanding aggressively to bring more Canadian oil to refineries in the U.S. Gulf, while oil majors that were pushed out of the South American country were redeploying their money and heavy oil expertise to Canada’s oil sands.

For Exxon Mobil Corp., Royal Dutch Shell PLC, Statoil ASA, Total SA, BP PLC, Canada was a good backup: it offered similarly large deposits, access to the U.S. market, as well as stable fiscal and political regimes.

But much like Venezuela’s loss was Canada’s gain when Hugo Chavez was alive, his death on Tuesday could take some lustre away from oil sands if it leads to a more pragmatic approach to oil development in Venezuela, as some expect.

In addition, if oil production in Venezuela stabilizes, and U.S. production from tight oil continues to increase, the U.S. could feel less pressured to get in bed with Canada over the long term for its energy security as it prepares to decide whether to permit the Keystone XL pipeline from Alberta to Texas.

But first, Venezuela must overcome big challenges, and it will take a radical change in leadership mindset and many years to pull them off.

They include: rebuilding its credibility as a secure place to invest, reverse policies that drove out international oil companies, make up for a lost decade of heavy oil development, steal the momentum away from the oil sands and fight for market share against other growing sources.

Alex Cardenas, a former managing director of Venezuela’s state oil company, PDVSA, said he hopes the country’s oil industry is at a turning point, but believes it has a lot of catching up to do and that it will take a lot of commitment at the top.

For the rest of this article, please go to the National Post website: http://business.financialpost.com/2013/03/06/will-chavezs-death-spoil-oil-sands-party/

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