Meet the new Saudis, eh--Energy security vital to U.S.

Sunday, March 30, 2003 By CP

The U.S. slurps up more oil and natural gas from Canada than any other foreign country on Earth. And with war raging in the Mideast, civil uprisings in other oil producing countries and a recent decision not to drill in a sensitive U.S. Arctic wildlife refuge in Alaska, even greater demand for Canadian energy is expected. The daily flow of Canadian oil to the U.S. has increased dramatically over the last few years and almost double the quantity from a decade ago. Canada is now second only to Saudi Arabia as a source of imported oil for the U.S., which imported 1.8 billion barrels per day from the Saudis in January and 1.6 million barrels per day from its northern neighbour. When imports of natural gas are included, the importance of Canada as an energy source for the U.S. becomes even more apparent. Canada supplied about 94% of American gas imports last year. Yet with all the volatility in global energy markets, talk of future U.S. energy rarely focus on Canada. "I don't think Canadian oil production comes first of mind to Americans when they think of where their gas, diesel and jet product comes from," said Rick George, president of oilsands giant Suncor Energy. But recent U.S. media attention to the massive energy reserves in the northern Alberta oilsands -- and the synthetic crude created from its bitumen -- suggests awareness is quickly growing, he said. For the first time, a recent report by the Oil and Gas Journal on global oil reserves included 177 billion barrels of reserves from the oilsands -- a number that dwarfs estimated reserves of Canadian conventional oil. Greg Stringham, a vice-president of the Canadian Association of Petroleum Producers, says political stability is also a key ingredient for energy trade between the U.S. and Canada. "They're a good market, we're a good supplier. (The U.S.) is close and it's connected by pipeline. So all of those things add to our attractiveness as a potential producer," Stringham said. Meanwhile, recent political problems have made several of the world's other large energy producers less-than attractive as an energy source for the U.S. Vince Lauerman, a global energy strategist with the Canadian Energy Research Institute, says a "relatively long and brutal war" in Iraq would greatly enhance demand for Canadian energy. "The worse the war goes, and the more the Middle East boils, the higher energy security becomes as an important issue to Washington," Lauerman said. "And with that comes benefits to Canada." But the Mideast is not the only trouble spot for global oil production. About 40%, or 800,000 barrels per day, of Nigeria's oil was cut off this week as energy companies evacuated staff amid tribal fighting that has killed at least 100 people in the past two weeks. And Venezuela is still struggling to recover from a two-month strike that failed to oust President Hugo Chavez and paralysed the South American country's lifeblood oil industry, costing about $9 billion. Still, geopolitical turmoil does not necessarily mean greater demand for Canadian oil, said one U.S. energy company spokesman. "There's lots of sources out there and a well-developed oil infrastructure all over the world." But a recent political decision in Washington has the potential to increase U.S. demand for Canadian energy in future. Last week, the U.S. Senate narrowly rejected a budget provision that would have allowed oil drilling in the 77,000-sq.-km Alaska National Wildlife Refuge.