Canadian Oil

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U.S. Oil Industry Urges Canadian Oilsands Execs to Step It Up

By Judy Monchuk

18 Jan 2007 at 12:11 PM EST

TORONTO (CP) -- Canadian executives were urged to massively step up oilsands production to five million barrels of oil per day in a relatively short period of time by their counterparts in the U.S., according to documents obtained by the CBC.

Executives from U.S. oil multinationals and Canadian oilsands producers met for two days in Houston, Texas, in the days following the election of Conservative Prime Minister Stephen Harper's government last year, the broadcaster reported Wednesday.

They recommended a five-fold increase in oilsands production fairly quickly, according to minutes of the meeting obtained by CBC.

The request stemmed from a long-term forecast for the region dating out beyond 2030, says a senior official within the Canadian industry.

''There's not political pressure, but there's market pressure depending on what happens to commodity prices,'' Greg Stringham of the Canadian Association of Petroleum Producers said Thursday.

Radio-Canada reported Wednesday that American and Canadian oil executives met in Houston in January 2006 and discussed ramping up daily production to five million barrels of oil from the current 1.1 million barrels in a ''short time span.''

The Radio-Canada report said the two-day session took place following the election of Stephen Harper's Conservatives, but a spokesman in the prime minister's office said it was under the Liberal government of Paul Martin.

The Conservatives have no intention of ''streamlining'' environmental assessment to hasten oilsands development, said PMO spokesman Dmitri Soudas.

''Canada's natural resources will be developed but that will not be done at the expense of the environment,'' said Soudas.

The session involved government and industry officials from the United States, Canada and Mexico and was part of a series of meetings focused on security and protection that began in the wake of the 9-11 terrorist attacks in the U.S.

Oilsands production output was 1.1 million barrels per day in 2005, according to the National Energy Board. It is currently projected to provide between three million and 3.5 million barrels per day by 2015.

Canada exports much of its oil to the United States. However, increasing production to five million barrels per day would be enough to satisfy a quarter of U.S. consumption and almost half its total imports.

However, such a massive production increase would require new refineries and pipelines to transport the crude from the Alberta oilsands as far as California and Texas, according to the document.

With a half-dozen new or expanded oilsands plants coming on stream in the next 10 years, there has been a push for increased pipeline capacity.

Two major energy companies that ship bitumen to the U.S. have recently announced plans for increasing the flow.

BP PLC [NYSE:BP] announced in September it will spend US$3 billion to retrofit its Whiting refinery near Chicago to become a primary processor of heavy Canadian oilsands crude.

EnCana Corp. [TSX:ECA; NYSE:ECA] also announced a C$15-billion deal last fall with ConocoPhillips [NYSE:COP] to ship Alberta bitumen to the U.S. ConocoPhillips is preparing to retrofit its refinery in Billings, Mont., to process it.

In addition, TransCanada Corp.'s [TSX:TRP; NYSE:TRP] plans to spend more than US$2 billion to convert some of its main natural gas pipeline to handle 435,000 barrels of bitumen per day, and Enbridge Inc. [TSX:ENB; NYSE:ENB] is planning to spend US$140 million to expand one of its Alberta pipelines to ship 450,000 barrels of bitumen per day.

Synenco Energy Inc. [TSX:SYN] said today its board has approved a capital spending budget for 2007 of $235 million, up from $118 million last year as the Calgary company ramps up its 60%-owned Northern Lights mining oilsands project.

The company said late Thursday the near doubling of capital spending reflects the company's share of costs for the Northern Lights mine about 100 kilometres northeast of Fort McMurray, Alta. The development is designed to produce 100,000 barrels of synthetic oil a day for 30 years.

However, Alberta's government appears to be conflicted on the issue of shipping raw bitumen into the United States for upgrading and refining.

Energy Minister Mel Knight says he's not uncomfortable with large volumes of bitumen - the tarry product mined from the northern oilsands - being exported, even though it means considerable value is being added to the product outside the province.

Bitumen is first upgraded into synthetic crude oil, which can then be piped to refineries for transforming into gasoline, lubricants or other petroleum products.

Knight said recently that Alberta should have enough capacity to upgrade about 80% of its bitumen within about a decade.

The message seems to differ somewhat from what Ed Stelmach said last month after he won the Alberta Tory leadership race.

The new premier told reporters then that he wants more of the oilsands production to be processed within Alberta instead of being transported as a crude resource to the United States.

© The Canadian Press 2007

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