The Chinese government, through a corporate front called Sinopec, has announced plans to invest another $4.5-billion in Canada’s oil sands. China’s going to buy ConocoPhillips’ 9% stake in the giant Syncrude project.
The Sinopec deal brings to $10-billion the Chinese investment in the oil sands in recent years. Is it a hostile takeover?
No, for several reasons.
First, 100% of Canada’s oil exports go to the U.S. — that’s the only place the pipelines lead. China isn’t buying oil sands companies for the oil. It’s buying them as a place to put its money in long-term, strategic investments, as it backs away slowly from increasingly wobbly U.S. treasury bills. China’s not buying our oil; it’s buying the reliable flow of Canadian corporate profits and our stable economic outlook.
Is it a national security risk to Canada?
No, again. It is true that, according to CSIS, the Chinese government represents the largest espionage threat to Canada, stealing the equivalent of $1-billion a month from our country in industrial secrets. (That’s more than our annual exports to China.)
But that espionage is done illegally by Chinese students, expats and other sympathizers, not through the legal ownership of share certificates. No doubt our high-tech energy secrets are being stolen and will continue to be stolen, but that is not happening because of a Wall Street deal. The central strategic value of the oil sands is not at risk.
And there is little room for corporate mischief, even if that were the Chinese strategy. For one thing, all of the Chinese ownership so far is fractional, with other shareholders involved in each of the companies. Canadian business law protects the fiduciary interests of those other shareholders. The Chinese, even if they had a majority stake in any company, couldn’t operate in any manner other than to maximize profits — which means operating normally and exporting oil to the U.S.
So a Chinese shutdown of the oil sands is not a legal possibility. Even if China were to buy, outright, a large number of oil sands companies, and in a moment of crisis took some concerted action against Canada’s national interests, the companies could simply be expropriated. Even American customers are protected, through our free trade agreement that ensures the U.S. has market access to Canadian oil.
So there’s no risk of China simply taking our oil, or stopping us from selling it to anyone else. But that raises the question: If countries like China can’t buy our oil now, is it in our interest to be able to sell it to them?
The answer is yes.
It’s an economic blessing living next to the world’s greatest economy. And it was investors from Texas, Oklahoma and Kansas, not from Ontario or Quebec, who first took a chance on Alberta’s oil patch. After nearly a century working together, the cross-border cultural and economic ties are strong. The fact that both president George W. Bush and vice president Dick Cheney were oilmen only made the relationship closer.
But President Barack Obama is a community organizer from Chicago, as culturally distant from the oil patch as possible. And Obama has said that, after health care reform, his carbon tax proposal (called “cap and trade”) is his highest priority.
In 2004, oil sands production vaulted Canada ahead of the Saudis to become the largest source of U.S. oil imports, so he’s talking about us. All of a sudden having the U.S. as our sole customer for oil exports is a lot less reassuring. Canada’s Conservative government has admitted the obvious: We will have to follow the U.S. lead on a continent-wide energy policy, which means we might yet see Stéphane Dion’s disastrous Green Shift enacted.
Which brings us back to China — and Japan and Korea, which also have oil sands stakes, and India, which has announced it’s in the market to buy oil sands too.
Those four countries together import more oil than the U.S. does. So at what point does it make sense to build a pipeline from Fort McMurray to the West Coast, and offer our bounty to Asia, too?
Pipeline operator Enbridge thinks the time is now. They’ve proposed a 525,000 barrel per day pipeline from Bruderheim, just northeast of Edmonton, to Kitimat, on British Columbia’s northern coast. The project, dubbed Northern Gateway, would be almost completely buried underground, minimizing its environmental impact.
Needless to say, it is being opposed by the usual environmental groups, a handful of aboriginal bands and Kitimat’s NDP MP, Nathan Cullen. But the pipeline itself would create 4,000 construction jobs, and hundreds more on a permanent basis. Like the oil sands itself, its employment would disproportionately favour aboriginal bands — not to mention Kitimat itself, reeling from the recent closure of a major pulp mill. And then there’s the value of the oil: Even if prices stayed at the current $85 a barrel, the pipeline would ship $16-billion a year.
If the Northern Gateway receives regulatory approval, it wouldn’t be operating until 2018 — likely too late to save Canada’s oil patch from any U.S. carbon taxes. But the mere prospect that the U.S. would have to compete for Canadian oil would be salutary in itself — and it might make Congress think twice before designing taxation policies to apply to Canadian industry.
Few international relationships in history have been as close as that of Canada and the United States. At first glance, shipping oil to Asia might seem like an anti-American slight. But if opening up a small pipeline to Asia causes Washington to rethink its plans to foist another National Energy Policy on us, it’s actually the best guarantor of a healthy Canada-U.S. relationship for decades to come.
National Post
Ezra Levant is the author of Ethical Oil: The case for Canada’s oil sands, to be published this summer by McClelland & Stewart.
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