As 2012 came to a close and 2013 was heralded in with the usual festivities, analysts looked into their crystal ball to see what might be in store for the energy sector in 2013. Whether or not you buy in to the superstition of “unlucky 13,” there is consensus that for Canada’s oil sands industry, 2013 will shape up to be a pivotally important year. Here’s why:
Canadian Oil Has Been Selling at a Growing Discount
Alberta oil sands crude has been selling at a whopping $55 discount to the Brent crude price, costing Canada as much as $2.5 billion a month, according to Charles St-Arnaud, an economist with Nomura Securities International. Limited markets due to lack of infrastructure are partially to blame. Canadian politicians are “deferential to the differential” as Calgary columnist Stephen Ewart puts it, and 2013 will see Canada considering all options to get oil sands crude to U.S. and other international markets. Not willing to close any doors, potential projects include two proposed pipelines to British Columbia’s West Coast, the Keystone XL pipeline to the United States, and reversal of pipelines to bring Alberta’s crude to Eastern Canada. 2013 will be an important year for the approval of these critical energy infrastructure projects.
Job Creation in Both Canada and the United States
With an expansion of Canadian oil sands projects, finding qualified oil patch workers is a challenge. The Canadian Petroleum Human Resources Council warns of severe labor shortages to come as new oil sands projects get underway in the next three years. In fact, companies may leave over 35 percent of these oil sands jobs unfilled due to a lack of qualified workers. Canada is looking to the United States to help fill those jobs. VetJobs, an internet job board geared toward American veterans, has partnered with Edmonton Economic Development to connect vets with oil sands employers. VetJobs CEO, Ted Daywalt, describes the opportunity as, “an ideal situation for veterans.” The work permit process is fast, the cultures are similar and the wages are high. Because the economies of Canada and the United States are so interconnected, for every two jobs created in Canada’s oil sands, one job is created in the United States according to the Canadian Energy Research Institute. We can expect more innovative programs like this in 2013 to address worker shortages.
Foreign Investment May Slow, but not Stall
Producing Canada’s oil sands requires vast amount of investment capital, which comes from both within Canada and internationally. The United States has long invested in Canada’s oil sands with companies like ExxonMobil (Imperial Oil) and Chevron forming Canadian subsidiaries to explore and produce oil in Canada. 2012 marked a new era with two foreign state-owned oil companies, Petronas and CNOOC, purchasing Canadian oil and gas companies outright. While the Canadian government stated that similar future acquisitions of Canadian oil sands companies would only be approved on an “exceptional basis,” minority participation and joint ventures are still welcome. As Asian states look to acquire strategic energy assets and technology know-how, 2013 could see numerous joint venture announcements from Asian state-owned companies in Canada’s oil sands.
While 2012 was rife with election coverage and promises, 2013 looks to be a highly charged year in its own right. In the case of Canada’s oil sands, a final decision on the Keystone XL pipeline will bring a vast and secure supply of Canadian oil to technologically advanced refineries in the US Gulf Coast , bringing with it financial benefits on both sides of the border. While this precedent setting approval process may become the new standard for infrastructure approvals, let’s hope it also paves the way for increased energy and economic security, further strengthening the world’s top trading partnership between Canada and the United States.