Canada's nationalism in energy has many oilmen checking out
Calgary, Alberta — In this winter of their discontent, Canadian oilmen are asking themselves whether there is any point in prolonging the agony of defending their industry against the rising tide of Canadian economic nationalism. A few of them -- mostly small, independent operators -- have already packed their bags and left western Canada's oil patch for the greener pastures south of the border.
Drilling rigs are also moving south as local subsidiaries of major foreign-owned companies, along with their indigenous counterparts, slash their 1981 budgets. This general belt tightening comes in the wake of Ottawa's October budget and simultaneously declared national energy police (NEP).
Gulf Canada lopped $900 million off planned expenditures up to 1985, beginning next year with a $200 million drop in exploration and development programs. Norcen Energy cut $40 million from its budget. A leading Canadian independent, Canadian Hunter Exploration controlled by Noranda Mines, switched all its discretionary spending -- about $90 million next year -- to prospects in the United States. (Those are funds available but not committed to specific ventures -- in other words, corporate pin money.)
Most companies anticipate comparable reductions in their respective 1981 budgets, once they have digested the new fiscal measures and faced up to the ramifications of Canada's new energy directions.
Probably the biggest blow came from the would-be sponsors of two megaprojects. Both Imperial's heavy-oil plant and the Shell group's oil-sands plant have been placed in holding patterns. Each is worth about $8 billion and each has a design capacity of 140,000 barrels a day of synthetic crude production. Both have an ultimate deadline of mid-1981 for deciding, imposed on them by their respective sponsors.
Other huge projects could be canceled in the next six months. The reason, the oil companies maintain, is that neither the new budget nor the NEF provides enough income for them to justify construction and operation of these projects.
The present impasse between Alberta and Ottawa over oil pricing and revenue sharing, of course, does not help matters, either. As for as commercial synthetic fuel production, with two down and none to go, Canada's alternative energy development program has been effectively halted. Originally, it was envisaged that up to five such plants would be working this region's enormous oil sands and heavy oil deposits by 1990.
Experts here point to a bleak fuel supplies in the latter part of the decade, when the two plants now on the verge of abandonment and at least one other similar project were to have been on stream. Their combined volumes of about 420,000 barrels a day of synfuels would by less than the projected natural decline of 500,000 barrels a day in domestic oil production. In other words, even if the plants went ahead as planned, Canada would still be short on domestic oil production.
To make matters worse, Alberta is preparing to begin cuts in conventional oil production March 1. Reductions will start at 60,000 barrels per day and amount to 180,000 barrels by September, or to about 20 percent of Alberta's current wellhead capacity.
It's not at all certain that Ottawa will stand by to watch a shortage of oil materializing on the one hand, which would have to be made good with costly and increasingly scarce imports. The federal government does have powers to take over all oil production -- lock, stock, and barrel -- if it perceived a national calamity in the making.
Similar expropriation had been applied to uranium and grain in the war years. The uranium and wheat trades remain under federal control to this day.