China Dives into Oil Sands as U. S. Balks

To lift a quip from Prime Minister Stephen Harper's Arctic sovereignty policy and apply it to the American view of Alberta's oil sands: Use it or lose it.

The Chinese government pushed its shovel deep into Canada's energy motherlode yesterday when it announced a $2-billion stake in a five-billion-barrel reserve of "dirty oil" that Americans increasingly find unworthy of fuelling their vehicles.

The 60% claim by Petro-China in two projects owned by Athabasca Oil Sands Corp., while small compared to the great gobs of capital pouring into oil sands expansion and extraction, are the global giant's largest investment in Canadian energy yet.

And China usually buys into products it aims to consume.

Sources in Washington predict politicians there will not be pleased at having a massive supply of secure energy on their northern doorstep slipping under Chinese ownership.

Well, too bad.

Under the greenish Obama administration, "oil sands" is becoming a dirty word as Americans take on the delusional swagger that they can be picky about which oil is good enough to buy in a recession when supply is temporarily ahead of demand.

Canadian oil sands exports are increasingly encountering U. S. political resistance at federal, state and municipal levels as low-carbon fuel standards move through the legislative process to erect barricades against an energy source with an extraction problem.

But it is delusional because there is no post-refining difference between conventional and non-conventional oil and banning it in one state or city merely moves it to another, with no corresponding reduction in carbon emissions.

Yet the difference between the American and Chinese views of oil sand imports suggests that Canada is nearing a moment of decision.

It can be forever held captive to the whims of U. S. refineries, which import 60% of oil sand production or about 780,000 barrels a day. Or it can create a battle of demand between the two energy-consuming superpowers that will soon find there is not enough oil to satisfy their combined thirsts.

That will require Canada, whose pipelines now head only north and south, to punch a hole in the Rockies and open up a crude flow to the West Coast, from where oil could head overseas.

Environment Minister Jim Prentice is no fan of a single-buyer market for exported bitumen, which actually sells at a discount in the U. S. compared with Middle East oil despite coming from a friendly neighbour. He'd like competition injected into the system.

"Doesn't it help Canada's exporters to have alternative market choices?" he noted in a recent interview.

"We need transportation mechanisms to ship it to the West Coast. Refineries in the U. S. have limited capacity and we don't have anywhere else to sell it. Having the capacity to ship it to the West Coast would keep everybody honest, so I think it's good policy."

That's so obvious as to be rhetorical, but the cost and complications of a new westbound pipeline may be prohibitive for the private sector to go it alone.

The proposed Enbridge Inc. Northern Gateway pipeline, which has been on ice for several years, is being thawed for reconsideration.

That's at least five years off and the project faces numerous environmental, aboriginal land claim and geographical hurdles, which is probably why they weren't talking about it yesterday --although they weren't ruling it out in the longer term either.

But to understand China's strategic investment interest, keep in mind that 2009 will likely go down as the first year when car sales in the Communist country beat the United States, making it the world's largest car-buying nation.

At the risk of stating the obvious, cars consume gasoline, gasoline comes from oil and the world's largest deposits of oil, albeit locked in tar, straddle northern Alberta and Saskatchewan.

If America doesn't want to use it on environmental grounds, they're only one pipeline away from losing it to someone else.