The Keystone pipeline delay shows Canada must diversify energy markets beyond the U.S., says Jim Prentice, P.C., Q.C., CIBC Vice Chairman

NorthWest Upgrader project a key to diversifying Alberta's energy infrastructure

EDMONTON, Nov. 21, 2011 /CNW/ - The recent delay in the Keystone pipeline underlines the need for Canada to open up new markets beyond the U.S. for its energy production, the Hon. Jim Prentice, P.C., Q.C., CIBC Senior Executive Vice-President and Vice Chairman, said today.

"The Keystone decision is troubling," Mr. Prentice told the Edmonton Chamber of Commerce. "In my judgement, the decision is a mistake even from the perspective of the United States, which has long had a policy objective of diversified and dependable sources of oil supply. It is, however, a mistake which is theirs to make.

"From our perspective, as a country that prided itself on being dependable, the whole sad Keystone experience has had a transformative effect on Canadian energy policy. Today, no one seriously advocates that Canada should be dependent on a single continental buyer for its oil."

Mr. Prentice pointed out that Canada exported $50 billion worth of crude oil and $91 billion in energy as a whole last year. But he added that both crude oil and natural gas are selling at a discount to international prices because Canada essentially has only one export customer.

This comes as the global market for energy continues to grow.  The U.S. Energy Agency has projected a 50 per cent rise in consumption of marketed energy between now and 2035 - with greatest increases coming from non-OECD economies.

"Canada will never get full value from its oil and gas resources until we have expanded pipeline capacity to the west coast, until our markets are broadened and our commercial influence expanded," he said. "Having one customer just doesn't cut it anymore. Unless we diversify our energy markets, we will remain a price-taker, and the dream of becoming an energy superpower will remain just that - a dream."

While the Keystone delay reinforces the need to diversify markets, it also reflects a need to diversify Alberta's energy infrastructure. Mr. Prentice believes the $15 billion NorthWest Upgrader project is a critical step in the maturing of the province's oil sands industry.

"When all three construction phases are completed, the upgrader will refine about 150,000 barrels of bitumen a day, adding significant value to the product before it leaves the province. Half the output from the upgrader will be ultra-low sulphur diesel fuel, helping to green up the operations of customers in agriculture, transportation and other industries. The upgrading process itself will be a world first - the first to combine gasification technology with CCS technology to capture 1.2 million tonnes of CO2 per project phase, or the equivalent of taking 900,000 cars off the roads.

"This megaproject adds economic value to one of our most important resources and is a milestone on the road to becoming a clean energy superpower."

To be a clean energy superpower he believes Canada must develop the necessary data to prove that it is a leader in addressing the environmental challenges posed by the oil sands. "Neither industry nor the governments of Canada or Alberta can defend themselves in the absence of credible, science-based data that substantiates the fact that we are protecting the environment," said Mr. Prentice."

He noted that historically this data has not been available, which is why both governments and the industry itself are advocating more robust monitoring systems for the oil sands. "This will allow the industry to get out in front of its critics by setting tougher targets and benchmarks with respect to impacts on water, air and land and by making the investments to meet those targets and by having the data to prove success."

Mr. Prentice said that future investment in Canada's energy infrastructure represents a tremendous opportunity to create jobs and long-term wealth noting that a report released just days ago by CIBC's Institutional Equity Research team concluded that Canada is in the midst of an infrastructure "super-cycle". In the energy sector alone, the report listed twenty-eight current and proposed projects in Canada, with a total investment of close to $75 billion.

"The opportunity represented by planned energy projects is unprecedented in the world today. When you tally up the capital investment in oil sands and pipelines, power generation and electricity transmission and distribution, the grand total is more than one million new jobs over 20 years."

A copy of Mr. Prentice's full speech is available here.

PDF with caption: "PrenticeEdmontoneng.pdf". PDF available at: http://stream1.newswire.ca/media/2011/11/21/20111121_C7881_DOC_EN_7008.pdf

SOURCE CIBC

For further information:

Rob McLeod, CIBC, (416) 980-3714 or rob.mcleod@cibc.com; Kevin Dove at (416) 980-8835 or Kevin.dove@cibc.com


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