Canadian Atlantic: The Next Big Oil Play?

next big oil playWill the Canadian Atlantic be the Next Big Oil Play?

Recently held in Calgary, the Global Petroleum Show showcased developments in the field to over 63,000 representatives from more than 100 countries. At the top of the list of items discussed were the waters off the Atlantic coast of Canada, which are still considered by many to be frontier territory.

Numerous strikes of oil have occurred in recent years, producing hundreds of millions of oil barrels for consumers. And there are many more potential prospects in the area proposed to launch new drilling programs for the third quarter of 2014. With the sudden surge of interest in the Atlantic waters from these new strikes, there is plenty of potential for companies to move in and develop the coast into the next huge oil boom.

Competing with Western Canada

While current figures comparing the oil production per day show that Western Canada completely dwarfs the production of Atlantic Canada (some 2.6 million barrels per day compared to approx. 235,000), the number of Atlantic prospects is climbing.

With a potential of 1.5 billion barrels projected to be pumped from the Atlantic Coast, many oil companies have been investing huge money in new technologies. In fact, so many potential drill sites have been documented, that many firms are beginning to develop new platforms that can handle the rough Atlantic waters with a focus on dodging icebergs and drilling to depths of nearly 4,000 meters.

Transforming the Atlantic Coast

There are complex plans that will shape the face of the Atlantic coast in the near future. Oil, and even mining companies, have proposed or are already building a new array of projects to harvest the abundant prospects on the coast. A slew of new mines, gas export terminals, hydro projects, pipelines, and offshore oil rigs will soon exist on the coast as companies seek to maximize the new wells.

While some may think companies are only in it for the oil, these developments will create thousands of jobs and in some cases provide new clean energy solutions for the local communities.

Upcoming Atlantic Projects

Of the many projects being developed, a few may single-handedly shape the surrounding coast.

The Energy East Pipeline is among these, marking a moment in history as TransCanada plans to develop its first crude oil transportation pipeline by altering an existing natural gas pipeline. In addition to alterations, the new pipeline would have to be built across multiple provinces to line up with existing pipe in preparation for oil transportation.

Additionally, the Gravity Based Structure (GBS) of the Hebron Project is currently in full production for implementation by 2017, with a goal of producing more than 700 million barrels of oil from the Hebron offshore field. Designed as a new innovation, the platform seeks to employ over 3000 people upon completion, with transportation of the platform to a deep-water site occurring this summer.

While there are many more sites in production, the two mentioned above are sure to be among the first to produce oil off the coast and pioneer the newest source of Canadian oil.

Canadian LNG Exports: Asia Seeking LNG

canadian lng exportsCanadian LNG Exports: Asian Buyers Seeking LNG

Liquid Natural Gas, or LNG, has seen a sharp rise in consumption in recent years. With Canadian gas deposits considered to be the largest in the world, most developed and developing nations are in the bid to secure the LNG from Canada for a cheaper price. Due to countries like China and India going through a period of booming development, as well as the recent need for energy after the Fukushima nuclear disaster, Asia has the largest demand for LNG. Therefore, the race to secure cheaper Canadian gas deposits is at the top of Asia’s agenda.

Rapid Development in India and China

Currently, India and China are the most rapidly developing countries, resulting in an insatiable demand for energy to drive the countries and their industries. Both countries mainly use LNG for domestic cooking and heating purposes. However, in India, a new source of demand has been noted in recent years.

With the government stepping up on environmental pollution, many vehicles are being converted to use liquid natural gas. This demand is spiking the countries need to secure the gas at lowered prices. LNG being used in the automobile industry, coupled with domestic use, has resulted in huge demand for a new supplier. This has prompted India to be among the biggest contenders in looking to secure Canadian gas contracts.

The Recent Nuclear Disaster and Energy Shortage in Japan

Japan has been driven by nuclear energy for several decades, with the country rarely considering importing or using other forms of energy or fuel. The recent Fukushima nuclear disaster resulted in the closure of all nuclear energy plants in Japan, which has literally ground the country to a halt. However, industrial development, manufacturing and consumer electrical consumption hasn’t abated; so they have resorted to using other forms of energy, one being LNG. This has also brought Japan in to the competition to secure LNG supply contracts from Canada. As they are facing an extreme energy shortage, they have been aggressively trying to negotiate Canadian gas contracts.

Group Purchasing Power

Since it’s clear that Asian countries show the highest interest in Canadian gas, it’s important that the involved nations consider taking a different approach towards securing the LNG contracts. Rather than scrambling to secure individual contracts, it may be worthwhile to approach negotiating the contracts as a purchasing group. Thus, allowing them to bargain for LNG contracts as a group, cutting off competition amongst themselves and ensuring they both get the LNG contracts for the same price and equal quantity.

As the gas reserves are found in BC, the money involved in the projects is huge. This would be considered the largest spend in the history of British Columbia for its natural resource. The prospect of billions of dollars in investments, high paying jobs and the potential of erasing government debt, has made this a high profile issue for the province.

South Korea Free Trade Agreement with Canada

south korea free trade agreementSouth Korea Free Trade Agreement with Canada

Canada has long held a leadership position with regard to delivering valuable energy commodities across the globe. Recently, South Korea has become one of Canada’s key free trade partners. The South Korea Free Trade Agreement represents the first of its kind with an Asian nation. This is going to be good news throughout the Canadian economy. The Mining Association of Canada has come out in strong support of the Canadian federal government’s efforts regarding the historic new agreement that was just signed into law.

The goal of the Canada-Korea Free Trade Agreement (CKFTA) is to establish a conduit between Canadian businesses and workers to distribution points in South Korea. Presently, South Korea generates an annual GDP of $1.1 trillion. It also has a growing population of around 50 million. That would mean 50 million potential customers for Canadian goods, services and energy resources.

The support from the Canadian mining industry is due, in no small part, to this trade pact’s reduction in tariffs. As it stands, the tariffs are in excess of 8% for various types of metals. Iron, aluminum and nickel ore are all impacted by those tariffs. When all the kinks in the agreement have been worked out, Korean importers will wipe out duties on 98.2% of their tariff lines. That will have a direct impact on the vast majority of Canadian imports. When you consider that the typical amount of a Korean tariff hovers around 13.3%, then it’s clear that having those taxes taken out of the equation is going to mean a huge boost for businesses that are set up to export into South Korea.

In 2012, the levels of mineral exports sold from Canada to South Korea was in the vicinity of $1.8 billion CAD. Of that amount, coal was the largest commodity with sales totaling out at $1.1 billion CAD in 2012. The rest of the sales were from aluminum, copper, nickel, and zinc.

Right now, South Korea ranks at number seven for Canada’s merchandising trade partner.  This makes it the third largest importer in all of Asia. Add up all of the merchandise that flowed from Canada to South Korea in 2012 and you’ll hit a total of $10.1 billion CAD in sales. Free trade agreements have already been established between South Korea, the U.S. and the European Union. It’s time that Canada gets a piece of that lucrative pie.