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Cenovus and TransCanada say opportunity to develop oil sands could be lost for decades

But is it true?

Michael Ganley is the editor of Alberta Venture. BizBeat takes a big-picture view of the provincial, national and international news affecting Alberta's business community. He can be reached at mganley@albertaventure.com and @MikeatVenture

Jan 17, 2014

by Michael Ganley

In a pair of speeches to the Canadian Club in Toronto on Wednesday, Cenovus CEO Brian Ferguson and TransCanada CEO Russ Girling made the case that if we don’t build pipelines and develop the oil sands now, the opportunity could be lost for decades. “Asia will figure out other sources to get supply from if they can’t get it from Canada,” Ferguson was quoted as saying by The Toronto Star. “As Canadians we have an opportunity to capture market,” said Girling. “My experience is, if you don’t capture market, somebody else will.”

It’s possible that without greater pipeline capacity the opportunity – or some of it – could be lost to those two companies, or to those two CEOs (we know how quickly the carousel has spun in recent years). But the bigger opportunity? The one to exploit the natural resource in the ground? That one will be around for a long, long time. It doesn’t depend on this pipeline or that rail connection. It depends on the cost of production, the regulatory environment and the price of oil.

Besides, the oil sands are already developing at a breakneck pace, driving costs up and returns – for both the producers and the public purse – down. A slower pace could be good for all involved.

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There is a case to be made in support of pipelines: they are a safer way to transport large volumes of oil than any other. The can help diversify the markets for Alberta’s bitumen and thereby earn better returns for both producers and government. But it’s specious to say that without them the oil sands won’t get developed.

Girling also made the curious comparison to the Mackenzie Valley natural gas pipeline, which the proponents decided not to proceed with even after getting approvals following a long, drawn out process. But by then, they say, natural gas prices were too low to justify the investment. So they’re mad because they weren’t allowed to make a dubious investment? And that natural gas is truly stranded in the Mackenzie Delta. There was and is no way to get it out without that pipeline. That’s not the case with the oil sands.

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