Alberta Oilsands: University Of Calgary Report Warns Time Running Out For Canadian Oil Producers

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Report says time running out for Canadian oil producers to access Pacific Rim. | Alamy

CALGARY - A research paper is reinforcing the idea that Canada's resource industry is at risk of being left behind internationally if it doesn't find a way to get oil to receptive markets in the Pacific Rim.

The report from the School of Public Policy at the University of Calgary says demand for heavy oil from Alberta's oilsands lies primarily in southeast Asia, but warns the window of opportunity will begin to close.

Author Michal Moore says Canada needs to find a way to get into those markets in the next two to five years.

"If we can get our products into the market in that stream we're going to be competitive," Moore, a professor of energy economics at the school, said Wednesday when the paper was released.

"The equivalent of being late is you have to take a bigger and bigger discount on your product, or switch and start supplying a more higher valued-added product."

The Alberta government has turned up the volume in recent weeks about the hole the oilsands oil discount is eating in the province's bottom line. Premier Alison Redford has warned of a $6-billion revenue shortfall this year because oilsands crude has been fetching a significantly lower price than the U.S. and global benchmarks.

She's also referred to the buildup of crude in Alberta as customers get a cheaper product elsewhere as a "bitumen bubble."

Moore says competition is an issue for Canada.

"There's a lot of that oil out there in the market. There's plenty of capacity in the Pacific Rim/Asian markets for heavy oil like ours, but it's not infinite and it's certainly competitive."

Maya heavy oil from Mexico and Arab Heavy are very close to Alberta's product in weight and sulphur content, Moore said.

The challenge becomes getting Alberta oil to ports so it can be loaded onto ships and sent to willing customers in China, Japan or Korea. Moore said the most cost-effective way of doing that is through pipelines, but delays in the proposed Northern Gateway project to the West Coast present a problem.

Some Alberta heavy oil is already being processed at refineries in California. Moore also pointed to the possibility of shipping Alberta oil eastward to New Brunswick. And there is talk of a rail link to a port in Alaska.

New Brunswick Premier David Alward was in Alberta this week and said he'd welcome a pipeline carrying oilsands bitumen to the 300,000-barrel-per-day Irving Oil refinery in Saint John — the largest in Canada — with the possibility of exporting some of that crude by tanker.

But the Alberta Federation of Labour says Alberta should require energy companies to upgrade oil in the province before they are allowed to ship it.

Citing an Alberta Energy Department analysis obtained under freedom of information laws, the group argued Wednesday that oilsands mining projects with upgraders will become hugely profitable as the light-heavy oil price differential expands.

Federation president Gil McGowan said the Alberta government continues to approve in situ oilsands projects without requiring associated upgrading, which is flooding the U.S. market and driving down the price.

"These projects become less economically viable as the price difference between bitumen and crude expands," McGowan said in a release.

"And yet these projects have mushroomed throughout the province. We’re flooding the market, and these documents show that the government knows it."

Alberta NDP Leader Brian Mason said the government's refusal to increase Alberta's upgrading capacity is part of a "bitumen bungle."

"Here we have a clear message from the market, from industry, from policy analysts and from the government’s own research, yet Redford continues to bury her head in the oilsands and stubbornly insist that we can only talk about moving bitumen because that’s what is in the ground,” Mason said in a release.

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