The Oilsands City goes Global: The impact of this development will be world-class

By Carol Christian - Sunday, June 3 2012

The new Fort McMurray Airport is on course to open in April 2014, if not sooner, with International Airport status and Customs. In 2011, nearly 764,000 passengers moved through a terminal designed for 250,000 and, by adopting the ‘medium’ projected growth for the region, by 2030, it will move 1.2 million passengers to and from Fort McMurray and destinations around the world. Today, there are 920 major projects valued at $209 billion in Alberta. Of that total, 61 per cent, or $128 billion, reside within the Regional Municipality of Wood Buffalo and, of that total, 91 per cent, or $117 billion, is related to oil and gas projects.1

The economics of the oilsands are astounding. It’s projected that $2,077 billion will be invested between 2010 and 2035, with the impact on Canada’s Gross Domestic Product estimated to be $2,106 billion and $1,989 billion for Alberta.2 No one can deny the promise that Alberta holds as a world supplier of crude oil, and when that happens, the Oilsands City will be ready and open for business of global dimensions.

On the heels of the Keystone pipeline rejection in late 2011 and concerns about the impending but distant Gateway decision, industry and government are looking at global diversification; a big, bold change in direction from its current reliance on a single market, the United States, for nearly 90 per cent of its exports.

In keeping with this bold outreach, Fort McMurray hosted the first Leading the North conference in early 2012, providing an inclusive platform for debate, discussion and collaboration on global diversification and the sustainability of market expansion.

Experts from environmental sciences, finance, government, First Nations and industry gathered with a wide field of stakeholders for three days of shared and contrasting expertise and viewpoints. Their conversations were timely. Along with the Pacific Rim being eyed as the logical new market for the  Oilsands, there is also a push to export domestically to the Atlantic Provinces, which are currently relying on foreign sources for 80 per cent of its oil. The need for market diversification was hotly debated during the panel discussion Diversifying Canada’s Energy Market - Pipelines, the Pacific Rim and the Future of the Energy Industry.

The panellists were: Michael Byers, Canada Research Chair in Politics at the University of British Columbia; Todd Hirsch, senior economist at the Alberta Treasury Branch; and Gordon Houlden, director of the China Institute at the University of Alberta.

The message emerging from the debate was the world is going to use Alberta oil one way or another. Who knows whether Enbridge’s Northern Gateway will be built, opined Byers, adding that the pipeline is premised on a substantial expansion of bitumen production. He even went so far as to advocate for a little cooling down of  Oilsands expansion.

According to Houlden, no matter who gets Alberta’s oil or how it gets there, “we need to strike out…I’m very uncomfortable without the idea that we can somehow build alternative markets.” But what makes getting that oil to market problematic is the fact Alberta is one of only two Canadian provinces that are landlocked. The other is Saskatchewan. This makes the issue of getting to the West Coast particularly significant.

Byers said it’s important to think about diversification not as one country versus another country, U.S. versus China, but diversification that includes, for instance, Atlantic Canada. Turning further afield, Byers recognized that Europe isn’t necessarily a market for  Oilsands crude since any oil it uses comes from other sources such as the Middle East.

That sentiment was echoed by Houlden, who pointed to a recent report the China Institute supplied to Alberta Energy. The report stated that the Chinese market is growing so quickly Europe is and will be a much smaller energy partner than Asia. Obviously, the more diverse the markets, the better it will be for Albertans and for Canada, offered Hirsch.

“It’s never great to be hostage to just one customer and that is a little bit of the situation we’re in here,” said Hirsch. “Doing business with the United States is easy, but now if we’re dealing with China, India, Brazil and other emerging economies, there’s more work involved and in the case of Alberta’s  Oilsands and bitumen, there’s more work involved in getting the product to market in the first place. It’s not as straight forward as what we’ve been used to in the past.”

“Diversifying the market is extremely important, which is not to knock the role of the U.S. as an export market, Houlden continued. “It will always be No. 1 for geographic proximity and its market richness,” he said. “It’s a little bit like only having one stock in your portfolio; you live or die by that stock. You’re going to get extreme volatility.

“Simply having other options, and this doesn’t have to mean just China, it means Asia, where the global economy is growing fastest.” Predicting that Asia is becoming the centre of gravity of the global economy, he said that if Alberta can play a part in the energy equation, it also achieves stability and it’s very lucrative because, currently, Alberta’s oil is sold at a discount in the U.S. market. When Alberta’s oil reaches those diverse markets, it will fetch a global price.

And the impact of this development on the Oilsands city, and the region’s future sustainability and ranking, will be world-class.

 

1 Inventory of Major Alberta Projects, Dec., 2011, Government of Alberta

2 Economic Impacts of Oilsands Projects (2010-2035) May, 2011 Canadian Energy Research Institute

 

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