Alberta Federation of Labour President Kerry Barrett was highly critical of the lack of any government industrial strategy in the wake of the announced closure of the Celanese Canada plant in Edmonton.
"Up to 300 Albertans are going to lose highly-paid industrial jobs as Celanese moves its operations to low-wage countries," charged Barrett, "yet the Klein government continues to embrace free trade and globalization and refuses to construct a pro-active industrial development policy." "The employer is simply closing its Alberta operations and moving production to its Mexico plant," said Barrett. "It is making this move despite staff cuts and real sacrifices by the workers to keep the plant in operation." "For years, the Alberta government has relied upon the energy sector to carry the provincial economy, said Barrett, "but their lack of any commitment to long-term planning or to any kind of industrial development plan is now costing hard-working Albertans their jobs."Barrett pointed out that the current government has focused far too much on resource export and far too little on building a healthy value-added industrial base. "There must have been something the Alberta government could have done to prevent this plant closure," said Barrett. "But, as usual, this government has done nothing before the fact and will doubtlessly do even less after the fact." "This plant-closure should come as a wake-up call to Albertans. Why was there no government action before the closure? Why is there no government help for the displaced workers? We have a right to expect answers to these questions," said Barrett."Maybe it is time for Albertans to reconsider who should be governing this province and what public policies would best serve them," said Barrett. "If the state-owned Chinese mining company can be praised for buying Canadian mining giant Noranda, isn't it time to consider an Alberta crown corporation to make use of the province's natural energy wealth for the benefit of all?"
The Alberta Federation of Labour (AFL) has added its voice to those worried about the ramifications of Canada's role in China's energy plans.
Following Prime Minister Stephen Harper's approval of state-run China National Offshore Oil Corporation's (CNOOC) takeover of Nexen, the AFL released China's Gas Tank, a report outlining how it believes China is moving to control all stages of its Alberta oil operations.
The report says three state-owned Chinese oil companies, CNOOC, PetroChina and Sinopec, have major investments in the oilsands. It points out these companies' U.S. tax filings admit the three companies are affiliated and sell oil to one another. Chinese state and private investment in the oilsands is unclear, but significant. For example, Chinese-owned Sunshine Oilsands "holds seven per cent of the total oilsands leases in the Athabasca region, or 1.15 million acres of oilsands leases," according to the report.
The report also points to the proposed Northern Gateway pipeline that would run from Alberta to the British Columbia coastline and is ostensibly intended to ease shipment of oil and natural gas to Asian markets. Sinopec is one of the 11 companies investing in that pipeline. Four remain unidentified.
Finally, the AFL asserts the Canadian federal government did a poor job negotiating the Foreign Investment Protection Agreement (FIPA) with China, and should renegotiate before it is officially passed.
"From our perspective the big problem is that the Chinese have interests that run counter to the interests of the Canadian public," says AFL president Gil McGowan. "It's clear that the Chinese are assembling the pieces necessary for what we would describe as a low price strategy for Canadian bitumen.
"What I've been told by people in government and in industry is that we can't be picky about what we send to those markets... we basically have to give them whatever they want.... Frankly I don't buy that argument because they need us more than we need them. But it's not challenged," he says.
Gordon Holden, director of the University of Alberta's China Institute, echoes McGowan's observations. He says China is not happy buying oil from Iran, Saudi Arabia and Sudan, and is looking for more stable sources.
"Alberta is rock solid in terms of the manner of doing business — relatively transparent, but also just without the complications," says Holden.
McGowan says the AFL, which represents 27 labour unions in Alberta, is not alone in its alarm over Canada's hasty business dealings with China. Even internationally, the public is asking Canada to slow down. U.K.-based Avaaz.org is an online campaign network with 17 million members that develops petitions and protest campaigns on social and environmental issues it believes are important to its members.
Avaaz is currently campaigning against the present form of the Canada-China FIPA. Nearly 38,000 people have pledged support to the campaign.
"As the owners of the resource, I think Albertans deserve to know what's going on and what's being lost, but they don't," says McGowan.Fast Forward Weekly, Thursday, Dec. 27, 2012Byline: Susy Thompson for News
EDMONTON - The Alberta Federation of Labour says the discounted price Alberta bitumen is fetching of the world market could provide an opportunity for more upgrading and additional jobs in the province.
About two weeks after Premier Alison Redford warned Albertans of a tough budget March 7, in which resource royalties are expected to plunge by $6-billion in the next fiscal year largely due to the lower price paid for the province's bitumen compared to other benchmark crudes, the AFL said there is a "silver lining" to the dismal fiscal projections.
Federation president Gil McGowan said a 2011 internal government report, obtained through a Freedom of Information request, shows that as the price differential between Alberta heavy oil and the benchmark West Texas Intermediate crude grows, mining projects that both extract and upgrade bitumen become more economically viable. Mines alone become less economically profitable, the data shows.
"The numbers do add up that there is a strong economic case for the type of development that Albertans want, which is upgrading and refining, and that the government knows that the economics are strong but has been telling us something else," McGowan said.
The AFL has long argued for more upgrading capacity in the province, saying it will create more long-term jobs and net better value for Alberta bitumen since the refined product garners a stronger price. However, on the same day as the AFL released its documents, Suncor Energy Inc. announced that a final decision on its planned multibillion dollar Voyageur upgrading project won't be made until the end of March due to a gush of higher quality light oil that has eroded the economic argument for the upgrader.
Alberta Energy Department spokesman Mike Deising said the private sector has the "paramount responsibility" to determine if building upgraders in the province is economically feasible.
"You don't make economic decisions on billion-dollar refineries or upgraders based on a price differential at one point in time," he said. "These are 30-year or longer assets and companies look 30 years out onto the horizon. Just because we're seeing a widening of the differential right now, that's not going to affect the business case that's going to be a 30-year asset, it's just going to be part of the decision-making process."
The differential between the two types of oil has been growing and spiked sharply in December. McGowan said it currently hovers in the range of 30 per cent. He called it an "incredible loss of value, an incredible loss of jobs and an incredible loss of opportunity" if the trend of refining less bitumen in the province continues.
The chairman of North West Upgrading Inc. spoke out this week about the benefits of refining more oil in Alberta.
The company is partnering with Canadian Natural Resources Ltd. to build the $5.7-billion Sturgeon upgrader and refiner through the province's bitumen-royalty-in-kind program. The scheme sends provincially owned bitumen to private sector refineries to be turned into higher-quality products. The Sturgeon facility is the only project that's coming to fruition through the program, which was started in 2010.
It is the first new refinery to be built in Alberta in 30 years.
McGowan said the bitumen royalty-in-kind program needs to be expanded.
Edmonton Journal, Wednesday, Feb. 6, 2013Byline: Alexandra Zabjek with files from the Calgary Herald
Deal will provide yet another avenue for employers to choose foreign workers over Canadians
EDMONTON – The Comprehensive Economic and Trade Agreement (CETA) signed between Canada and the European Union will disrupt the Canadian labour market by allowing European firms to bypass Canadian workers when doing business here.
“This deal will essentially create another stream of the Temporary Foreign Worker Program,” Alberta Federation of Labour president Gil McGowan said. “Documents made available today by the European Union show that the CETA will allow European companies to bring staff along with them when they set up shop in Canada. The documents also show that the deal will liberalize the Canadian energy market.”
The European Union’s announcement of the CETA shows that it will “make it easier for firms to move staff temporarily between the EU and Canada. This will make it easier for European companies to run their operations in Canada.” [Click here to link to CETA document] It also shows the CETA will allow European firms to access the Canadian market in “key sectors” such as energy. The Harper government’s announcement on the deal makes no mention of the effect on Canadian workers other than to say states the “rights of workers will be respected.”
“The Harper government’s announcement of the deal has no details whatsoever, but, judging from the European Union’s information, we can only conclude that this deal allows European firms – especially those operating in Alberta’s oil sands – to bring their own workers from overseas instead of hiring Canadians first.
And we’re not just talking about trade’s people here. We’re also talking about engineers, managers and other professional workers,” McGowan said. “It’s strange, though not unexpected, that the Harper government’s announcement heralding the deal is silent on the fact that the CETA will allow European firms to bring their own labour when doing business in Canada.”
In light of the Harper Government’s track record with guest worker programs, labour activists say that Canadians should be concerned about the labour mobility clauses in the CETA.
“The Harper government simply cannot be trusted when it comes to workers rights,” McGowan said. “They’ve fumbled the Temporary Foreign Worker Program file by only listening to the interests of businesses, not those of the workers on job sites earning a living working with their hands and backs.”
“Canadian workers should brace themselves for further displacement by workers from overseas, especially in the oil sands.”-30-
Olav Rokne, Communications Director, Alberta Federation of Labour at 780.289.6528 (cell) or via e-mail email@example.com
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
CALGARY – Nexen Inc. began 2012 as a troubled oil and gas company struggling to meet its production targets and appease its shareholders.
It ends the year on the brink of being sold to China's CNOOC Ltd. for $15.1 billion – the Asian superpower's largest-ever overseas foray.
The transaction reverberated beyond Nexen's sleek glass office tower in downtown Calgary, past the pocketbooks of its investors, all the way to Ottawa.
It forced Prime Minister Stephen Harper to weigh whether foreign state-owned enterprises ought to own Canadian resource companies and, if so, which players are welcome and what extent of control is acceptable.
He ultimately decided that SOEs deserve more scrutiny than private ones, and that the oilsands – the third-biggest reserves on the plant – warrant greater protection than other resources.
"Harper was caught a little flat-footed in the sense that I don't think he fully understood both the political reaction to the CNOOC bid and that there might be subsequent bids from state-owned companies coming into the Canadian oilsands," said Queen's University business professor David Detomasi.
Nexen started 2012 in a rough spot. Marvin Romanow made an abrupt exit as CEO in January. The company's flagship Long Lake oilsands project had yet to come close to producing the volume of crude it was designed to, outages at a North Sea offshore platform were causing headaches and Yemen had just booted it out of a major oil project.
Investors' patience was wearing thin.
It would later be revealed that negotiations to sell Nexen to CNOOC began in earnest once Romanow was out the door.
CNOOC was rebuffed twice before Nexen (TSX:NXY), under the leadership of interim CEO Kevin Reinhart, accepted its offer.
But winning over Nexen's board of directors and shareholders would be the least of CNOOC's challenges.
Gordon Houlden, the head of the University of Alberta's China Institute, said the subject would not have been so prickly if it had been France or Norway bidding for Nexen, and not China.
"Certain state enterprises, certain countries, come with more baggage and China is that because of its size, because of its internal complexities, its history, its profile," said Houlden, a former diplomat with postings in China.
On Dec. 7, the CNOOC-Nexen deal was given Ottawa's blessing.
So, too, was the $6-billion acquisition of Progress Energy Resources Corp. (TSX:PRQ) by Malaysia's state oil and gas company. That deal would have been relatively uncontroversial under ordinary circumstances, but it had the misfortune of being announced right before CNOOC and Nexen dropped their bombshell this summer.
The approvals came with a key caveat for future deals – that state control in the oilsands will only be allowed in "exceptional" cases from now on.
The Harper government's handling of the Nexen-CNOOC file was "reactive in nature," said Wenran Jiang, a senior fellow at the Asia Pacific Foundation of Canada.
It's a stance Jiang found curious, given that the Conservatives had for years been actively courting Chinese investment – not the other way around.
CNOOC, having been burned by its unsuccessful bid for U.S. energy company Unocal seven years earlier, was getting the signal that perhaps the conditions were right to try again.
Instead, Ottawa found itself having to navigate around negative public sentiment toward Chinese investment that Jiang sees as largely "misinformed."
"Somehow we're the boy scout and the Chinese are just coming to invite themselves for dinner and then they're ready to roll us over," he said.
"It's not the case at all. We invited them for dinner. We invited them to come and they bought a big dinner ticket and that's why they thought they were coming – for a good party."
By contrast, Jiang praised Liberal leadership candidate Justin Trudeau for arguing in a newspaper column that foreign investment is good for Canada and that the Nexen takeover must go ahead.
It's an approach Jiang would have liked to have seen from Harper.
"You need to make a passionate, positive and proactive case for China needing energy. There's nothing sinister about it."
China is no stranger to Canada's oilpatch. For the past two decades its companies have been gradually building up their presence through joint-venture deals and small-ish acquisitions.
Jiang said it's hard to argue that their track record has been anything but good, but fears that China is up to something nefarious have nonetheless dominated the conversation.
Still, there are concerns that CNOOC's chain of command does ultimately end with communist government in Beijing.
While an ordinary corporation driven by commercial considerations alone would want to sell its oil for the highest price possible, the Alberta Federation of Labour says CNOOC and other Chinese-state-owned outfits are more interested in getting a lower price, so that the Chinese economy benefits.
AFL leader Gil McGowan brought that concern up during a question-and-answer session at a conference on Asian oilpatch investment, held in Calgary on the Monday after the Nexen-CNOOC verdict.
He bristled at the suggestion that anyone who raises those alarms just doesn't understand the issue.
"People who raise these concerns are not immature, we're not jingoistic, we're not xenophobic," he said.
"We're raising legitimate concerns about business ventures which are not business ventures in the way that we understand them."
One of the conference's speakers, the University of British Columbia's Paul Evans, said a more nuanced discussion needs to take place on the matter of what "state-owned" means.
"There's a view that to do business with China means that you are dealing with the Chinese state, and that when you're dealing with the Chinese state, you're dealing with the Chinese Communist Party," he said.
"When you're dealing with the Chinese communist party, you're dealing with a regime and an approach that is repressive on human rights, on espionage, a whole frame of things."
Evans, with UBC's Institute of Asian Research and Liu Institute for Global Issues, asked: "They're state owned but are they state controlled? What does control mean? What are the actual mechanisms for intersections with the Chinese Communist Party?"
There's been minimal hand-wringing within Alberta's oilpatch over what the government's decision will mean for investment going forward.
Provincial Energy Minister Ken Hughes did warn that "there is the potential for less investment coming into oilsands in Alberta and the impact of that is it will simply increase the cost of capital."
But John Zahary, CEO of early-stage oilsands company Sunshine Oilsands Ltd. said that while it's good to have all options on the table, his company will be able to fund growth through equity, debt and joint-ventures.
"We don't need a takeover, and so we don't feel exposed with respect to this decision."
Hal Kvisle, CEO of Talisman Energy Inc. (TSX:TLM), said foreign dollars will continue to flow into Canada through joint-venture partnerships, which he sees as a less disruptive way to do business than building a company only to sell it all to the highest bidder.
And so what if the oilsands have been singled out? There's "all sorts of good stuff going on there" even if all-out takeovers are mostly off the table, Kvisle said.
It's the natural gas players that are hurting right now, and there's no reason to believe they'll stop attracting Asian partners to help build liquefied natural gas facilities, like the one Petronas will be pressing ahead with now that its deal with Progress has closed.
"I think the government has played this brilliantly, actually," said Kvisle. "I think the Harper government deserves full marks for what they've done here."
Global Edmonton, Wednesday, Dec. 12, 2012Byline: Lauren Krugel, The Canadian Press
During the last month of 2012, Christian Paradis, Canada's minister of industry, announced on behalf of the Canadian government the approval of the $15.1 billion acquisition of Nexen Inc. by China state-owned enterprise (SOE) China National Offshore Oil Company (CNOOC).
The CNOOC deal was heralded as the largest acquisition by a Chinese SOE, and the media suggested that with this transaction the Chinese communist regime indicates its intention to reduce its investment in U.S. bonds.
CNOOC pledged to abide by free market standards, including "transparency and disclosure; commercial orientation, including an adherence to Canadian laws and practices ... and employment and capital investments, which demonstrate a long-term commitment to the development of the Canadian economy," as stated in a Dec. 7, 2012, Government of Canada announcement.
It is not known if a national security review, often required under the Investment Canada Act, has been completed in the CNOOC-Nexen purchase, especially as Canadian secrecy rules prohibit anyone from discovering that such a review took place.
The CNOOC deal is not cast in stone yet, as Nexen has assets in the United States, the United Kingdom (U.K.), and the European Union (EU), and thus still needs approval from the U.S. Committee on Foreign Investment in the United States (CFIUS), Canadian regulatory agencies, and respective U.K. and EU government agencies.
"The U.S. approach is more specific, transparent, and integrated than the Investment Canada scheme. The U.S. CFIUS model also requires nine agencies to work together to carry out reviews," said Debra Steger, law professor at the University of Ottawa, in a Dec. 7, 2012, interview published by Maclean's.
Secrecy and Lack of Transparency
According to media reports, the Canadian government has not prevented the acquisition of a Canadian oil and gas company by any foreign SOE, because it could always find a net benefit for Canada. However, as of date, the government has not been transparent as to what it considers a net benefit and how it tests for the net benefit.
"There is no formal, transparent, judicial or quasi-judicial process. Rather, the process is an internal investigation conducted by Industry Canada officials in the case of a 'net benefit' review," Steger said in the interview.
There are actually two types of reviews: One is the net benefit review, and the other is the national security review. The latter could be ordered when the foreign buyer is an SOE. However, this type of review is shrouded in greater secrecy, and it is impossible to determine if such a review has taken place.
"In the case of a 'national security' review, the process is even less transparent ... and no written reasons are published. ... The national security process is shrouded in secrecy, there is no appeal, and ... no one knows what happened in a particular case or even if a national security review was conducted," Steger said.
Acquisition of Canadian Assets
The Nexen purchase isn't CNOOC's or other Chinese SOEs' first purchase of Canadian assets.
"In 2011, CNOOC made a major move into the oil sands by purchasing 100 per cent of OPTI Canada for $2.1 billion. Sinopec acquired Daylight Energy in 2011, and made a $4.65 billion investment in Syncrude in April 2010.
"China Investment Corporation (CIC), a sovereign wealth fund with an office in Toronto, made an investment of $817 million in a new oil sands joint venture with Penn West Energy Trust in May 2010; it also made a $1.5 billion investment in Canadian mining company, Teck Resources, in 2009. Petro China invested $1.9 billion in Athabasca Oil Sands Corp. in late 2009," according to Steger.
Concerning some of the above investments, Steger suggests that some of them were minority investments, and thus didn't fall under the Investment Canada Act requirement, even though some of the investments were for a large amount of money.
Chinese SOEs and the Trust Issue
The question remains, can the agreement between CNOOC and the Canadian Ministry of Industry be taken seriously?
"About two-thirds of the public (68%) say the U.S. cannot trust China too much or at all," according to a Pew Research Center Sept. 18, 2012, report.
"Unfortunately, as long as China is ruled by the communists, ... [their] words cannot be trusted," according to a commentary on the Eye Dr. DeLengocky website, a website by a Vietnamese doctor who immigrated to the United States in 1990
Quoting former president of South Vietnam Nguyen Van Thieu, Dr. Tayson DeLengocky said, "Do not listen to what the communists say, just look at their actions."
Public Relations Ploy
Concerning the takeover of Canadian assets by foreign SOEs, Stephen Harper, Canada's prime minister, announced that going forward, Canada would put in force tougher conditions, which would nix acquisitions like the CNOOC-Nexen deal.
"Prime Minister Harper's supposedly 'tough new conditions' for foreign takeovers are nothing more than a public relations ploy aimed at masking the fact that he has just allowed a foreign government to seize unprecedented control over Canada's energy resources," a Dec. 7, 2012, article on the Alberta Federation of Labour (AFL) website suggests.
The AFL doubts any sweeping overhaul is in the making, especially since the process will be outside the public eye, and the industry minister will still be in charge of the proceedings.
"CNOOC is not your typical oil company. It doesn't operate on market principles, and it isn't beholden to investors. If they [Canadian officials] had been serious about defending the interest of Canadians, they would have nixed the deal outright," according to AFL President Gil McGowan in the Dec. 7, 2012, article.
Trying to Nix the CNOOC-Nexen Deal
"The Harper Government approved the sale of Nexen to a Chinese government-owned oil company Friday in part because critics of the deal couldn't make a good case against it," a Dec. 9, 2012, article on the Calgary Beacon website suggests.
Arguments that China is a communist country are a political weapon, but not a sound argument to scuttle the CNOOC-Nexen acquisition.
The communist allegation cannot be seen as a valid reason for nixing the CNOOC-Nexen deal, as proponents will ask, "Then why does Canada do business with China?" For example, why does Canada continue to do business with the Chinese state? In 2011, Canada's trade deficit with the Chinese state was CA$32 billion and CA$24 billion from January 2012 to September 2012, according to the Asia Pacific Foundation of Canada.
Concerning the argument that Canada is handing over its natural resources to China, the Calgary Beacon article disagrees.
"Under Section 92A of the Canadian constitution, the provinces own the country's natural resources and are given the responsibility for managing them," according to the article.
Many of the opponents to the CNOOC-Nexen deal point to the flagrant industrial espionage the Chinese state has been committing for years. No one doubts that the Chinese state has been known for years as a violator of intellectual property rights and has been linked to online spying.
"The counter argument is that CNOCC is state-invested, not state-managed, ... [and] has plenty of Canadian shareholders. ... CNOOC has also pledged to keep on the existing Nexen management team, which suggests that using the Canadian entity to commit espionage may be tougher than it looks," according to the Calgary Beacon article.Epoch Times, Friday, Jan. 11, 2013Byline: Heide B. Malhotra
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
Bitumen pipeline placement Comments 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
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
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 2012Byline: Kelly Cryderman, Calgary HeraldWith files from The Canadian Press
The technical hearings on economic issues raised by the Northern Gateway pipeline recently concluded in Edmonton. In these quasi-judicial hearings, Enbridge and intervenors (labour organizations, First Nations, environmental NGOs and the provinces of BC and Alberta) presented expert testimony and cross examined the experts of other parties. The Northwest Institute summarized the 15 days of hearings. Here are some highlights.
Cross examination of Enbridge Experts
Labour: refine the dilbit in Canada and create jobs
The Alberta Federation of Labour (AFL) questioned the export of raw dilbit (diluted bitumen, the tar sands' crude oil) rather than refining it in Canada. Enbridge responded that markets aren't looking for refined oil. They are looking for feedstock for their own refineries. No one could make money doing it, according to Enbridge, so there would be no benefit to Canada. Ninety percent of the claimed benefit to Canada is the "price uplift" that Enbridge claims will raise the selling price for all Canadian oil producers.
In later questioning, the AFL asked an expert for the Government of Alberta about the $8 per barrel "discount" for tar sands crude. The Alberta expert explained that tar sands crude fetches its highest price in the limited number of refineries capable of refining it for optimal value. When those refiners reach capacity, the price for tar sands crude drops $8. The $8 discount would be avoided by the Northern Gateway during its first year. Any pipeline (Northern Gateway, Keystone, Trans Mountain) would have the same "up lift" but, after the first few years, more heavy crude than refining capacity will trigger the discount and things will be back to where they are. Still, the Alberta expert concurred with Enbridge that, in his government's view, building upgraders in Alberta would not be commercially viable.
BC: an underinsured pipeline
The Province of BC questioned Enbridge about its insurance coverage. Enbridge stated that it was looking at exposure of $60 million for the cleanup cost of a spill once every 250 years. BC noted that works out to $280 million for a 20,000 barrel spill. That's the size of the spill in Kalamazoo which has already cost more than $767 million. BC also questioned whether the proposed separate corporate structure for the pipeline was intended to limit the liability of the corporate giant. Enbridge denied this. It stated that it would not consider a commitment to guarantee 100% of the clean up.
eNGO Coalition: National benefit from a pipeline that is half foreign owned?
A coalition of environmental NGOs (Forest Ethics Advocacy, Living Oceans ad Raincoast Conservation Foundation) established that Enbridge has ten potential funding participants who may each acquire a 4.9% interest and suggested that foreign ownership of the pipeline would impact the purported national benefit. Enbridge responded that the corporate structure would be modified for Enbridge to retain a controlling interest.
Later, the Coastal First Nations noted that, given 47% foreign ownership of Canada's oil and gas industry, that same percentage of the asserted $17 billion of benefit to private interest presumably would leave the country.
Chris Peters: Externalized cost of greenhouse gas emissions
Chris Peters, a Prince George engineer, calculated that the "well to wheels" greenhouse gas emissions would be 37 million tons (2/3 of BC's total emissions in 2010) and suggested this social cost should be entered into the equation. Enbridge responded that Canada is not responsible for emissions it exports to other countries, underscoring Peters' point that the social costs of the emissions enabled by the proposed pipeline are not accounted for anywhere.
Haisla First Nation: An undersized study
The Haisla First Nation's traditional territory will have more impacts than other First Nations because it is affected by all three aspects of the proposal: the pipeline, the terminal and the super tankers. The Haisla established that Enbridge gave different financial forecasts to different audiences – higher to the public, which inflates the claimed public benefit of a "price lift," - and lower to investors.[xii] Enbridge responded that the different forecasts were insignificant to the project's viability. The Haisla also raised concerns that the condensate costs and risks were not adequately addressed. Enbridge responded that this was the responsibility of the shippers. The Haisla noted that Mark Anielski's "natural capital and ecological goods and services" study included no impacts beyond the right of way, no river or salmon impacts and less land than the pipeline would actually occupy.
Coastal First Nations: Enbridge admits that a spill is 93% likely
The CFN noted that neither the provincial nor federal governments have exclusive jurisdiction to decide whether the project will proceed given that the First Nations have never ceded their traditional territories. The CFN couldn't evaluate impacts to salmon because they hadn't been provided the necessary information. "Whose responsibility is that?" CFN council asked. Enbridge responded that they had tabled sufficient information for a determination by the JRP.
Enbridge agreed that there is a 93% chance of a tanker spill, terminal spill, or full bore pipeline rupture happening within 50 years. In a heated exchange, CFN pointed out that there was no accounting of the social costs of the conflict that the pipeline would cause if the project goes forward.
Economist Robyn Allen: risks from tanker traffic increases are exponential
Enbridge's questions to the Alberta Federation of Labour panelist economist Robyn Allen allowed her to point out that if the pipeline were to increase from its stated capacity (525,000 barrels per day) to its potential capacity (850,000 barrels per day), this would increase tanker traffic by over 50 percent as well as activity in the marine terminal. "Risk is not additive," she said. "It is exponential."
JRP panelist Kenneth Bateman asked Allen about the value of Enbridge giving a "parental guarantee" that it would backstop all costs of a major oil spill. When Allen stated Enbridge won't entertain that, Bateman implied that it could be required by the federal government.
The technical hearings will continue through December. Beginning October 9, the JRP will convene in Prince George to hear expert evidence regarding the construction and impacts of the pipeline. Beginning November 22, the JRP will travel to Prince Rupert to hear expert testimony on marine and First Nations issues. Community hearings in southern BC are scheduled to begin in January 2012. The final arguments on technical evidence will be in April, 2013. The 2012 Federal Budget and Bill C-38 require the JRP to submit its report by the end of 2013. The federal cabinet will make the final decision.
Earth Matters, Oct 05 2012Byline: Carrie Saxifraze
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 jobsThe 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 ... Calgary Herald, July 16, 2011 July 19th AFL release July 18th AFL release Gil McGowan's op-ed Edmonton Journal, July 19, 2011
Alberta become Dubai of the north with 'guest worker' programNew 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 AlbertansWant 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 dealNegotiators 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 Urgent Action 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 ... Events 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
The federal government's new rules around foreign investment by state-owned enterprises (SOEs) could potentially result in less investment in the Alberta oilsands and that could make it more expensive to operate those projects, the province's energy minister has warned.
"The impact of that is that it will simply increase the cost of capital, that it will add on one more slice of cost of production in this province," Ken Hughes told a conference in Calgary Monday. "We already have challenges of operating business in Alberta."
Alberta is a high-cost place to do business because of the competition between the private sector, and the oil and gas sector in particular, and all other sectors, he told the conference, Canada in the Pacific Century, hosted by the Canadian Council of Chief Executives and The School of Public Policy at the University of Calgary.
Last week, Prime Minister Stephen Harper approved a $15.1-billion bid by CNOOC Ltd. for Nexen Inc. and a $5.3-billion takeover of Progress Energy Resources Corp. but said foreign state control of oilsands development has reached the point at which any further foreign state control would not be of net benefit to Canada (DOB, Dec. 10, 2012).
"Friday's announcement was an important inflection point in the history of this country and the oilsands that we should not underestimate how it will affect future investment in this province," said Hughes.
The federal government had an extremely difficult decision to make but it balances Canadians' interests "not badly," he said.
"The last thing the energy industry and Alberta need is for Canadians to feel really uncomfortable about any foreign investment so you have to modulate foreign investment and where it comes from and that's not a bad objective from a foreign-policy point of view and from a social licence perspective."
Alberta has always turned to foreign investment of one kind or another because it has never had enough capital or human resources to develop its own energy resources in this province, said Hughes, adding for the longest time most of that support came from the United States.
Last year the oilsands alone attracted more than $22 billion in investments and the Alberta government does not expect that to slow down, he said.
The government also fully expects there will continue to be campaigns against oilsands and pipelines and the way to address that is to perform well, to tell people what the industry is doing to perform well and to continue to fund innovation in the province, said the minister.
Michal Moore, professor at the School of Public Policy at the University of Calgary, told the conference one does not have to read very far between the lines of the federal government's new policy to see that it could have tentacles reaching out to other areas such as manufacturing and to other provinces.
He asked the energy minister about the extent the Alberta government participated in the federal government's decision. Hughes responded that while the province had been "appropriately engaged" more engagement would have been welcome.
With its takeover of Nexen, CNOOC will hold 100 per cent of the Long Lake in situ oilsands project and 7.23 per cent of the Syncrude Canada Ltd. oilsands consortium.
Gil McGowan, president of the Alberta Federation of Labour (AFL), asked if the Alberta government had considered the possibility that on the subject of oil prices the interests of CNOOC and the Chinese government run counter to Alberta's and particularly to that of the AFL.
Nexen is not only an oil producer but a marketer of 300,000 bbls of oil per day as well and possibly a shareholder in the proposed Gateway pipeline, he said.
"Our concern is that through CNOOC, Sinopec and other investments that the Chinese are pursuing their national interests by controlling the development, the pipelines and the marketing and if they control the marketing, will they be marketing for our interests or theirs, and their interest is low price, not high price," said McGowan.
Hughes said that even if Alberta were to get world prices for all its products it wouldn't be "all sweetness and light from there on in" because it will be subject to the usual vagaries of the commodities market.
Also, even with China's might and breadth and depth it can't get to the point where it can control the world market; there will always be transparent markers in the market place to indicate what the market really is, said the energy minister.
"Transparency as a result of market forces is the force that balances out any one player trying to corner the market," said Hughes, adding China's now roughly 10 per cent interest in oilsands production is "far from a dominant position."
He noted that Nexen does market on behalf of the Alberta government in a process the government opened to competition. "We're ensuring that we have access to transparent market signals."
Hal Kvisle, president and chief executive officer of Talisman Energy Inc., said Friday's announcement by the federal government provided clarity to the industry and bodes well for the future of its structure. It clearly sets the stage for joint ventures with Canadian companies thus providing an opportunity for state-owned enterprises to participate in oilsands and natural gas projects with Canadians operating them, said Kvisle.
Indicating a slide with Peters & Co. statistics saying Canada owns 59 per cent of the oilpatch leaving 41 per cent foreign-owned, Kvisle said that's a remarkable reversal in the numbers since he began his career in the 1970s.
Canada can work very well with foreign companies, he said, noting Talisman's joint venture this year with China's Sinopec International Petroleum Exploration and Production Corporation.
Talisman entered into a US$1.5 billion joint venture with Sinopec, which bought 49 per cent of the shares of Talisman's U.K. North Sea business (DOB, July 23, 2012).
Paul Evans, professor at the Institute of Asian Research and Liu Institute for Global Issues at the University of British Columbia, said in some ways Harper's decision was not just a decision about a particular commercial transaction nor even the oilsands.
"This is a broader marker in where Canada is going in the Pacific century and how we're going to come to terms with business organizations, governments [and] rules of the game that vary from what we have been accustomed to in Canada in the era of Western domination," said Evans.
On a domestic political level, Harper's decision was tactical brilliance but showed "severe ambiguity" for Canada's future as a global player in the oil industry and how the country will deal with state-owned enterprises and forms of capitalism that are "basically playing our game but not quite by our rules," said Evans, adding, "This is in some ways the most important decision made on the Pacific century by the Harper government."
While he acknowledged there is a threat from state-owned enterprises, it's very manageable, he said. "China has all of the capability, very few of the rules and all of the strategic interests in various areas that are important to Canadians, from telecommunications to energy."
Ray Boisvert, president of I-Sec Integrated Strategies, a firm specializing in risk mitigation and the use of advanced analytics to combat cyber and other emerging threats, said he is comfortable with investment from China because it is needed.
Much of Canada's success as a world-class leader in the energy sector is due to its know-how -- its intellectual property - and that has to be protected, said Boisvert, former assistant director of intelligence at the Canadian Security Intelligence Service where he was responsible for the directorate that sets intelligence collection priorities as well as the service's foreign relations and academic outreach programs. He also led CSIS's counter terrorism program
"When we engage with others, especially those who don't play by rules we're used to, there could be consequences so we have to be mindful of that," he said.
Boisvert said Canada needs to be on the lookout for corruption and to verify its supply chain as it gets more engaged with China and other SOEs. "We must move forward with eyes wide open and that means being smart that others will eat your lunch," he said.
He cautioned that SOEs may want to gain access to not just resource plays but also technologies and warned producers to manage their information, communications, databases, engineering reports and sales teams.
"I can tell you honestly that a lot of countries are taking advantage of those systems, those communications, to get insights on deals," he said.
Also on the panel was John Zahary, president and chief executive officer of Sunshine Oilsands Ltd., whose shares are traded on the Hong Kong Stock Exchange as well as the Toronto Stock Exchange.
Nearly half of Sunshine's shares are owned by Asian investors.
Zahary was asked if he has any concerns that -- while Harper is being praised for his balanced decision, until the details of what constitutes a "net benefit" has been determined or what the "exceptional circumstances" are that would allow some deals to go ahead -- that decision sends a message to Beijing that the brakes have been applied to investments in Canada.
Zahary said it may be in Canada's best interest that net benefits are not precise, that it is appropriate the federal government has some discretion and generally the rules are well understood. What's important are employment, capital and transparency, he said.
Daily Oil Bulletin,Byline: Lynda Harrison
VANCOUVER - The nationwide Idle No More movement merged with ongoing protests against oil pipeline projects proposed for British Columbia, to bring more than a thousand protesters out to greet the federal review panel conducting hearings in Vancouver.
The community hearings by the federal panel on the Northern Gateway project are scheduled to resume this morning, after a noisy start on Monday night.
First Nations from as far as the Haisla Nation on the North Coast, near the would-be tanker port of Kitimat, B.C., and from the Interior took part in a march to the downtown hotel where the hearings are being held.
"The Harper government has one of the most aggressive, high-carbon strategies in the world," Eddie Gardner, of the Sto:lo Nation, told the crowd as they mobilized ahead of the march.
He blasted the federal Conservatives for changes they've made to environmental laws that will affect oversight of the Northern Gateway proposed by Enbridge (TSX:ENB) and other projects.
"He implemented that legislation, it has become law, and he did it with crass and ruthless disregard for the environment," Gardner told the protesters.
"Stephen Harper is hell bent to expand the tar sands.
"Canada is coming alive to Harper's real agenda ... he is one of the biggest enemies of the environment."
Protesters were met by Vancouver police, who kept them from entering the building. They remained outside the Sheraton Wall Centre for a short time, drumming and chanting "No Pipelines" before moving on.
Kiera Corrigan, 25, said she is originally from Bella Coola, a small community on the central coast.
"I think it's really important that we don't put in this pipeline. My home town is right south of Kitimat, so it hits really close to home if we ever have an oil spill, which there will be," she said.
Protesters also took aim at a proposed expansion of the existing TransMountain pipeline operated by Kinder Morgan.
The pipeline moves oil from the oil sands to port in Vancouver, and a proposed $4.3-billion expansion would more than double the capacity of the 1,100-kilometre line.
The joint review panel, which is weighing the Northern Gateway, has scheduled eight days of hearings in Vancouver.
They're hearing public comment on the controversial plan to deliver oil from the Alberta oil sands to a tanker port on the North Coast of B.C.
Community hearings were held previously in Victoria, and a one-day hearing is scheduled in Kelowna later this month.
The panel limited access to the hearings room to participants.
"Given the large urban nature of Victoria and Vancouver and previous protests held in both locations regarding the proposed Enbridge Northern Gateway project (the project), the panel has decided that it will limit access to the hearing room," stated the directive.
Members of the public are able to listen to submissions in another location. The hearings are also being streamed live on the panel website.
Access to the hearings remained closed off after the protesters dispersed.
Inside, the three-person panel heard from a range of interested members of the public, from First Nations and environmentalists, to a scientist who lamented telling her children and grandchildren about what she did about climate change.
"What will you tell your grandchildren?" the woman asked the panel.
Eric Doherty, a former Canadian Coast Guard marine engineer turned environmental planner, chided the panel for failing to consider emissions from the Alberta oil sands in its assessment.
"It's no longer controversial that global warming is killing people," he said. "It's no longer controversial that global warming is THE threat to our society."
The pipeline project has been incredibly divisive in British Columbia and as the end of the long regulatory process nears, both sides are trying their utmost to rally support.
The United Association of Plumbers and Pipefitters decided to weigh in Monday, with a statement from Canadian director John Telford stating that the project "will provide jobs to members in Eastern Canada as well as the West."
"The regulation of the oil and gas industry as a whole ensures that the impact to the environment and native peoples will be minimal and the benefits should far exceed any possible drawbacks," the union said in the statement.
And Enbridge has been on a charm offensive in the province for months, with full-page newspaper ads and radio ads extolling the benefits of the project and assuring B.C. residents they will employ world-leading safety measures.
The panel held final hearings earlier in Edmonton, Prince George and Prince Rupert, where company experts and interveners answered questions under oath.
Those hearings will resume in Prince Rupert next month, and the panel must submit its recommendations to the Environment Minister by the end of this year.Huffpost BC, Tuesday, Jan. 15, 2013Byline: Dene Moore, 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
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.
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.
When Peter Julian visited his in-laws in Shandong province in 2011, he was struck by skies which, depending on weather, either were grey, or grey and wet.
The New Democratic Party MP for Burnaby-New Westminster recalls, on sunny days, blue skies were absent with the sun appearing only faintly as a faint yellow blob behind thick haze.
As NDP energy and natural resources critic, Julian lately has been thinking a lot about greenhouse gas emissions.
He's a crusader against both the Northern Gateway pipeline and a tanker port on B.C.'s north coast.
Further, he and his party want the energy debate in this country shifted - away from how Canada can export oil-sands bitumen to China from a west coast port - to how this country can generate wealth by augmenting green energy investments and refining more of its petroleum.
Julian says the Harper government is too focused on maximizing profit from the oilsands, missing the boat on green job creation.
International tallies suggest he has a point. Conservatives have not enthusiastically embraced what many consider to be the next generation of jobs.
Those jobs include manufacturing, installing and operating renewable energy technologies like wind and solar power; running public transit systems; designing and constructing green buildings and retrofitting older structures.
Indeed, Conservatives in 2011 cancelled a popular eco-Energy Retrofit program that provided grants for making homes more energy efficient.
According to the Vienna-based International Energy Agency, the world relies on renewable sources for around 13 per cent of its total primary energy supply.
Canada's renewable energy sector generates 17 per cent of the country's primary energy supply, according to a federal website. But, of course, that figure is skewed upward by a domestic bounty of hydro power.
In a global list of top-10 renewable energy investors, Canada is absent, with China, the U.S. and Germany ranking as the world's green energy big shots.
The list was part of a European study that, even so, categorized Canada as "a significant investor," with $5 billion invested in 2011, ahead of Australia and New Zealand.
But in a report, titled Falling Behind, the Toronto-based Blue Green Canada environmental group reports, if Canada did no more than match U.S. per capita investment, "an additional $11 billion would have been earmarked by the Canadian government for clean energy."
The Alberta-based Pembina Institute says Canada's green entrepreneurs are being thwarted both by a lack of stable government policy and difficulty accessing cash.
While the renewable energy sector still has a fair share of detractors - folks turned off by giant wind turbines and companies that have gone belly up after gobbling government grants - Julian believes that renewables are an unstoppable and wholly viable trend for a world that badly needs to wean itself off fossil fuels.
The NDP, joined by Liberals and Greens, also wants more refining of oil within our borders.
The Alberta Federation of Labour asserts only half of bitumen harvested in the province is now being upgraded. In a report, titled The Bitumen Glut Has A Silver Lining, the federation argues, instead of exporting raw bitumen, it makes sense to capture greater value and jobs by refining and upgrading the product. A single upgrader, it says, employs 2,000 people.
Unquestionably, the oilsands are a giant asset for this country. They'll create 905,000 jobs across Canada by 2035, says the Canadian Association of Petroleum Producers.
But, as the push for a greener world grows ever more intense, Canadians will want their governments to get creative. China's polluted skies are a potent harbinger.
The Windsor Star, Thursday, Feb. 21, 2013Byline: Barbara Yaffe