JAMES STEVENSON <a href=www.canada.com>Canadian Press Sunday, March 30, 2003

CALGARY (CP) - The United States slurps up more oil and natural gas from Canada than any other foreign country on Earth.

And with war raging in the Middle East, 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 United States, which imported 1.8 billions 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 United States becomes even more apparent. Canada supplied about 94 per cent of American gas imports last year.

Yet with all the volatility in global energy markets, talk of future U.S. energy supplies 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 a 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.

"My belief is it will be positive," said George.

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.

Despite a recent disagreement between the Bush administration and the Chretien government over the handling of the Iraqi crisis, the energy-trading business has been very open and free, Stringham said.

"They're a good market, we're a good supplier. (The United States) 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 United States.

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 Middle East is not the only trouble spot for global oil production.

About 40 per cent, or 800,000 barrels per day, of Nigeria's oil production was cut off this week as major energy companies evacuated staff amid tribal fighting that has killed at least 100 people in the African country 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.

Venezuela is still only producing about two-thirds of its three million barrels per day total it had before the strike and the situation remains volatile as Chavez continues to seek revenge on strike leaders.

Still, geopolitical turmoil does not necessarily mean greater demand for Canadian oil, said one U.S. energy company spokesman who asked not to be identified "There's lots of sources out there and a well-developed oil infrastructure all over the world."

But a recent political decision in Washington - overshadowed by Iraqi war coverage - 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-square kilometre Alaska National Wildlife Refuge.

Development of the refuge had been a key part of President George W. Bush's energy plan - despite opposition from environmentalists who fear that drilling would jeopardize the delicate ecosystem and its wildlife.

Stringham said he doesn't believe attempts to drill in the wildlife refuge will go away. "The administration down there has been quite adamant in trying to put it forward and I'm not sure if they're ready to just drop it at this point in time."

Canada has long lobbied for a U.S. ban on drilling in the wildlife refuge and has taken a more prominent role recently in promoting Canadian energy to its larger neighbour to the south.

Some Canadian oil executives, however, say further lobbying efforts are not needed to increase U.S. demand for energy.

"I think what we've got to show is steady supply, good quality product and reliable outcomes," said Suncor's George. "And then the market will come."

Read Reuters, 03.26.03, 4:43 PM ET

CALGARY, Alberta (Reuters) - Lack of skilled workers held back oil and natural gas drilling in Canada in the first quarter, but service companies expect to make up for work curtailed by the shortage in coming months, resulting in higher demand and rental rates in a traditionally weak period. High oil and natural gas prices kept 86 percent of Canadian drilling rigs working in the first quarter, up from 68 percent a year ago. "As far as the second quarter looks, it looks quite strong right now," Bob Geddes, vice-president of drilling at Ensign Resource Service Group Inc., said during a conference call. "This year we are expecting a very strong May and June in southern Alberta on shallow gas projects." Staff constraints caused Precision Drilling Corp. , Canada's largest drilling contractor, this winter to run 70 of its 225 rigs with only two crews of five workers, instead of the usual three. "We needed another 350 employees," said Dale Tremblay, Precision's chief financial officer. Stiff competition for workers, partly a reflection of oil-rich Alberta's healthy economy, resulted in fleet utilization falling short of the 92 percent benchmark set during the first-quarter drilling boom of 2001. Rig use was also dragged down by mild temperatures in December, which slowed the start of the winter drilling season. Winter is the busiest time for drillers because marshy areas in northern Canada freeze, enabling them to support the weight of heavy rigs. The number of rigs working peaked at 607 in February, up from 300 in November, said Miles Lich, an analyst with brokerage Peters & Co. "In previous years we've ramped up through December but this year's increase was so late that, boom, we added 300 rigs in no time," he said. "That's a lot of rigs." The surge in activity was driven by unexpectedly strong prices for oil and natural gas. Fears about oil supply, the result of a prolonged strike in Venezuela and uncertainty about the impact of the U.S.-led war against Iraq, boosted oil to about $34.25 per barrel this year. In the fourth quarter of 2002, oil sold for $28.33 per barrel. Falling production from aging fields and a cold winter in the East that severely drained storage inventories have pushed up natural gas prices across North America. Spot contracts in Alberta have averaged about C$8.25 ($5.57) per thousand cubic feet this quarter, compared with C$5.38 in the final three months of 2002. Tremblay said high commodity prices and drilling project delays due to the staff shortage mean increased demand in the spring and summer, normally a slow periods for service firms. "We know it's going to stay steady. Producers are going to try to get out of (spring) breakup and be moving as fast as possible," he said. "It's looking very strong through the summer." Prices for Ensign's smaller rigs, used to punch down shallow wells, will likely fall C$1,000 per day this spring from the winter peak, Geddes said. A year ago, weak oil and gas prices caused spring rental rates to plunge C$2,000 per day from first-quarter levels. Depending on rig size, rates can range from C$10,000 to C$20,000 a day. Some forecasts have predicted 17,500 wells will be drilled this year in Canada, ahead of 14,500 last year and lagging only the record of nearly 18,000 set in 2001. "We're ahead of the curve from last year but we're still not through 2001 numbers yet," Lich said. "The second quarter will determine whether we have a banner year or just a good year." ($1=$1.47 Canadian)

Read article By PATRICK BRETHOUR Wednesday, March 26, 2003 - Page B1

Closing Markets Wednesday, Mar. 26

S&P/TSX -27.96 6357 DJIA -50.35 8229.88 S&P500 -4.79 869.95 Nasdaq -3.56 1387.45 Venture -1.52 1040.68 DJUK 1.19 153.54 Nikkei 113.16 8351.92 HSeng -15.06 9047.09 DJ Net .89 44.39 Gold (NY) +1.80 330.10 Oil (NY) +0.66 28.63 CRB Index -0.49 228.42 30 yr Can. -0.01 5.59 30 yr U.S. -0.01 4.93 CDN$ buys US$ +0.0030 0.6798 Yen +0.4360 81.6660 Euro +0.0025 0.6366 US$ buys CDN$ -0.0065 1.4710 Yen +0.1107 120.1307 Euro -0.0004 0.9365

CALGARY -- Alberta plans to go solo on the stage of world oil politics, bypassing Ottawa to limit the fallout from what it says is the federal government's anti-American rhetoric and "punitive" energy policies.

The province is speaking with members of the Organization of Petroleum Exporting Countries about obtaining observer status within the cartel, Alberta Energy Minister Murray Smith said.

That would be a first for OPEC, where observer status has been extended only to national governments, such as Russia.

Alberta also plans to meet formally with the International Energy Agency, which advises Canada and 25 other industrialized countries on energy policy.

In both cases, Alberta will be acting alone, Mr. Smith said, adding that he has no intention of checking in with the federal government.

Some provinces attend international forums in concert with the federal government, but the Department of Foreign Affairs and International Trade said it is not aware of any instance in which a province has participated in such bodies by itself.

However, Alberta is looking to dissociate itself from Ottawa's stance on the war in Iraq, particularly comments last week by Natural Resources Minister Herb Dhaliwal that U.S. President George W. Bush is a failed statesman.

"We're working hard to repair the damage that Mr. Dhaliwal has done in our trade relationship with the United States," Mr. Smith said.

Mr. Dhaliwal heads the federal ministry chiefly responsible for energy policy.

The Prime Minister's Office said the federal government is responsible for international relations, echoing its rebuff last week of Alberta Premier Ralph Klein's public support for the U.S. war effort.

"In terms of foreign policy, the Prime Minister and the Foreign Minister speak for Canada," said PMO spokesman Jim Munson.

Alberta has often clashed with Ottawa over the oil patch, the most recent battle being the debate over ratification of the Kyoto Protocol, aimed at reducing greenhouse gas emissions.

Yesterday, Mr. Smith said Kyoto was one of the main motivations for the province in contemplating a seat at OPEC meetings.

"We're always concerned about the notoriously inept energy policy that comes from Ottawa, so we look for ways to build bridges, to build dialogue," he said.

The subject first arose in December, when an influential energy industry journal published estimates of national oil reserves that included Alberta's oil sands for the first time -- giving Canada the world's second-largest reserves, after Saudi Arabia.

OPEC's entire purpose is to manage world oil supplies in order to maximize its members' revenues, but Mr. Smith said he did not see Alberta joining in the cartel's efforts to control production.

Right now, Alberta regulates the oil sector, but does not dictate output levels.

The Canadian Association of Petroleum Producers said it could be helpful for Alberta to have first-hand information on OPEC deliberations, but vice-president Greg Stringham said he did not foresee the province attempting to micromanage crude production.

As for meetings with the IEA, Mr. Smith said Alberta is looking to gain a better understanding of how energy demand will change after the war in Iraq ends.

OPEC is largely made up of producers from the Middle East and North Africa, but it also counts Nigeria, Indonesia and Venezuela among its member nations.

Canada Energy

Canada is a net exporter of oil, natural gas, coal, uranium, and hydropower. It is one of the most important sources of U.S. energy imports.

Note: Information contained in this report is the best available as of February 2001 and can change.

Canada currently has a bright economic outlook, with projected gross domestic product (GDP) growth of 3.2% in 2001. Liberal Prime Minister Jean Chretien won his re-election bid in November 2000, enlarging his party's majority in the parliament. Chretien plans to reduce taxes, which is expected to lead to increased consumer spending and business confidence. Unemployment is at historic lows.

edmonton.cbc.ca Web Posted : Mar 18 2003 12:34 PM CST

London - Crude oil prices staged their biggest one-day drop in more than a year Tuesday, as traders speculated that an Iraq war would be so short and decisive that Middle East supplies would not be severely disrupted.

In New York, April crude futures were down by $3.18 US to $31.75 US a barrel by early afternoon.

With war now a virtual certainty, traders are rushing to unwind positions ahead of a further price drop, once it's clear oil will keep flowing.

Saudi Arabia has moved to made good on earlier promises to ramp up production in the event of any supply shortages. And OPEC has already said it would not allow a supply shortage to develop.

The U.S. government has also signalled that it is prepared, if necessary, to release supplies from its 600-million barrel strategic oil reserve.

Oil topped out at $39.99 US a barrel in late February as war fears combined with a bitterly cold month and production problems in Venezuela to drain reserves.