Recently an article in Report on Business fingered the Canadian propensity to study resource projects to death, while our competitors around the world get on with them. Result, the Australians, Americans and even the Gulf States capture markets that could have been ours, and we are left virtuously sucking our thumbs.
The article cited a Shell executive who spoke of prospects for the vast shale plays in northeastern British Columbia. We need an expanded customer base to properly develop that resource. Soon the Americans aren’t going to need our natural gas any more, as their own shale production ramps up. Our market increasingly will be in Asia.
It is not just sales, but dollars that are in play. A thousand cubic feet of gas goes for around $4 in North America against $14 in Asia. But to get that premium, we have to build export facilities – pipelines and terminals.
The same argument applies to oil, though in a different way. The Americans would take all the oil we can foreseeably produce – but on their terms. Their own terms means lower-than-world prices, and an ability to backload carbon pricing onto us rather than the U.S. consumer.
On price, multiply two million barrels per day by the up-to-$20 differential between American and world prices and you’re talking billions. On carbon, hypocritical California regulations already give a free pass to their own (very dirty) heavy oil and put a large burden on Canadian producers. Until we can access world markets we can’t fight this.
We have enormous resource extraction possibilities that could pay for health care and pensions for decades. Alas, standing in the way is one very large problem, namely our sclerotic project approval process for the necessary pipelines and ocean terminals.
It is important to understand the “first mover” advantage in world markets. The nation that gets there first can lock up customers with long-term contracts that freeze us out. Once our competitors have built their basic infrastructure, their expansion plans will usually be cheaper, leaving us playing catch-up.
Catch-up may never come. The iconic Canadian example of lost opportunity is the Mackenzie Valley Pipeline. Forty years ago, this huge project was all financed, ready to go. It was shot down by a combination of environmental and native objections. New proponents brought native people on side, but then gas prices collapsed (shale production, again) and the MVP was back in never land.
We are figuratively back in the Mackenzie Valley on the much larger possible oil and gas sales to Asia. Canadian entrepreneurs have been doing their job. The Apache gas pipeline and Kitimat LNG terminal plan is well advanced. However the horizon is 2015 given various permitting requirements. But the Australians already have two huge LNG facilities up and running and more under construction. Will we be left at the altar again?
The situation is ever more stark on oil. The proposed $5.5-billion Enbridge pipeline (also to Kitimat) is floundering in controversy and delays. The issues are oil tanker traffic and native land claims along the pipeline route.
We have to find ways of cutting through these regulatory knots. We need enforceable timelines on environmental reviews. Some environmentalists vaunt the so-called “precautionary principle.” Their interpretation is that if we don’t know everything, we shouldn’t do anything. That doesn’t make sense. The world is about risk analysis and management, otherwise stay in bed all day.
The native claims question is tougher. Our disgraceful history on the treatment of aboriginals is nowhere worse than in B.C. where these enormous projects are proposed. The law might, in extremis, permit running roughshod over native objections, but as of now, public opinion would not.
Governments simply have to get serious about engaging on this problem. Their irresponsible attitude to date of offloading the resolution of native issues onto project proponents is just not good enough.Only the Crown can deal with that. B.C. treaty talks have been going on for a generation with little to show. We badly need native co-operation now, if only for crass economic reasons. It is time to be seeking a grand (and generous) bargain.