Meeting China's energy needs

(Edmonton) The University of Alberta’s China Institute released a report Monday examining China’s energy sector and how Alberta could diversify its energy exports to the country.

The study takes a detailed look at China’s petroleum needs, how it manages energy imports and its energy capacities and examines Alberta’s options in pursuing energy interests in China in concert with the federal government and energy decision-makers in Asia, says Gordon Houlden, director of the institute.

Houlden says the potential benefits of looking towards China to export Alberta energy are immense. “If all of the energy [pipeline] proposals to the West Coast were built, they still wouldn’t have the volume to deal with the increases that would be coming from the big upgraders and the new projects and production that are coming forward, both conventional and unconventional, in this province,” Houlden says.

“In other words, just as the Keystone XL pipeline would not solve the problems of energy surplus in Alberta, neither would the others. We need similar or distinct schemes. Canada needs energy market diversification, while China needs supply diversification," Houlden says.

The authors of the report, Building a Long-Term Energy Relationship Between Alberta and China, note that even if there were no “Keystone problem,” which Houlden says will not be solved anytime soon by the U.S., Canada’s own interests, but especially those of Alberta, would point to urgent development of energy-sector linkages with emerging Asian economies—above all, that of China, the region’s largest economy.

Houlden says while the U.S. will likely always be the principal importer of Alberta’s energy exports, there are strong incentives to diversify markets. “In the foreseeable future, oil production will exceed the capacity of the U.S. to absorb it, and hence we need to look for energy quarters in Asia,” he says.

“Particularly because of what is happening with the delays with the Keystone pipeline now, there is vulnerability for the Alberta economy in having just one export market for its energy, particularly where Alberta’s petroleum exports are being sold to the U.S. for prices lower than the global norm,” he says.

Houlden says China is an ideal source for Alberta’s oil exports because China is growing very quickly. The gap is growing between its energy production and consumption in China, and its energy consumption is already moving towards exceeding that of the U.S. The report says China is expected to consume nearly 70 per cent more energy than the U.S. by 2035.

The study proposes creating what its authors describe as a viable energy-dialogue mechanism with China. Houlden notes China has invested approximately $15 billion in Alberta’s energy sector in the past several years. The document also offers recommendations on how the province could quickly put in place systems to faciliate exporting energy to China, through which, Houlden says, the province could build a long-term strategy.

The report recommends government officials in Alberta work closely with energy decision-makers in China, particularly those in government ministries and state-owned enterprises. It also recommends developing an economic co-operation framework to guide and advance ties between the countries in the energy sector. A key recommendation is to work towards eliminating overlap and duplication between the federal and provincial governments. The authors identify the lack of capacity on the West Coast to export energy as the single biggest challenge the province faces.

“Putting adequate infrastructure into place will take years to resolve. But it’s so crucial to the future of this province that it must be addressed,” Houlden says. “We have the resources, the industry talent, the international experience and the business environment in Alberta to build viable energy corridors to alternative export markets.”

The report was commissioned by Alberta Energy, Government of Alberta.

The full report is available for download from the China Institute’s website.