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Alberta’s oil sands will be developed, no matter what U.S. greens say

President Obama may not want to exploit the energy buried in Canada’s Alberta oil sands, but China sure does. Think of Monday’s $15.1 billion offer by China’s state-owned Cnooc to buy Canadian energy giant Nexen as a post-Keystone XL Pipeline bid to replace the U.S. as Canada’s biggest energy investor and market.

Nexen offers Cnooc a sweeping North American energy footprint, with assets from heavy oil and shale gas in Alberta to offshore leases in the Gulf of Mexico. Part of the bet is also on Canadian politics, which could block the investment on nationalist grounds but which so far hasn’t been captured by the anticarbon fevers that dominate Washington.

Canada seems to understand that its resources are a gift that can raise national prosperity. And as extraction technology has improved, Canada’s proven oil reserves have climbed to at least 180 billion barrels, putting it behind only Saudi Arabia and Venezuela.

Unlike the U.S., Ottawa cedes most energy decisions to the provinces, which have encouraged production. A decade ago Alberta reduced to 1% the royalty that companies must pay until they have earned back their capital costs; then the rate reverts to 25%. The incentive kick-started the oil sands investment boom.

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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.

Roger Martin is dean of the University of Toronto’s Rotman School of Management.

The CNOOC takeover bid for Nexen demonstrates once again that while a given government policy tool may have a bright, sunny face, it often simultaneously casts a dark, problematic shadow.

The Canadian policy tool that will be used to determine whether this takeover will be permitted is “net benefit.” This means that after all the capital-market formalities are taken care of – which should be pretty straightforward due to the 61-per-cent premium being offered – the government will declare whether the takeover produces net benefit for Canada.

Thus far, the net benefit tool has been all happiness and light for Ottawa. The handy thing is that the government can make up any conclusion it wants under the as-you-like-it construct of net benefit. The prima facie evidence for making stuff up is the BHP Billiton bid for PotashCorp, where the government determined that the bid didn’t provide net benefit to Canada and disallowed the takeover. I suspect the government felt pretty chuffed about the power of the net benefit tool.

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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.

Jim Prentice is senior executive vice-president and vice-chair of CIBC, and a former industry minister.

A few months ago, The Economist magazine opined that the defining battle of the 21st century would not be between capitalism and socialism, but between different versions of capitalism – market capitalism on the one hand and state-owned enterprises (SOEs) on the other.

If that is so, the battleground has now shifted to Canada’s oil sands. To be clear, I do not have a horse in this race. I personally favoured a Canadian outcome for Nexen. Its assets lay in the shop window for months, arguably years, but no Canadian energy company emerged to buy them.

Instead, CNOOC, one of the world’s largest SOEs, has stepped forward with a blockbuster offer. This transaction represents the largest outbound Chinese deal to date and has been carefully insulated to provide commitments for Canadian investment, Canadian jobs, a Canadian hemispheric headquarters and a Canadian domiciled public listing.

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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.

LUNENBURG, N.S – British Columbia Premier Christy Clark opened another front in her demand for a “fair share” of benefits from the proposed Northern Gateway pipeline, calling on the Harper government to sit down at the negotiating table along with Alberta.

Ms. Clark laid out the new terms as Canada’s premiers met with aboriginal leaders in the historic fishing town of Lunenburg ahead of the annual Council of the Federation meetings, which begins Thursday in Halifax. “My basic request is for Alberta and Canada to come to the table and sit down and figure out how we can resolve this,” she told reporters after the meeting.

But the province’s push for a greater slice of oil-sands prosperity comes as the sector’s prospects dim. Suncor Energy Inc. is backing away from its plans to produce a million barrels of oil a day by 2020, amid growing concerns from investors about the profit outlook for the oil sands. The Calgary-based giant’s hesitation stands in contrast to a bold play by China’s state-controlled CNOOC, which this week proposed a $15-billion takeover of oil and gas producer Nexen Inc.

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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.

Jeff Rubin is an author and former chief economist of CIBC World Markets. His second book is The End of Growth.

CNOOC Ltd.’s blockbuster deal for Nexen Inc., if nothing else, is a stark indication of how far the goal posts have moved not only for Canada’s oil patch, but also for world oil demand.

Only four or five years ago, the notion that a state-owned Chinese company could buy–lock, stock and barrel of bitumen–one of Canada’s premier oil names was politically unthinkable. Any such deal was sure to be turned down by Ottawa under its Foreign Investment Review Act (not to mention the hue and cry that would come from Alberta’s provincial government).

Today, that’s all changed. CNOOC’s $15-billion offer for Nexen follows a number of major foreign transactions in Canada’s energy sector. Among others, Malaysian energy giant Petronas is paying $5.5-billion to get at Progress Energy’s natural gas reserves in British Columbia. Earlier this year, PetroChina Co. Ltd. completed a two-pronged deal for Athabasca Oil Sands Corp. that tallied $2.5-billion. In 2010, Sinopec paid $4.65-billion for a 9 per cent stake in Syncrude, which runs Alberta’s largest oilsands mine.

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

Canadian oil and gas markets are being rocked by a lot of news lately, whether it involves building pipelines in Canada or potential economic turmoil in Europe. The latest is Monday’s announcement that China National Offshore Oil Corp. will pay $15.1-billion in cash to take over Nexen at a 66% premium relative to the 20-day average stock price.
 
The immediate consequence is to make a lot of Nexen shareholders richer, since the share price shot up from $17.29 to $26.35.
 
The Nexen takeover also lit up the chattering political classes in Ottawa. The federal government will need to make a critical decision over whether to approve this takeover under the Investment Canada Act. In my view, the worst decision would be one based on poor economics and perceptions. The best decision would be a clear policy focused on “net benefits” when assessing takeovers of Canadian companies by foreign state-owned enterprises and sovereign wealth funds.
 
Certainly, the usual nationalists will be out in full force, pushing to block the takeover. My skin crawls with dubious concepts such as “strategic assets,” “national champions” and “hollowing out.”

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

As premiers gather in Halifax this week, the divide between Alberta, British Columbia and Saskatchewan over the spoils of energy development is growing. B.C. is demanding its fair share of benefits from oil pipelines cutting through the province and Saskatchewan has got to be nervous that Alberta’s oil sands production is going full tilt, pushing down prices for its conventional crude because there’s not enough pipeline space to move both.
 
All this makes talk of a national energy strategy, championed by Alberta and expected to be one of the main topics of discussion at the Council of the Federation meeting, naïve at best, explosive at worst. Given Canada’s bad experiences with central planning in energy, Alberta’s Premier, Alison Redford, and the strategy’s diverse cheerleaders, should have seen it coming.

The rift between Alberta and British Columbia over the proposed Northern Gateway pipeline cracked wide open this week and a quick fix is unlikely. In fact, it could be all downhill from here if the anti-Northern Gateway NDP gains power in the coming provincial election, as polls suggest.
 
“There is no way this pipeline is going to happen without B.C.’s approval,” Premier Christy Clark told CBC Radio from Halifax Tuesday.

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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.

Edmonton and Halifax — A standoff between premiers has left the proposed Northern Gateway pipeline in peril, with Alberta Premier Alison Redford saying she won’t share any resource revenue and B.C. premier Christy Clark saying she’ll block the project without more cash.

Speaking Tuesday morning at an annual pancake breakfast at the Alberta legislature, Ms. Redford rebuffed B.C.’s day-old demand that more money – an unspecified “fair share” – be included if it’s to support the proposed $6-billion pipeline, which would carry Alberta oil to the B.C. coast for shipment to Asia.

“We will not share royalties, and I’ve seen nothing else proposed, and would not be prepared to consider anything else at this point in time,” the Alberta premier said.

B.C. Premier Christy Clark said she was taken aback by the comments, and repeated that Northern Gateway won’t go through without a slice of royalties. “If Alberta is not willing to even sit down and talk, then it stops here,” Ms. Clark vowed.

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