Guest Post: A Run for the Canadian Border
The Gulf of Mexico disaster has changed U.S. priorities, costs, and
energy supply sources for years to come. But the fact that the U.S.
needs energy isn’t changing anytime soon, and as mass sources of green
energy are still a while away, the most likely alternative might be the
most surprising one.
With US$15 billion invested annually in offshore drilling in the United
States, the disaster in the Gulf of Mexico means that this money is
getting ready to migrate elsewhere. And it is the Athabasca oil sands
of Alberta, Canada, that are number one on the list.
Given the amount of bad press the oil sands get, this could come as a
shocker. But technological advances and improvements in recovery
methods, as well as reduction of water usage and greenhouse gas
emissions, have made oil sands a viable and popular option for the
future of U.S. energy.
The numbers, too, are looking in their favor. Out of the 1.34 trillion
barrels that is the world’s total proved oil reserves (2009), only
about 20% (270 billion barrels) of this number is actually available to
free-flowing capital investment – the vast majority is in the tight
grip of various national oil companies.
And a good chunk of these “free-market” barrels, about 178 billion, is
sitting underneath the feet of Canadians, or as some call them, the
Crazy Canucks. For a country that runs on oil, the United States
couldn’t have been presented with a better lifesaver. Compared to
alternatives such as Chavez’s Venezuela or the oil fields of the Middle
East, reliable oil from politically stable and friendly Canada is by
far the easier pill to swallow.
As it is, roughly one in every six barrels of oil consumed by a U.S.
citizen today comes from the Canadian oil sands. The fact that
infrastructure is already in place for oil sands development and oil
already flows through pipelines between the two countries only sweetens
So, we wouldn’t be taking a huge step in assuming that any future
capital spending that will be diverted away from the Gulf of Mexico
will find it hard to bypass Canada. In addition, as global oil supply
is affected by the drilling restrictions, in the long term we’ll be
seeing higher oil prices. While this news might not make the drivers
amongst us happy, it couldn’t get better for Alberta and the energy
companies operating in the oil sands. With oil prices hovering over
US$70 a barrel, the stream of investment dollars into the oil sands is
Submitted by Marin Katusa, Chief Energy Strategist, Casey Research
A Run for the Canadian Border
Obama’s first-ever Oval Office address has confirmed our expectations
of no more growth in the American offshore drilling industry anytime
soon. But the Gulf accounted for a large chunk of U.S. oil production
(25-30%) and consumption (9% – the entire consumption of France), and
that shortfall must be met.
While renewable energy is where the future of U.S. energy lies,
according to Obama, it is still some time before green energy producers
will be able to meet the full demands of the nation. In the meantime,
authorities have also realized the importance of Canada for U.S. energy
and are enticing companies with new pipelines. Plans on expanding the
Keystone Pipeline, linking up Texas and Oklahoma to 500,000 Canadian
barrels a day, have already been drawn up and put into motion.
The turmoil in the U.S. energy market has created a number of
opportunities, both in the short and long term. For now, investment
into the Canadian oil sands is about to increase dramatically, and
things are moving rapidly. We’ve uncovered the lowest-cost producer
with significant upside production, and they’re the one on the list as a
takeout target by Big Oil.