Government of Alberta does not consider jobs, taxes, royalties, or the public interest in their evidence at Northern Gateway hearings
Government of Alberta does not consider jobs, taxes, royalties, or the public interest in their evidence at Northern Gateway hearings
Edmonton – AFL President Gil McGowan will be available to the media throughout today as the Federation quizzes the Government of Alberta on their evidence before the Northern Gateway panel.
“We are very troubled by what we’ve heard so far today. The Government of Alberta did not put any evidence before the Board about jobs, taxes, or royalties, says McGowan, President of the Alberta Federation of Labour, representing over 145,000 unionized workers.”
“The Government’s evidence confuses what’s good for foreign-owned oil companies with what’s good for Albertans. Their evidence at Northern Gateway looks exclusively at industry profits, without considering jobs or royalties for Albertans.”
The province is “blurring the lines between profits for the world’s largest corporations and the public interest,” says McGowan.
“Oil companies are capable of advocating for themselves, they shouldn’t need the government’s help. It’s the government’s job to advocate for Albertans. They are failing to do that job at the Northern Gateway hearings.”
McGowan says the Government of Alberta’s evidence – though technical in nature and written by high-priced energy consultants – really tells a very simple story.
“The government allowed a stampede of development in the oil sands, without making good on their commitment to have 2/3 of our bitumen upgraded here,” says McGowan, adding that the province’s evidence predicts only 26% of Alberta’s bitumen will be upgraded in Alberta by 2025.
The result is a flooded market of an inferior product.
The Government’s evidence shows oil companies are getting a lower price for bitumen because Alberta doesn’t force them to upgrade it before it leaves Alberta.
“We are selling the wrong product,” explains McGowan.
“If we were selling upgraded synthetic crude oil, we would be getting better prices, and higher royalties as a result,” says McGowan.
Raw bitumen can only be turned into gasoline or diesel by a small number of refineries in North America. The rapid pace of development means there is too much bitumen on the market. The choice is simple: bitumen could be upgraded to synthetic crude before it leaves Alberta, creating thousands of jobs. It could then be refined at a large number of refineries around the world. Or, it could be shipped raw to China, and take thousands of jobs with it.
“There is not one word in the Government of Alberta’s evidence about the public interest. We are left to wonder if they care about jobs and royalties for Albertans, or if the priority is profits for oil companies backing the Northern Gateway pipeline – none of which are majority-owned by Canadians,” says McGowan.-30-
MEDIA CONTACT: Gil McGowan, President at 780-218-9888 (cell) or 780-483-3021 (office) Alberta Federation of Labour
Reality Check: Profits, Prices, and Access to Markets
Alberta is producing too much of the wrong product; no mystery why oil companies are getting a low price.
The Government of Alberta’s evidence filed with the Joint Review Panel for the Northern Gateway pipeline shows Alberta’s failure to upgrade bitumen is what is causing lower prices for bitumen and what is driving the alleged need for the Northern Gateway pipeline.
The Government of Alberta hired energy consultant firm Wood Mackenzie to do an analysis on the need for “new markets” for Alberta’s bitumen. The analysis is designed to support the Northern Gateway pipeline.
The report is technical in nature.
The GoA evidence says oil sands producers “could” lose up to $8/barrel because bitumen is flooding North American refineries incapable of handling it. Chinese refineries can handle bitumen, and it makes sense for oil sands operators deeply involved with Chinese state-owned oil companies to ship raw bitumen to Chinese refineries, who rely on lower labour and environmental laws.
There is plenty of North American refinery space for synthetic crude oil, which is upgraded bitumen. But the Government of Alberta hasn’t forced companies to build upgraders, and has allowed a stampede of development without any regard for keeping jobs in Alberta.
The Government of Alberta is responsible for the problems they describe in their evidence. We are pulling bitumen – a lower-quality product – out of the ground, shipping it out as fast as we can, flooding the market with a low-quality product, and wondering why we are losing money.
The Wood MacKenzie report before the NEB might be complicated and technical, but the explanation is quite simple. Upgrade the resource before it leaves Alberta, keep the good jobs here, earn more tax and royalty revenues for Albertans, and the economic case for the Northern Gateway pipeline evaporates.
Technical Backgrounder on the Wood MacKenzie Report
Wood MacKenzie’s $8/barrel “discount”
WMK’s $8/barrel discount prediction is a figure based on the concept of “refining value.”
The discount of value is driven by the fuel oil yield in the cracking configuration, which sells at a discount to the gasoline and diesel produced in a coking configuration.
“The Refining Value, which is the value of refined petroleum products produced from a given crude oil, falls as a refinery configuration becomes more ‘simple’ because the simpler configuration has less capability to convert the lower-value heavy end of the crude assay to higher-value products, such as transportation fuels.”
The $8/barrel “discount” is attributable to:
- A glut of supply for coking refineries
- Too much non-upgraded bitumen looking for a home. It is finding its home in cracking refineries, thus simply producing fuel oil rather than diesel or gasoline
Prediction of losses of refining value are further attributable to:
- Not enough pipeline capacity to “premium heavy crude markets,” aka refineries that can process bitumen straight into gasoline or diesel
- Runaway growth in bitumen supply and a glut on the market
The Wood Mackenzie analysis relies on the following assumptions:
- A lack of upgraders in Alberta. If bitumen is upgraded to SCO in greater amounts, higher refining values can be achieved
- A prediction of just 26% of Alberta bitumen being upgraded by 2025, far below the Government of Alberta’s stated policy goal of 2/3 bitumen upgraded in Alberta
- A growth in supply due to ERCB approving every project, without associated upgrading capability
- A total lack of pacing by the GoA Department of Energy
- Ignoring the use of rail entirely, which is not only being used right now but also contained in Enbridge’s analysis
Heavy Crude Refining Predicted to Fall in Western Canada With Northern Gateway
According to Enbridge’s evidence before the National Energy Board, Western Canadian “heavy crude” – aka bitumen coming from the oil sands - will be increasingly refined in China, where state-owned companies are building massive refining complexes capable of handling bitumen.
2011 Refinery Throughput – Reported to CAPP
2018 Forecast By Enbridge – With Northern Gateway Pipeline
Heavy Crude, All Grades
Total Throughput – Western Canada
About the AFL Northern Gateway Reality Check Series
The Alberta Federation of Labour is a full intervener in the Northern Gateway Pipeline.
The debate around the Northern Gateway pipeline is heated, and we hear governments and industry saying all kinds of things to justify locking Canada in to being a raw resource producer, but never move up the value chain with our natural resource wealth.
“The Northern Gateway pipeline hollows out our value-added industries, imposes higher oil prices on consumers, and rewrites the rules of Canada’s oil industry. Gateway will reduce the amount of oil sands upgraded in Alberta and ship thousands of jobs to China,” Gil McGowan, President, Alberta Federation of Labour.
Page 1 of 12, A Netback-Impact Analysis of West Coast Export Capacity, Addendum Report for Alberta Department of Energy by Wood Mackenzie Inc, Appendix A, The Government of Alberta Responses to Information Request No 1, to Gitga’at First Nation.
 All 2018 Forecast figures for Western Canada and Ontario are taken from Enbridge Northern Gateway, “Market Prospects and Benefits Analysis For the Northern Gateway Project,” July 2012. Attachment 1 to Northern Gateway Reply Evidence. Prepared by Muse, Stancil & Co for Enbridge. Table A-9: Disposition of Canadian Synthetic and Light/Medium Conventional, Northern Gateway Case; Table A-10: Disposition of Canadian Synthetic and Light/Medium Conventional Base Case (No Northern Gateway); Table A-12: Disposition of Canadian Heavy Northern Gateway Case, All Heavy Grades.
Bitumen pipeline placementComments made by the late Peter Lougheed hung over public hearings Monday about a pipeline that would ship bitumen from Alberta's oilsands to Asian markets.
Both sides in the debate tried to claim the support of the former Alberta premier who died Sept. 13.
Rick Neufeld, lawyer for pipeline proponent Enbridge (TSX:ENB), suggested Lougheed backed the line's construction.
"In one of his last interviews, didn't he say the [Northern Gateway] pipeline was essential for Alberta?" he asked while cross-examining Gil McGowan, president of the Alberta Federation of Labour.
In response, McGowan suggested Lougheed was sympathetic to the federation's concerns that too many oilsands projects were exporting raw bitumen and robbing Albertans of some of the benefits they would reap from upgrading it in the province.
"Lougheed took an activist approach to ensure we had a value-added industry," McGowan told the National Energy Board. "It wouldn't have been here without government policy and intervention."
The federation's previous testimony that the $6-billion project would make it harder to create upgrading and refining jobs in Alberta, as well as increase fuel prices throughout Canada, came under repeated attack in Monday's cross-examination.
No shortage of bitumen
Neufeld pointed out there is no shortage of bitumen currently available for anyone interested in building a refinery. Nor has Calgary-based Enbridge ever said it would restrict access to bitumen.
He disputed the notion that pipelines encourage the export of raw natural resources. He noted that the Transmountain pipeline originally built to transport crude now moves both oil and refined products.
McGowan responded that the labour group believes projects such as Northern Gateway help price Alberta out of the market for new industrial development. He said the pipeline would only help speed oilsands development, creating demands for labour and materials that drive up their cost.
Neufeld also grilled federation adviser Robyn Allan over her testimony that the 550,000-barrel-a-day pipeline would drive up fuel costs in the rest of Canada.
"So if Canadian producers get higher netbacks in Edmonton, refineries will have to pay more in New Brunswick?" he asked.
Allan responded that oil shipped to Asia would no longer be available to North Americans, which will eventually raise its price.
"When you take oil out of North America and take it to Asia the price increase is going to affect all markets in the long run," she said.
Enbridge analysts have argued that the price of oil is set globally and the Gateway pipeline wouldn't change the price of the Venezuelan, European and Middle Eastern oil on which refineries in Central Canada rely.
In afternoon testimony, federation lawyer Leanne Chahley revisited potential Chinese ownership shares in the pipeline.
Cross-examining a panel of energy producers who hope to ship on Gateway, Chahley pointed out that one of them — Nexen — is being bought out by the Chinese National Offshore Oil Corp. Nexen holds one of 10 shares that give it an option for a five per cent ownership stake.
MEG Energy — owner of another of the ownership options — is about 15 per cent owned by the Chinese corporation.
Chahley also pointed out that Total E and P Canada, another hopeful Gateway shipper, is involved with two developments that include some level of Chinese investment.
CBC News and iPolitics, Mon Sept 24 2012
The Canadian Press
AFL on witness stand at Northern Gateway hearings; President available to speak to media after testimony ends
Edmonton – AFL President Gil McGowan resumes his time on the witness stand today at the National Energy Board hearings in Edmonton, at the Westwood Conference Centre, 18035 Stony Plain Road.
McGowan is expected to deliver evidence until this afternoon and will be available to the media when he is finished.
The AFL opposes the Northern Gateway pipeline because it is designed to ship unrefined bitumen to China. Thousands of good jobs in refining and upgrading will be lost down the pipeline; the project is therefore not in Canada's public interest.
"Northern Gateway is not Canadian infrastructure. It is Chinese infrastructure," says McGowan.
"Enbridge compared this pipeline to the Canada Pacific Railway. It is certainly a nation-building project; it is certainly designed to guarantee energy security, but it will do those things for China, not Canadians," adds McGowan.
Northern Gateway will connect Chinese-owned oil sands production in Northern Alberta with refineries in China via the pipeline and oil tankers through Kitimat, BC. The National Energy Board must assess whether the project is in the public interest, and is empowered to reject the proposal under the broad definition of the "public interest" contained in Section 52 of the National Energy Board Act.
"The oil industry has told us this pipeline is about chasing a higher price for bitumen in Asia.
"The benefits are only for big, foreign-owned oil companies. Canadians lose the jobs and the industry. Northern Gateway makes northern Alberta into China's gas tank," says McGowan. McGowan adds that federal and provincial governments ought to cooperate to create refining jobs across Canada, and support pipelines that reach "our east, not the Far East."
The Northern Gateway pipeline creates only 224 permanent jobs and about 1,850 short-term construction jobs. Upgrading and refining those resources in Canada would create tens of thousands of permanent jobs.
"Evidence submitted to the NEB shows that if this pipeline is built, in addition to all the other bitumen pipelines that have already been approved, Alberta will only be upgrading 26 percent of its bitumen in 2025, down from about 60 percent today," says McGowan.
"That means that tens of thousands of quality jobs will be lost down the pipeline to places like China. Oil companies and the Chinese government may be happy with this situation. But this is clearly not in the best interest of ordinary working Canadians."
For more information or to arrange for an interview with AFL President Gil McGowan, after he is finished delivering evidence, contact:
Shannon Phillips at 403-330-9878
Listen to the first segment of Part 3 of CBC's "As It Happens" for Tuesday, September 4th titled "Northern Gateway Hearings. The Alberta Federation of Labour says the Enbridge pipeline project will actually eliminate Canadian jobs":
The Alberta Federation of Labour has two main criticisms of the Northern Gateway pipeline: (1) Canadian jobs would be created if the crude bitumen was refined in Canada and then exported rather than being exported directly; and (2) The pipeline will reduce the "Asian" premium, which means a higher price of oil in Canada and job loss due to the higher processing costs for Canadian refineries.
In about 200 words carefully explain why the creation of the Gateway pipeline from Alberta to Kitimat BC will raise the price of crude oil for Canadian refineries. Be sure to include proper references to your background material.
According to Gil McGowan (President of Alberta Federation of Labor), the creation of Northern Gateway pipeline will raise the price of crude oil for Canadian refineries. Oil refineries take crude oil as the raw material for production and convert it into consumable products like gasoline. Currently, the oil suppliers for Canadian refineries are primarily domestic, and the buyers/consumers of their refined products are primarily domestic as well.
With the pipeline in place, the expansion of Canadian crude oil industry to a world market would bid up the domestic price of crude oil to meet the world price (narrowing the gap between the domestic and the world price). This will be so as the result of a much higher demand from a worldwide refinery industry/oil market, particularly with access to the ones in Asia and West coast US. Mr. McGowan mentioned that the Saudi Arabia (currently the main oil supplier to the Asian market) when facing the Canadian entering their Asian oil market could lower their oil price to keep their market share. Thus, it would result in a reduced "Asian Premium". The "lowered" oil price in Asia market/world market would then still be higher than the current Canadian domestic price of crude oil because of the high demand. This would encourage Canadian crude oil export as long as it allows a higher margin of profit than selling the oil domestically. The potential shrinking supply of crude oil domestically would cause the domestic oil price to rise. In addition, the Canadian refineries' bargaining power would be reduced as the Canadian crude oil industry is open to the world market which would probably be reflected on an increase of price of crude oil as well.
Happy Trades Blog, September 10, 2012
Forecasts are too rosy; critics claim
Enbridge faced tough questions Wednesday on its predictions that more than $300 billion in economic benefits will flow from its proposed $6-billion pipeline to the West Coast to carry oilsands bitumen to Asia.
In its second day of questioning at the federal Joint Review Panel, the Alberta Federation of Labour challenged the company's forecasts of the economic benefits to Canada.
Federation lawyer Leanne Chahely asked economists why their forecasts say little about the impact of the pipeline on gasoline prices but tout major economic gains for oil producers and a net benefit for Canada.
Enbridge contends the proposed pipeline would allow oilsands producers to get higher prices - up to $20 more a barrel - for bitumen by opening up new markets in Asia.
The company also says other conventional oil producers in Western Canada would also get $2 to $3 more per barrel.
Enbridge panel economist Bob Mansell said the local price of gasoline will likely only increase by about 1.5 cents per litre as a result of the "price uplift" that comes from Gateway sending 585,000 barrels of bitumen a day to Asia. Mansell said it's "likely" Canadian refiners would absorb that small additional cost, because there's pressure to keep the price low to compete with gasoline imports.
Over a 35-year period, the higher prices for crude oil feedstock would cost refiners in Canada about $12 billion, Mansell said.
But that additional cost to the refining industry has been taken into account in the company's forecast, which says Canada will gain $312 billion net benefit over the 35-year forecast, said Mansell, a University of Calgary economics professor.
Even with the pipeline shipping out 585,000 barrels of bitumen a day, there will still be plenty of crude oil feedstock to supply Canadian refineries, the economists said.
AFL president Gil McGowan disputed the net benefit figures.
"They want Canadians to believe statements refiners will not pass the higher cost on to consumers .
"Does anyone really believe that? The net benefit to Canada is a house of cards. It is based on the assumption that all oil producers in Western Canada, not just those with bitumen in the pipeline, will get higher prices for their product."
There is also no guarantee that Chinese refiners will continue pay the "Asia premium" when bitumen starts flowing, he said. Saudi Arabia currently charges a higher price for crude it sells to China, called the Asian premium.
Edmonton Journal, Thursday, September 6, 2012
Byline: Sheila Pratt
Enbridge's proposed Northern Gateway oil pipeline to Canada's Pacific Coast could cost thousands of high-paying refining jobs in Alberta, a labour group warned in Edmonton on Tuesday as the company faced its first day of grilling at public hearings into the contentious project.
Alberta Federation of Labour contends the $6-billion line, which would ship 525,000 barrels a day of oil-sands- derived crude to tankers bound for Asia, would mean 5% less refinery throughput at home and the loss of 8,000 jobs.
Enbridge and the oil industry say it would open up lucrative new markets for growing volumes of Canadian crude in regions overseas where the producers can escape the deep price discounts their oil now sees in the North American market.
"China is in the midst of a building boom in terms of refineries and refining capacity, so our fear is that if our policymakers allow this pipeline to be built we'll end up in a situation where our own homegrown refineries are no longer economic and they'll close down," federation president Gil McGowan said during a break in the hearings.
"We'll end up in a situation where we're sending our raw bitumen oil to China and then buying back the refined product."...
Job Market Monitor, Wednesday September 5, 2012
Nexen could be just the beginning...
In June, the Alberta government launched a website publicly outing employers who haven't paid their workers—an online hall of shame. Among these "deadbeat bosses," as the media quickly dubbed them, the worst offender was a subsidiary of China Petrochemical Corp. (Sinopec), a Chinese state-owned oil giant. That same subsidiary, along with others, is facing charges after the deaths of two Chinese workers flown in to work on a site near Fort McMurray, Alta., in 2007. After much delay, the trial begins this fall.
It's the kind of bad press Chinese firms can't afford as they seek to buy up swaths of Alberta's oil patch and attempt to win over Canadian regulators and a wary populace. Last week, Chinese state interests went after two Calgary-based companies. China National Offshore Oil Corporation (CNOOC) Ltd.'s $15.1-billion bid for Nexen Inc. got the most attention by far: it's the biggest-ever takeover of a Canadian company by a state-owned entity. On the same day, Talisman Energy Inc. said it would sell a 49 per cent stake in its U.K. North Sea outfit to Sinopec for $1.5 billion. "Virtually overnight, Chinese investment in the energy sector has doubled to over $30 billion," says Wenran Jiang, director of the Canada-China Energy & Environment Forum. Although the deals have yet to be approved, it's a sign of things to come.
The proposed Nexen deal would be the latest—and by far the largest—in a string of acquisitions. Last fall, Sinopec bought Calgary-based Daylight Energy Ltd. for $2.1 billion, the first time a Chinese state-run company made a successful bid for a North American energy ﬁrm. Earlier this year, PetroChina bought Athabasca Oil Sands Corp., giving China its first full ownership of an oil sands project. The Nexen deal takes things to another level. It's worth more than all of China's direct investment in Africa in 2011 ($14.7 billion), according to Gordon Houlden, director of the University of Alberta's China Institute. Jiang says China's interest in Canada is ramping up partly because we've become more welcoming. Prime Minister Stephen Harper once vowed not to sell Canadian values to the highest bidder and bestowed honorary Canadian citizenship on the Dalai Lama, to China's chagrin; lately he's softened his stance. In January, after the U.S. rejected the Keystone XL crude oil pipeline from the oil sands to the U.S. Gulf, Harper courted the Chinese more aggressively, visiting Beijing to discuss oil sales as part of a trade mission. (With the vast majority of Canada's crude oil going to the U.S., he's said he's keen to diversify.) The controversial Northern Gateway pipeline, if approved, will tap into the surging demand in Asia.
If last week is any indication, China could quickly become a dominant—if not the dominant—player in Canada's oil sands. Many critics question the motives of state-run firms, which operate like other Western companies but ultimately answer to the Chinese government. Beyond that, China's markets remain largely closed to foreigners. On July 27, U.S. Democratic Sen. Charles Schumer wrote a letter asking Treasury Secretary Timothy Geithner to block the deal until China opens its markets. (Nexen has offshore holdings in the Gulf of Mexico, so the deal also requires U.S. approval.) "I urge you not to miss this opportunity—the largest foreign acquisition ever by a Chinese company—to hold China to the commitments it has made to provide a level playing field for U.S. companies seeking to access Chinese markets," Schumer wrote, calling the current investment relationship between the U.S. and China a "one-way street."
Other critics worry about whether Chinese companies will respect Canadian regulations on the environment and labour standards, where Beijing's track record remains notoriously poor. "Does it matter who owns the oil sands? You bet it does!" said Gil McGowan, president of the Alberta Federation of Labour, in a statement about Nexen. He argues that foreign governments would "develop the oil sands in their own best interests," keeping the best jobs for themselves, and ignoring Canada's energy needs and environmental priorities. McGowan has previously expressed concern about overreliance on temporary foreign workers in the oil sands, driving down wages for Albertans. The NDP, too, criticized the Nexen deal for lacking "hard commitments on the environment."
So far, at least, it seems that China's interest in our energy sector has been of benefit to both sides. Here, China has found a stable place to invest. Resource-rich and democratic, this country is undeniably attractive, and China has been burned in the past; in Libya, it had to evacuate more than 35,000 workers after civil war broke out, Jiang notes, losing $18 billion in the process. Nexen made an ideal target. It has considerable assets abroad, where the Chinese are also interested in expanding (just 28 per cent of Nexen production is in Canada). Nexen's stellar corporate image and brand reputation also make it appealing—Nexen was featured in Maclean's in May as one of Canada's top 30 green employers, its third year on the list.
Still, it's not hard to see why Nexen felt pressure to sell. The firm has been plagued by operational difficulties at its Long Lake oil sands project. "It wasn't creating value for shareholders, and its stock price wasn't performing well [relative to its peers]," says Lysle R. Brinker, director of equity research on integrated oils and national oil companies at I.H.S. Herold in Colorado. In January, Nexen removed CEO Marvin Romanow, and CNOOC swooped in. It offered an all-cash price of $27.50 per common share in its bid, a 61 per cent premium to Nexen's closing price on July 20.
This takeover is undoubtedly the best possible outcome for Nexen shareholders, but whether it's best for Canada is still up to regulators to decide. The deal now faces review by Industry Canada and the federal Competition Bureau. Even though Harper has insisted that "nothing should be assumed," experts agree this takeover will almost certainly go ahead.
First, though, it must be shown to have a "net benefit" to Canada, a condition that CNOOC has clearly considered. The company said it will put its North and Central American headquarters in Calgary, list its shares on the Toronto Stock Exchange, and hold onto Nexen's management and employees. "CNOOC looked at why Potash didn't go through, and made some adjustments," says Robert Schulz, professor in the University of Calgary's Haskayne School of Business, referring to BHP Billiton Ltd.'s $40-billion hostile bid for the Saskatchewan fertilizer company, which was withdrawn after regulators indicated there was no net benefit.
Foreign investment has long been a reality in the oil sands, but if the U.S. is the "devil that we know," China is the devil we don't, Jiang says. State-run companies still have to obey Canadian laws, pay royalties and taxes, just like any other company here. Jiang points to a poll from the Asia Pacific Foundation noting that a majority of Canadians feel uncomfortable with Chinese foreign direct investment. This anxiety stems "from concerns about human rights and democratic development, to product safety and Chinese defence buildup," notes Paul Evans, director of the Institute of Asian Research at the University of British Columbia. "There's not a deep knowledge about these Chinese state-owned enterprises and how they're conducting themselves."
China is the largest energy consumer in the world, and will use as much as 70 per cent more energy than the U.S. by 2030, says Jiang. What if Canada, in the face of deep economic troubles, decided that oil resources would be better used to benefit Canadian interests? It's not inconceivable. The country flirted with nationalization under Prime Minister Pierre Trudeau when he introduced the National Energy Program in 1980 to boost Canadian ownership and government revenues. Canadians rejected it in favour of a market-based system. "We need to make a choice: will Canada maintain its market-economy status, or convert our natural resources into a state-owned enterprise?" Jiang says. If we really are "open for business," China will continue buying from us.
The Nexen deal is "a tough first test," Evans says. If it gets the go-ahead, we'll see other state-owned companies—from China and elsewhere—wading in. How this will reshape Canada's energy sector is an open question. Among the opposing camps who either welcome the Nexen sale or view it with trepidation, one point is agreed upon: this is only the beginning. "If China now has the second-largest economy on earth, and is en route to number one, there may not be much choice but to deal, trade with and work with China," Houlden says.
Federal government to review deal
The proposed takeover of Calgary petroleum producer Nexen Inc. by a Chinese state-owned oil company sparked a fiery debate Monday, with the Alberta government welcoming foreign investment as opposition parties, unions and some business leaders urged caution.
Federal Industry Minister Christian Paradis announced Monday that Ottawa will review the China National Offshore Oil Corp.'s (CNOOC) $15-billion bid for Nexen under the Investment Canada Act.
The federal minister will have the final say on whether the takeover goes through, based on if it's deemed a net benefit to Canada.
Although the provincial government has no formal say in the matter, Energy Minister Ken Hughes said the news is further evidence of the importance of Alberta's oilsands in meeting global energy demand.
"Foreign investment benefits Albertans, and Canadians, putting Canadian firms in a better position to compete globally," Hughes said.
"The investment required to develop oilsands resources is significant . . . The result is jobs for Canadians here and abroad, and competitive products on an international market."
The Nexen takeover is not the first Chinese state-owned enterprise foray into Canada, but it's by far the biggest. The $15.1-billion agreement is equal to the amount Chinese firms have invested in Canada's oil and gas industry over the last three years.
The sheer size of the takeover will put Prime Minister Stephen Harper and the premiers to the test, forcing them to decide how to handle the future of the oilpatch, said University of Calgary economist Jack Mintz.
"It's going to be fascinating," Mintz said in an interview.
Debate over the Nexen deal began immediately after the news was announced Monday. Federal NDP energy critic Peter Julian said the Harper government needs to better define the criteria for a foreign sale, and the Nexen takeover should be subject to a transparent review - not decided behind closed doors.
Liberal industry critic Geoff Regan said in assessing the "blockbuster" deal, the Harper government needs to determine whether Canadian companies will be given reciprocal leeway to make major investments in China - and whether the state-owned company will act according to free market principles.
In Alberta, Liberal MLA Kent Hehr said the proposed sale should provoke questions about whether Albertans are losing control of their own resources.
And Alberta Federation of Labour president Gil McGowan said Canadians shouldn't let a company like Calgary-based Nexen, with a major stake in the oilsands, fall into the control of a foreign government without serious reflection.
"They'll keep the best jobs for themselves. They'll do the minimum to protect the environment and ignore Canada's long-term energy needs in favour of their own nation's needs," McGowan said.
But Gordon Houlden, director of the University of Alberta's China Institute, said given the size of the Chinese economy, it would be strange if the Asian powerhouse wasn't investing in Canadian energy companies.
He noted China is still a smaller player than Europe and the U.S. in Canada's oilpatch, but the U.S. will quickly realize it has a robust competitor north of the border.
The Nexen deal is likely to draw comparisons with CNOOC's $18.5-billion bid for U.S. energy giant Unocal in 2005, a tender ultimately beaten down by political opposition on Capitol Hill.
In Canada, the Harper government blocked Australian miner BHP Billiton Ltd.'s hostile bid in 2010 for Potash Corp. of Saskatchewan after political and business leaders lobbied against it.
Dick Haskayne, one of those business leaders, said the onus is on Nexen and CNOOC to prove this latest deal is a net benefit to Canada.
Haskayne, one of Calgary's most prominent energy executives, said Ottawa's decision needs to be shaped by the fact a number of energy companies hammered by the global economic slowdown and low natural gas prices are also ripe for a takeover.
"It's going to be a critical decision," Haskayne said. "It's not just Nexen. If Nexen is approved, you know the other ones that are in the same league."
Haskayne said he doesn't know all the pros and cons of the deal, but one of his key concerns is whether a pledge to keep a head office in Calgary is met.
But businessman Jim Gray, who also opposed the Potash Corp. sale, said it's a good thing Canada is building a closer relationship with the country poised to become the world's largest economy.
The chairman of the energy group of Brookfield Asset Management said he was concerned about Potash Corp. falling into the hands of a foreign entity because the Saskatchewan company controls one-fifth of the global resource.
Control of the oilsands isn't as concentrated, Gray noted. While Nexen is a major Canadian company, much of its assets are located outside the country.
"There's no parallel between those two deals," he said.
Recent Chinese investments in Alberta
- July 23: Calgary-based Nexen Inc. agrees to a friendly $15-billion takeover bid by CNOOC, China's largest offshore oil producer. Separately, Talisman Energy agrees to sell a 49-per-cent interest in its UK division to Sinopec Corp. for $1.5 billion.
- January: Calgary-based Athabasca Oil Sands Corp. announces it is selling its remaining 40 per cent of the MacKay River project in northern Alberta to PetroChina for $680 million. PetroChina becomes the first Chinese-state-owned company to wholly own a Canadian oilsands project.
- December 2011: Sinopec Group spends $2.2 billion acquiring Calgary oil and gas explorer Daylight Energy Ltd.
- November 2011: CNOOC buys Calgary oilsands developer Opti Canada Inc. for $2.1 billion US.
- May 2010: China Investment Corp. injects $1.25 billion into Penn West Energy to develop the trust's oilsands assets in the Peace River region.
- April 2010: Sinopec purchases ConocoPhillips' nine per cent stake in Syncrude for $4.65 billion.
- August 2009: PetroChina buys a 60-per-cent share in Athabasca Oil Sands' MacKay River and Dover projects for $1.9 billion.
- April 2005: CNOOC Ltd. pays $122 million for 16.7 per cent in MEG Energy Ltd. for a northern Alberta oilsands project.
The Edmonton Journal, July 24 2012
Byline: Kelly Cryderman, Calgary Herald
With files from The Canadian Press
July 2011: Tories give billions of dollars and thousands of jobs away; Alberta Dubai of the North; ethical shopping website; CETA
Alberta Tories give away billions of dollars and thousands of jobs
- The Alberta Progressive Conservative government's management of the energy industry and provincial finances has come under fire from the AFL. Firstly, the AFL showed that the current government gave $2.9 billion to oil and gas companies in a failed scheme to boost employment, while a $100-million education shortfall was allowed to cause more than 1,000 teachers and support staff in the province to be cut for K-12 schools. Secondly, more AFL research revealed that Premier Ed Stelmach is failing on his promise to upgrade more raw bitumen in this province, which will allow thousands of good jobs to be shipped down the pipeline to the U.S. For more ...
Alberta become Dubai of the north with 'guest worker' program
- New figures from the federal government reveal that Alberta employers are using to Temporary Foreign Workers (TFW) program to fill jobs while long unemployment lines continue to plague other parts of Canada. "While unemployment is in the double digits in other parts of Canada, and more than 25 per cent for young workers in some provinces, it's becoming increasingly apparent that the TFW program is becoming the first choice for many employers rather than a tool of last resort, especially here in Alberta," says Gil McGowan, president of the Alberta Federation of Labour. For more ...
Ethical shopping website launched for Albertans
- Want to be a consumer with a conscience but don't know where to shop? The Alberta Federation of Labour and United Food and Commercial Workers Local 401 have launched a website for discussion on shopping ethically and to provide the information you need to make more ethical shopping decisions. For more information ...
Join the fight to stop the Canada-European Union trade deal
- Negotiators for the Canadian government and the European Union are working on the Canada-EU Comprehensive Economic and Trade Agreement (CETA) - a deal which could cost Canadians $2.8 billion in prescription drug costs, lead to the privatization of public services and weaken democracy by transferring decision making from local governments in Canada to multinational corporations. Municipal governments are being kept in the dark on these negotiations, but you can fight back and get your local councils involved. For more information ... Watch these videos on the dangers of the CETA deal: http://www.youtube.com/watch?v=xQPh_YSnkVI and http://vimeo.com/26354593
- Please shop at these two Sobeys - We are STRONGLY encouraging consumers to shop at two Sobeys stores. They are Rosslyn Sobeys in North Edmonton and Forest Lawn Sobeys in Southeast Calgary. No other Sobeys stores are currently recommended as they have not met ethical standards. For more ...
- August 8-12: AFL Kids Camp
- August 9: International Day of the World's Indigenous People
- August 12: International Youth Day
- September 4: Calgary Pride Parade
- September 5: Labour Day, CDLC and EDLC Labour Day BBQs
- September 8: International Literacy Day
- September 15: International Democracy Day
- September 16: International Day for Preservation of Ozone Layer
- September 21: International Day of Peace
Did you know ...
- Municipal services, public utilities and prescription drug costs are among the things at stake in the Canada-EU Comprehensive Economic and Trade Agreement (CETA)
- An Environics Poll shows that 81 per cent of Canadians trust the public sector more than the private sector to provide drinking water treatment and delivery
- Canadian municipalities could lose Canada-only tendering rights and local-preference policies
- EU demands could mean $2.8 billion in increase prescription drug costs for Canadians