Oil and Gas Sector-Politics and Image

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Ottawa — The federal government has imposed a strict deadline on a review panel to conclude the work on Enbridge Inc.’s controversial Northern Gateway pipeline, even as it scrambles to rescue the $6-billion project from a political sinkhole.

In a notice released Friday, Ottawa has given a review panel until December 2013 to conclude its report, and cabinet will make the final decision by June 2014, roughly a year before Prime Minister Stephen Harper is due to face B.C. voters. A majority in the province, at this point, at least, are staunchly opposed to the Gateway project. The notice confirmed that the federal cabinet – not the National Energy Board – will have the final say as to whether the pipeline can proceed despite environmental concerns.

But the Conservative’s senior minister for British Columbia has fired a clear warning shot across the bow of Enbridge: If the company doesn’t improve its performance, it won’t win approval for the pipeline project that Mr. Harper and the Alberta-based oil industry see as an urgent priority.

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The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

VANCOUVER — It is a sunny Sunday and Vancouver is doing what it does best: looking pretty and post-industrial. Morning lights up the downtown’s glass horizon. A half-dozen scooters rip down the road in a platoon. Cyclists swish past Zipcar lots, kayakers and stand-up paddle surfers ply the waters.

But just a few kilometres away, an oil tanker is preparing to raise anchor and slide into port. Soon, it will open its holds, with a total capacity of 650,000-barrels, to a flush of Alberta oil. After 30 hours of pumping, it will slip away to Long Beach, Calif. Oil tankers are, for now, relatively rare here. A tanker sails into the Vancouver harbour about once a week, docking at the Kinder Morgan-owned Westridge Terminal to accept Alberta crude flowing across the Rockies in the Trans Mountain pipeline.

On this day, it is the 250-metre long Aqualegend that glides into place, smoothly manoeuvring alongside the Kinder Morgan dock. Its deck is spotless enough to eat off. The waters alongside the dock are clear and blue; a harbour patrol vessel has to ask crabbers to make way so the tanker can dock. Under blue skies and sunshine, exporting oil seems safe – even easy.

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

CALGARY — China’s largest overseas acquisition to date, CNOOC Ltd.’s US$15.1-billion bid to purchase Canadian oil and gas producer Nexen Inc., was crafted to surpass foreign-investment requirements in Canada and the United States, yet risk remains that the landmark bid from the state-controlled company will not proceed.
 
The risk is reflected in Nexen’s share price, which is trading about $2 below the bid price, a significant discount that suggests the market is worried political noise could drown out the benefits. “If the stock is down $2 per share, that is the price of uncertainty,” said Glen Hodgson, chief economist at The Conference Board of Canada.
 
Observers say the primary risk in both countries is politics. There are concerns, expressed publicly and privately, about the perceived loss of control of energy resources, worries that the bid could open the floodgates to a flurry of Chinese purchases in Canada, and that ultimately it is being used by the communist country for foreign-policy reasons over and above business considerations.
 
In Canada, the deal’s hurdles include passing the vague ‘net benefit test’ under the Investment Canada Act and convincing the Competition Bureau the deal will not lessen or prevent fair competition.

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

As CNOOC Ltd. unveiled its takeover bid for Nexen Inc. in Calgary last week, the Chinese government was barring overseas companies from bidding directly in an auction for a piece of China’s shale gas reserves, estimated to be one of the largest in the world. Foreign players were only allowed in via joint ventures with local companies, ensuring they play second fiddle to domestic producers. Bear in mind that China desperately needs Big Oil as its companies have little experience in drilling for shale. Still, it didn’t swing the door wide open.
 
While Canada puts out the welcome mat for global companies to invest in its resources and buy out its companies, it appears the rest of the world isn’t playing by the same, open rules.
 
It’s not a strategy peculiar to China. Across the world, major oil-producing countries beef up and are biased toward domestic producers even if they allow foreign players to enter the market. Leaving OPEC producers aside, even the Western energy-producing countries have a national champion or flagship energy company, although they often don’t have full control over their affairs: BP PLC (U.K.), Statoil (Norway), Total SA (France), Eni SpA (Italy) were all carefully nurtured by their governments for decades before they became global powerhouses.

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

Steven Globerman is Kaiser Professor of International Business, Western Washington University College of Business and Economics, and adjunct professor, Simon Fraser University, Beedie School of Business.

Imposing conditions on foreign takeovers has costs

he recent announcement that CNOOC, China’s large multinational oil company, is bidding $15.1-billion for Canadian energy producer Nexen brings into focus the Canadian government’s vetting process. Under the Investment Canada Act, foreign takeovers of large Canadian companies must pass a “net benefit” test. That is, a foreign takeover of a Canadian company must convey additional economic benefits to the Canadian economy over and above those currently being realized under domestic ownership.

Over the past 20 years, the Canadian government has blocked only two proposed takeovers. The most recent was the attempted takeover of Potash Corp. of Saskatchewan by BHP Billiton, a large Australian mining company — the “strategic value” of retaining domestic ownership of Saskatchewan’s large potash mines was seen as exceeding any advantages that would be created by BHP Billiton operating the mines.

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

CALGARY – This month’s interprovincial tussle over the Northern Gateway is just the beginning, experts say: The pipeline could face sabotage and a legal morass that would challenge the limits of aboriginal law and sovereignty over disputed lands.
 
“[It is] difficult to foresee a quick completion of this pipeline,” said Tom Flanagan, former advisor to Stephen Harper and a professor of political science at the University of Calgary. ‘‘The difficulties are very real and they’re large.”
 
The federal Joint Review Panel is expected to rule on the Enbridge-proposed pipeline, to run from northern Alberta to Kitimat B.C., by the end of 2013.

If approved, Enbridge would negotiate for access to the lands along the route, about 80% of which is provincial crown land. Much of the line would also run through territory claimed by First Nations groups, who are promising both legal obstacles and physical blockades.

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The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Calgary — The U.S. government has issued a harsh warning and a list of demands to Enbridge Inc. in the wake of a pipeline spill in rural Wisconsin, adding to the severe pressure on energy companies in their quest to rapidly expand North America’s pipeline network.

The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) is questioning Enbridge’s “integrity management program” after an oil line leaked Friday on its Line 14 in rural Wisconsin.

It’s the second time in less than a month that U.S. regulators have lashed out at the Canadian company because of busted pipelines. In early July, the chair of the U.S. National Transportation Safety Board compared Enbridge with the “Keystone Kops” because of the way it handled a huge spill in Michigan’s waterways two years ago.

While the sharp words and fresh regulatory demands focus on Enbridge, the fallout will be felt across the industry. And growth in the oil sands could slow if major pipelines, such as Enbridge’s proposed Northern Gateway to Canada’s west coast and TransCanada Corp.’s Keystone XL to the U.S. Gulf Coast, are stymied as lawmakers question the industry’s ability to operate safely.

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As pipeline leaks go, it was just a gooey puddle and barely worth a news brief. But the spillover effect of losing six minutes worth of piped oil from its Chicago line has unleashed a gusher of bad publicity for Enbridge at the worst possible time.
 
The 158,000 litres of light crude turned a Wisconsin farmer’s field into a black mess, which was easily cleaned up leaving behind no significant environmental damage.  Yet media attention on Enbridge has amplified into a frenzy courtesy of its Northern Gateway proposal, a $6-billion pipeline to the west coast now turning the Great Divide into a political as well as geographical watershed between Alberta and B.C.
 
Premier Christy Clark may have thrown a Hail Mary pass when she demanded a piece of royalty action from Alberta as B.C.’s toll for the pipeline’s unopposed passage, but it’s not without local voter appeal and seems likely to revive a premier whose re-election prospects appeared palliative.
 
Meanwhile, federal government heavyweights are increasingly weary of carrying the Northern Gateway crusade solo, complaining to me privately that the media-shy company has done a lousy job of spinning its story while leaving difficult public relations to cabinet ministers.

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The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

GRAND MARSH, Wis. — Reuters – Canada’s Enbridge Inc on Sunday worked to repair a major pipeline that spilled more than 1,000 barrels of oil in a Wisconsin field, provoking fresh ire from Washington over the latest in a series of leaks.

The spill on Friday — almost two years to the day after a ruptured Enbridge line fouled part of the Kalamazoo River in Michigan — has forced the closure of a major conduit for Canadian light crude shipments to U.S. refiners and threatens to further damage the reputation of a company that launched a more than $3 billion expansion program just two months ago.

On Sunday, an Enbridge spokesman said the company was working diligently to carry out inspections to Line 14 and repairs to ensure a safe restart. The company did not say what had caused the incident and provided no estimate on when the 318,000 barrels-per-day Line 14 would resume service.

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The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Stephen Harper is going to have to talk to the provinces about energy. And he hates that sort of thing.

In Saturday’s Globe, Premier Christy Clark succinctly outlined her key demands before the British Columbia government will support the Northern Gateway pipeline proposal. Most of them are eminently reasonable: The project must clear the National Energy Board review; there must be the most stringent possible controls to prevent and mitigate spills; first nations in B.C. must benefit from the project.

The final demand, however, is the deal-breaker: “B.C. must receive its fair share of the fiscal and economic benefits,” from the pipeline. B.C. wants a piece of the action.

Alberta Premier Alison Redford made it abundantly clear at last week’s premiers’ meeting that Ms. Clark can have all the revenue she wants, so long as not one penny of it comes from Alberta’s take.

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The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Those who have discussed the issue with him report that Prime Minister Stephen Harper has been worried a state-owned company, likely from China, would take a run at a major Canadian energy producer.

Now that the massive China National Offshore Oil Corp. (CNOOC Ltd.) has bid $15.1-billion for Nexen Inc., it’s easy to understand the Prime Minister’s uneasiness. His initial statements were properly guarded, as befits the complexity of the file and his own apparent hesitations.

It has been said that the CNOOC bid is a standard business transaction: one company taking over another, in this case with the support of the Nexen board. CNOOC trades on stock exchanges. It has made commitments about keeping headquarters in Calgary, maintaining staff and conducting business pretty much as before.

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