Maybe foreign state-owned oil companies aren't a threat to the security of Canada's energy sector. Maybe they're the solution to the sector's security.
Stéfane Marion, chief economist and chief strategist at National Bank Financial in Montreal, published a research note Monday arguing that while Asian-based state oil companies are showing growing interest in Canadian natural gas (a prime example being the now near-dead bid from Malaysia's Petronas for Progress Energy Resources Corp.), the prime market for Canadian natural gas is disappearing.
As a result of the boom in U.S. shale gas production, the United States is fast approaching the point where it is producing more gas than it can consume. The U.S. Department of Energy predicts that the United States will be a net exporter of natural gas by 2022.
If the prediction proves accurate, that means that a decade from now, Canada's biggest customer for natural gas not only might not have much need for supplies from north of its border, but could well be competing aggressively with Canada for foreign sales, through liquefied natural gas – the burgeoning yet infrastucture-intensive solution for moving natural gas to overseas markets.
"At the end of the day, Canada must absolutely find new markets for its energy, and Asia remains the prime destination for our products," Mr. Marion wrote.
Many critics view the arrival of state-owned energy companies from the likes of China, Malaysia and India – with their desire, implied if not always clear, to direct Canadian oil and gas to energy-thirsty emerging Asia – as a sinister plan to swipe Canada's resources out from under us. It's a simplistic and wrongheaded view. In fact, the Canadian energy sector is going to need the financial heft of those state-owned entities if it wants to tap into new customers.
"It is … in our country's interest to quickly build the proper infrastructure that will give us access to new markets. Given the costs involved and the time required to develop such infrastructure, we think that patient investors with deep pockets should continue to be welcomed," he said.
David Parkinson