The moment I stepped off my flight to Calgary, I was greeted by a familiar face.
On my last two trips, he was always the first to find me. The perfect guide for Canada’s energy scene, the guy knew everyone and every operation. So despite my living more than 2,300 miles away, just a stone’s throw from the Chesapeake Bay, I certainly wasn’t a stranger in a strange land.
My guide was already prepared for this next leg of the trip.
I knew the ten-hour drive was a far cry from my first fifty-hour excursion to the oil sands patch, but I was still excited for the road. And this time, it wasn’t just the new in-situ company I was about to visit that had my blood pumping.
Once we hit Highway 63 for the second half of the trip, he made an offhand comment that he wasn’t expecting “a guy like me” to be here.
What he meant was, I wasn’t Chinese.
China’s Energy Scramble
I wasn’t offended; in fact I expected him to be more surprised than he was.
After all, China has been on a veritable energy shopping spree for the last few years.
Last year, a colleague of mine consistently pointed out that the Chinese were busy buying up all the oil, coal, and natural gas they could find. He was sending me one story or another about a new Chinese energy deal nearly every day.
But he failed to point out a vital part of China’s strategy — and believe me, China has a much different strategy than the United States…
The Middle Kingdom is buying up all the secure oil, coal, and natural gas they can find. They’re looking for the safest energy sources on the planet.
Granted, both China and the U.S. are still indebted to the Saudis. But that’s to be expected; the Saudis have established themselves atop the oil food chain for decades now. And despite the need to end our fixation with Middle Eastern oil, the U.S. remains hell-bent on this very course, now that imports of Saudi oil are back on the rise.
Need further proof that the Chinese are banking on more secure sources of energy?
Two of China’s largest oil suppliers are the Saudis and Angola. Those two also happen to be members of an exclusive club — countries that can actually increase oil production. Across the Atlantic, Canada is a member of this same exclusive club.
For years, China has been carefully crafting Angola’s oil resources, spending billions developing infrastructure. Naturally, the country will be more than happy to expect Angolan crude as repayment. Three years ago, Angola became China’s largest source of crude oil.
Ditching the Risk
But wouldn’t it make more sense for China to be attracted to Russian crude?
After all, quite some time has passed since Russia surpassed the Saudis as the world’s largest oil exporter…
Unfortunately, Russia’s track record isn’t the best. Just look at how they deal with Europe’s gas dependence — any disagreements, and the Russians won’t hesitate to shut off the taps.
That said, it shouldn’t come as a surprise to see China sniffing around North America for more Canadian energy.
Oil Sands Profits Still Ahead
There is still plenty of growth opportunity in Canadian energy. To believe otherwise would mean missing out on a fortune in oil sands profits.
Future production growth is an inevitability. For smart investors, it’s a no-brainer.
Yet there’s an even better reason to expect more profits ahead — one that ties in with our own domestic energy boom. The explosive growth in North American natural gas production gives us even more confidence in the oil sands patch.
We know that the future of oil sands production won’t come from the environmental disasters of the various surface mining operations. That’s a point we’ve been driving home for years here at Energy and Capital.
Time and again, we’ve seen how SAGD will make take on an increasingly vital role in production. The glut of natural gas supply will keep a lid on future natural gas price spikes, which means these SAGD operators won’t be spending an arm and a leg on production.
Of course, we also know firsthand that the more profitable oil sands players have been lining investors’ pockets for years, regardless of how much money China throws in their direction. And things are only going to get better from here on out.
Changing Course
Soon enough, we were kicking up dust and flying back down 63.
Some unknown force was tugging at me; I wasn’t completely satisfied with what we’d seen.
Truth be told, it was the same unsettling feeling I got on my very first trip to Alberta, as we drove through North Dakota, eventually crossing the border in the aptly-named town of Portal…
By the time we hit Edmonton, I knew we’d barely make Calgary before my flight left the tarmac. And that’s when it hit me: I wasn’t ready to leave.
I told the guy who was driving to turn left.
He pointed out that it was getting late, gas was low, and his poor car probably needed an oil change before its next trip.
I told him we needn’t worry about that last part… There was plenty of it next door in Saskatchewan.
I’ll tell you more about that later this week.
Until next time,
Keith Kohl
Editor, Energy and Capital
