Booming U.S. exports likely over: report
Chris Varcoe <a href=www.canada.com>Calgary Herald Wednesday, April 02, 2003
After a decade of booming growth in Canadian energy exports to the United States, the era of sending additional oil and gas supplies south is likely ending, says a new report by the C.D. Howe Institute.
In a study released Tuesday, the Toronto-based think-tank said the energy industry will face a new challenge of "sustaining current (production) levels, rather than adding appreciably to them."
"A more assertive U.S. administration will challenge Canadian understanding of the significance of continental energy integration," said the report, written by former University of B.C. professor Paul Bradley and economist Campbell Watkins.
"The rapid growth in Canadian oil and gas exports is probably over; indeed, growing strains on capacity foreshadow higher prices, especially for electricity."
Since the deregulation of Canada's energy business in the 1980s, the
$50-billion-a year industry has expanded rapidly due to a burgeoning appetite south of the border for more oil, natural gas and electricity.
About 60 per cent of all crude oil pumped in Canada now heads south, while more than half of the natural gas production is exported to the United States.
Canada is now the largest supplier of energy to the U.S., topping Saudi Arabia, Venezuela and Mexico.
One area of future growth for Canada will come from the Alberta oilsands, the report contends. While conventional oil reserves in Canada would last about nine years without future additions -- similar to U.S. levels -- the 176 billion barrels of oilsands reserve boost that figure to almost 80 years.
Yet, huge investment dollars, along with long lead times, are required to build new projects and produce additional synthetic oil from the Athabasca oilsands, the report notes.
"Remaining steps toward freeing markets will be more contentious as consumers face higher commodity prices and perhaps sacrifice some direct sharing of the lower costs that are attributable to Canada's natural endowments," it states.
Industry insiders disagree, saying there will be strong growth of oil and gas exports as petroleum output increases from Canada's East Coast, the North and in the oilsands.
The National Energy Board predicts oil production will rise to 3.1 million barrels per day by around 2005, up from about two million barrels in 1999.
The Canadian Association of Petroleum Producers expects overall oil output to hit 3.5 million barrels a day by 2010, a 46 per cent jump from the 2.4 million barrels currently pumped.
Gas production is expected to increase by two to four per cent annually, according to CAPP.
"It's not the doubling in the gas industry we saw in the 1990s, but it's still very strong growth. But it's on the oil side, not the gas side," said CAPP vice-president Greg Stringham.
The report's authors also say terrorist attacks in the U.S. have increased concerns about security of energy supply in the United States, boosting the momentum for Washington to reduce its reliance on Middle East oil.
"More emphasis on energy security by the U.S. provides a platform that could enable Canada to better press its interest in securing favourable access to the U.S. market and in sharing benefits and costs of further market integration," the 33-page study said.
"Energy is one sector where Canada can negotiate from a position of strength."