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Canada Pension Plan Invests in Oilsands
Shaun Polczer of the Calgary Herald reports, Canada
Pension Plan invests in oilsands:
Taking a page from
the playbook of overseas investment funds, the managing arm of the
Canada Pension Plan (CPP) on Tuesday made its first foray into the
oilsands as a private equity investor by sinking $250-million into
Calgary-based Laricina Energy.
The privately-held company, which is
looking to establish its first commercial oilsands production later
this year, announced that the Canada Pension Plan Investment Board
(CPPIB) will acquire 17 per cent of the company ahead of an expected
initial public offering (IPO) in 2011.
“The CPP investment is a
very important endorsement for Laricina and we are excited CPPIB has
shown confidence in Laricina’s management team and development
strategy,” CEO Glen Schmidt said in a news release. “This is a strong
testament to Laricina’s growth potential and continued progress toward
building a leading in situ oilsands company.”
About 41 per cent of the fund’s $127.6 billion is invested in
emerging or foreign markets, with just 14.5 per cent in Canadian
equities, and marks the first homegrown entry into a sector that has
seen increasing interest from foreign -- and especially Chinese --
investors.
Also on Tuesday, privately held MEG Energy filed an
amended prospectus for an IPO that is expected to close at the end of
this month. Bloomberg, quoting unnamed sources familiar with MEG’s
pending IPO, said MEG is looking to raise $1.1 billion from the sale of
23 million shares at a price ranging from $42 to $48 a share, making
it the second-largest IPO this year after Athabasca Oil Sands Corp.
held one of the most successful IPOs in oilpatch history, raising $1.35
billion to develop a pair of projects in partnership with PetroChina.
In late 2009 PetroChina, one of the world’s
largest public companies, put $1.9 billion into Athabasca to form
joint ventures to develop a pair of oilsands leases. Last month, CPP
equivalent China Investment Corp. (CIC), the Chinese sovereign wealth
fund, made a $1.2-billion investment in Penn West Energy Trust to
accelerate development of its Peace River in situ oilsands holdings.
Like
Athabasca and Penn West, MEG has a significant Chinese ownership
presence. The China National Offshore Oil Company (CNOOC) bought 17 per
cent of the company’s shares in April of 2005 for $150 million, and
placed an additional $120 million in 2007, according to the English
translation of its website.Laricina is expected to follow suit
with an IPO of its own in 2011, Schmidt told the Herald in an interview
last month.
The company is currently
constructing the first pilot project to extract bitumen from the
Grosmont carbonate, which the Energy Resources Conservation Board (ERCB)
said in its annual report is the second-largest — and virtually
untapped — oilsands deposit in the province with 400 billion barrels of
potential resources.
But Karen Lillejord, Laricina’s
vice-president of finance, said the monies gained in the deal will
likely be allocated to the company’s 5,000 barrel per day Germain
project, which isn’t expected to come on stream until 2012.
In an
interview, she agreed that it’s unique to see a major investment by the
equivalent of a Canadian sovereign wealth fund in the oilsands
following the interest by foreigners, especially China.
“They’re
(CPPIB) certainly got good quality capital, we’re glad that it’s
Canadian. I think it’s a win for Canada too.”
Linda Sims, a CPPIB spokeswoman, said the fund owns shares of
oilsands companies through its public arm but this is the first
oilsands investment through its private investing division.
The
CPPIB was formed in 1997 and manages the CPP as a Crown corporation
with $127.6 billion under management. Like other pension funds such as
Ontario Teacher’s and the Alberta Investment Management Corp., it has
adopted an arm’s-length entrepreneurial investment style aimed at
growing the fund to $1.55 trillion by 2050.
Although it adheres to ethical investing criteria that promote
environmental, social and corporate governance standards, Sims said
there was no issue on any of those fronts with the Laricina deal even
though oilsands has been dubbed “dirty oil” by critics in Canada and
the U.S. On its website, Laricina says its thermal technology uses less
steam, energy and ultimately, fewer emissions than conventional
extraction techniques.
“We do take those objectives into
consideration when we do our due diligence and we’ve concluded this
company is very proactive in managing these issues,” she said.
Although
I'm not a big fan of oilsands - mostly because of environmental
reasons - I think this is a good time to be investing in long-term
energy projects. And if this company's thermal technology is
environmentally "cleaner" than other technologies, then all the better.
Still,
even the best technology means emissions. Interestingly, on the same
day CPPIB announced this deal, Dina O'Meara of
Calgary Herald reports, Prominent
U.S. congressman rejects expansion of oilsands pipeline to Gulf coast:
A
top U.S. politician has waded into the debate against a Canadian
pipeline expansion to take crude from Alberta's oilsands to southern
markets, calling the Keystone XL a "step in the wrong direction."
House
Energy and Commerce committee chairman Henry Waxman called on the U.S.
government to block the expansion of TransCanada Corp.'s proposed
pipeline expansion to the Gulf of Mexico.
The California Democrat joins a growing list of U.S.
representatives and environmentalists opposing the line which they say
promotes global warming and environmental degradation by supporting
oilsands operations.
The proposed $7 billion expansion would pump
510,000 barrels per day of crude from Alberta to U.S. refineries in
the Gulf of Mexico. It would be completed by 2013, and forms part of
TransCanada's Keystone line which began pumping to refineries in
Illinois last week.
"This pipeline is a multi-billion dollar
investment to expand our reliance on the dirtiest source of
transportation fuel currently available," stated Waxman in a letter to
the U.S. State Department. "I am concerned that the Keystone XL
pipeline would be a step in the wrong direction," he said about the
Obama administration's push on climate change.
Last week, 49 Democratic representatives sent a letter to
Secretary of State Hillary Clinton urging her to halt the Keystone XL
expansion on grounds the bitumen carried on the line represents damaged
environments in northern Alberta and higher carbon dioxide emissions
in North America.
In response to mounting pressure against the
oilsands, Alberta Premier Ed Stelmach ran a half-page ad in the
influential newspaper the Washington Post on Friday.
Stelmach outlined the importance of Canada's
secure oil supply, the jobs the industry represents in the U.S. on the
pipelines and refineries processing the resource, as well as
technologies being used to mitigate some of the environmental impacts.
He urged collaboration between the nations to develop a secure energy
future.
Canada is the largest exporter of oil to the United
States, followed by Mexico, Venezuela and Saudi Arabia.
Oilsands
are big politics up here in Canada. Mike De Souza of
Canwest News Service reports, Politicians
cancel oilsands pollution probe, tear up draft reports:
Federal
politicians from the government and opposition benches have
mysteriously cancelled an 18-month investigation into oilsands pollution
in water and opted to destroy draft copies of their final report,
Canwest News Service has learned.
The aborted investigation comes
as new questions are being raised about the Harper government's
decision to exempt a primary toxic pollutant found in oilsands tailings
ponds from a regulatory agenda.
The
government is in the process of categorizing industry-produced
substances that could either be toxic or harmful, but has excluded
naphthenic acid — a toxin from oilsands operations — from the list, and
left it off another list of substances that companies are required to
track and report.
The exclusion is "alarming" according to a
letter sent Tuesday to Environment Minister Jim Prentice and Health
Minister Leona Aglukkaq, since the federal and Alberta governments have
already identified it as a primary source of pollution in liquid waste
dumped into ponds after companies extract oil from the region.
"Naphthenic
acids are one of the main pollutants responsible for the toxicity of
tarsands tailings to aquatic organisms, and have been shown to harm
liver, heart and brain function in mammals," wrote Matt Price, the
policy director at Environmental Defence, an independent research
organization based in Toronto. "Naphthenic acids are also very
long-lived, taking decades to break down."
Price also said in the
letter that the federal and provincial governments are already
allowing some of the toxins to leak into groundwater and surface water.
"It
is therefore urgent that all tailings pollutants, and naphthenic acid
in particular, be properly assessed and managed to minimize the risk to
human and environmental health," he wrote.
Environment Canada
said that a variety of acids from the oilsands are on a medium
priorities list of its chemical-management plan, but have not yet been
assessed. A spokeswoman explained in an e-mail that the government
would also consider adding naphthenic acids to a list of substances
that companies would be required to report following further study.
The
petroleum sector is the only industry with its own stream of
substances to be evaluated under the government's plan.
Meantime, Price added that the United States
had moved forward with specific reporting requirements for the
substance, urging the Harper government to follow suit, especially
following the cancelled investigation in Parliament.
"The recent
decision of the federal environment committee to abandon its work on a
report regarding water and the oilsands industry heightens the need for
the federal government to properly deal with oilsands pollution, or
risk further undermining public trust in responsible oversight of the
industry," Price wrote.
The MPs made the decision to terminate
their investigation and destroy copies of their report in a meeting
behind closed doors on June 17, and they have all declined to provide
details on what happened apart from explaining that they failed to
reach a consensus.
Liberal MP Francis Scarpaleggia, who
spearheaded the parliamentary investigation on water pollution from the
oilsands, blamed the government for dragging its feet on regulating
the industry. He said he was working on his own report based on
evidence and testimony gathered during parliamentary hearings.
"I
. . . have no intention of letting go this subject that should be part
and parcel of the true national water strategy Canadians demand and
deserve," Scarpaleggia said. "The Conservative government has a lot of
answering to do for its persistent lack of leadership on water in
general and on oilsands and water in particular. The Conservative
government's record on water and oilsands has been one of constant
denial and foot-dragging."
Conservative MP James Bezan, who
chairs the House of Commons environment committee, said he was
disappointed that MPs were unable to agree on the final report, but
believes the investigation has still brought important information into
the public domain through the hearings and testimony from expert
witnesses that have resulted in several independent reports and
commentary.
"Over the next few weeks, I expect that you'll see
the opposition parties and the government responding with their own
considerations and recommendations on what we heard," Bezan said.
Environment Minister Jim Prentice has also
recently announced that his department was investing $1.6 million in
new technology to identify chemical fingerprints of toxins in the water
to determine whether they are originating from specific oilsands
operations.
And NDP environment critic Linda Duncan confirmed
that she plans to produce her own report based on the committee's
investigation. But she noted that some of the delays were caused by the
government's decision to shut down Parliament at the end of last year.
"I'm
very, very upset that it's dragged on this long," said Duncan. "It's
absolutely shameful that the federal government is sitting on its
hands."
In its investigation, MPs on the committee also travelled
to hear from witnesses in Calgary, Edmonton and Fort McMurray in
Alberta, but figures on their budget were not immediately available.
The politics of oilsands are very messy. I was
hoping to see more money go to developing new technologies to extract
oil in a much cleaner manner. I am a firm believer in clean technology,
but lots more needs to be done with oilsands.
CPPIB's first direct foray
into oilsands may yield impressive gains in the future, but the
environment remains a pressing concern, especially after the BP
disaster. Hopefully more companies like Laricina Energy will emerge,
addressing some of the environmental concerns attached to these
investments.
»
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Always with Canada, Leo! Don't you know there is a whole world outside of Canada?
If you did, you might opine on Diageo filling its pension gap with £430m or so of maturing whisky spirit, which is far more interesting than oil sands.
I would suggest that the CPP put more of their capital towards mini-nuclear, it's a cheaper and more environmentally friendly option with better and more stable long-term prospects. I see that they have some minor holdings in Toshiba, which probably has the leg up on getting this mass market (Hyperion wouldn't be a bad idea either). Increasing those holdings and holdings in Australian mining with uranium interests would be a safer and likely more profitable bet than oil sands.
http://www.aua.org.au/Content/AUAMemberCompanies.aspx
I am glad to see that Canada, at least, got something of measurable value for its pension fund investments; unlike CALPERS which wound up holding the bad on Stuy Town while Blackrock feasted on its Fed MBS contracts and Tishman-Speyer continued to borrow from the Fed.
Leo, I apologize if I missed it but what is the break-even price of a barrel of oil at which these deposits become economic?
My understanding it that it's about $50. But, for most of the oil sands companies, it's a calculus equation because the process requires copious quantities of steam produced by natural gas.
Total SA got smart and built a nuclear reactor on their Athabasca plot.
Actually, I think its more complicated as each individual operation has costs that may vary considerably. One example is an abundance of water, which is required in volume. If there is lots of cheap water, then maybe it is $50, but if water comes at some kind of cost then the price goes up. I also want to say there are several thousand patents that go into a tar sands operation. Much of the improvements in efficiency are tied to recycling stuff on site such that less external inputs are required (e.g. burning off by products for heat/energy or refining by products into a usable input on site). So the tech of the operation is also a big factor.
Regards,
Cooter
I am not in love with Tar Sands investments and will gladly sell them off if they are no longer viable as a fairly economical source of energy. For example, if Alaskan oil and natural gas production was expanded to include the gargantuan reserves located in the islands, I would be very open to re deploying capital.
Whilst mining oil sands produces toxic substances, I believe that they are no worse than what is produced by conventional means. The argument that the Oil Sands produce 'carbon pollution' ( what a stupid phrase) is invalid. The theory of Man-make global warming as touted by the philanderer and wanna be billionaire Al Bore, and his cast of shills has already been exposed for its fraudulent premises and junk science. Why, for example, are Greenpeace and WWF unusually quiet regarding the Gulf Oil Spill? Follow the money... to BP and GS!
If the USA does not wish to extract internal oil resources, then the Tar Sands represent their best hope for energy independence from unfriendly foreign nations.
"Still, even the best technology means emissions."
Leo, being a human means emissions.
I like to tell people that I think can-n-trade is a property tax on life. Most of the time they just look at me with those blank cow eyes.
Occassionally folks laugh.
Cooter
The US has also waved environmental and safety regs for the pipeline in the US. With Obama trying to keep the gulf shutdown from expansion, I can see why Canadians want to pump money into it. If Obama succeeds in keeping the gulf closed, he will have effectively propped up Canadian industry and pensions. All I can figure is he must owe some Canadian company (or the govt.) a favor. Again selling out American industry for a foreign one. I'm not a big fan of pointing political fingers...but this smells rigged to me (tinfoil hat is on this am).
http://www.nytimes.com/2010/05/19/business/energy-environment/19sands.ht...
Wow - 41% invested (gambled) in foreign and emerging markets while all of CPP liabilities are in Canadian Dollars. I was laughing when I saw the target of 1.5 Trillion by 2050 - who but a delusional idiot sets a target four decades into the future. CPPIB is an extremely well remunerated bunch of tourists (politicians and public servants love to travel).
I spent several years working the old communist countries back in the 70's - every big politico had his kids in the ministry that wrote the 10-year plan - the communists even knew that was a joke because some event in the next week would make the plan pointless.
There isn't a pension plan anywhere that has a lifetime return equal to a Certificate of Deposit -
Shale finds killed this sands business. Sands are just too costly to process. Bad choice Canada.
Thought Obama put the brakes on shale back in 2009?
http://online.wsj.com/article/SB123560039534376131.html
There really are no choices left:
Canadian oil sands are expected to become America's top source of imported oil this year, surpassing conventional Canadian oil imports and roughly equaling the combined imports from Saudi Arabia and Kuwait, according to IHS Cambridge Energy Research Associates, a consulting firm.
http://query.nytimes.com/gst/fullpage.html?res=9400E7DA103EF93AA25756C0A...
Although "I'm not a big fan of oilsands - mostly because of environmental reasons"
Ha! This is the quote of the decade. As if offshore oil is any cleaner:) I do agree with you that cleaner tech is always welcome. I have always thought they should build nuclear reactors to generate the necessary steam rather than use natural gas (although the water thing comes into play again). Anything oil is a wise investment at this stage as so much oil production capacity is offline with the gulf moratorium. I would watch for more downside action in the price of oil in the next few weeks as commodities are under pressure. There will be some great entry points in many oil companies coming soon (many pay great dividends). With the constant threat of war in the middle east, oil prices have great upside potential.
"I would watch for more downside action in the price of oil in the next few weeks as commodities are under pressure. There will be some great entry points in many oil companies coming soon (many pay great dividends)."
Agreed, like XOM, but momentum is still bearish.
If you look at the integrated majors, though, they aren't replenishing their reserves. They've spent decades drilling on Wall Street instead.
If I had to own one, it'd be COP with its share of Jack/Jack II.
Longer term, however, the fundamentals look good. If you truly believe the economy is recovering, then demand for oil will increase.
At what price per barrel of oil is tarsand "marketable" and how many barrels of water does it take to harvest a barrel of oil from tarsand? Nobody is telling where the "water" is going to come from and where the waste-sludge is going. Water availablity may be a very limiting factor in this region.
If this stuff really was viable, it would have been tapped by now, so hear, hear, to dcb on calling this a market top indicator.
If you care to learn about the subject, there many posts in this archive that explain various aspects of tar sands production. Just page back a bit through the series a bit and you will have plenty of interesting reading.
http://www.theoildrum.com/tag/tech_talk
Regards,
Cooter
This piece speaks to some of the issues you raise.
http://www.cos-trust.com/operations/Sustainability/default.aspx
Including capital costs, $50-55 per barrel is breakeven. Older projects it is less. There is a 30 year trend of rising production here, which is now huge, so it is viable.
How many barrels of water does it take to harvest a barrel of oil in the GOM? The tarsand stuff is really viable and has been harvested for decades. A good proportion of the gas in your tank is likely from Alberta.
1) I think a good way to confirm a market top is to look at pension funds. Once more confirmation along with that calpers purchase
2) no surprise in this article Leo. it is all about the oil lobby money. not about ultimate cost.
One thing the article points out are environmental concerns of the tar sands. You thing BP mess in the Gulf is bad? It pales in comparison to tar sand oil. Basically, tar sand oil digs up virgin soil killing all vegetation leaving it desolate of top soil. Destruction below event the top soil making the land useless.
It is time we find a replacement for oil. It is going to take real amounts of R&D money. If not, this kind of destruction is going to continue unabated.
Vampyr...
Your assinine and dimwitted remarks are obviously nothing more than a regurgitation of the Greenpeace propaganda you have been subjected to without checking the facts on your own. I live and work in the Oilsands, and can tell you from firsthand experience that the oil companies don't just dig a goddamn hole in the ground and leave it as that. The old mines are reclaimed and restored back to their original condition after the oil has been removed from the sand. Oh, and this topsoil you speak of, the entire northwest corner of Alberta is muskeg which is a Cree word for low lying marsh...as in the whole goddamn place is a swamp (lots of topsoil in swamps LMAO).
This bashing of "dirty oil" is really hilarious because I wasn't aware that there were any clean sources of petroleum out there. It's a dirty business that has allowed all of mankind to enjoy (at least in the western world) the high standard of living we've become accustomed to. Do some homework before you say such ridiculous things as: "You think BP mess in the Gulf is bad? It pales in comparison to oil sands." If there was not a market for this product, it would not have been mined for the last 3 or 4 decades in escalating quantities.
Excuse my grammar error in the original post. First of all, I am not an environmentalist by any means. Second, I live in Texas among oil people and have many friends from Louisiana whose livelihoods are gone. Most likely forever. The crap starting to wash up on our Texas beaches soon to be ruined. Do most of you care? Probably not, since you can't even point out Texas on a map.
It is OK to trash other people's natural landscape as long as you don't see it. I guess Canada's pristine forest is next. Maybe they will start drilling for oil in your local park?
The point I am making is it is coming to a nice place near you. Yes, you, you and you motherf*&ker.
Claiming the damage caused by mining tar sands exceeds the Gulf Horror Story is absurd. Millions of fish and animals are not dying because of the mining of tar sands. The eco systems are not comparable. Hundreds of thousands of people are not being exposed to toxic chemicals resulting from tar sands production. You are entitled to be stupid and lose your money, but not to your facts. I suggest you visit the tar sands and then visit the gulf before making such asinine comments. On the other hand, dummies like you make it easier for me to make money, so perhaps I am being too harsh.
Many, many scientists and organizations have been searching for an oil replacement with very limited success. Do you not think that the US Military, the largest consumer of gasoline and diesel in the world, is not actively searching for oil substitutes? Why the hell are they in Iraq, anyways? Who are you going to tax, and whose money are you going to take to fund the R&D? Do you think that 1.5 billion plus people living on this planet earning les than $2 per day can afford to pay higher prices for food (yes, it takes energy to produce food)? And even if such technology emerged, do you believe that it will made available to the masses?
Obvious answer is sun
Sun is THE free source of energy for next few billion years
But present technology is not good enough to replace the oil economy
let us hope some brainiac out there finds a new way pretty soon
Incertain areas this is a viable option...but not all. Additionally, and more key, our electrical storage technology is pitiful....this is the real hurdle we need to overcome first.
you get junked for this
Other people have pointed out how dimwitted you are so I will just point out that other people are pointing out how dimwitted you are as there is no need for me to also point out your dimwittedness.
Hey Leo
What's your take on ENER
why didn't an American company get money from Obama's Solar Fund?
strange
Wow, ENER is hitting 52-week lows...looks UGLY:
hahaha , what's there to Junk that?
I agree ENER is junk but what's leo gotta do with that?
Chill guys
There's a few Leo haters due to his somewhat less than rational advocacy for chinese solar companies. Junking him for posting a chart and calling it what it is doesn't make a whole lot of sense.
Natural Gas.... Bitches