CNOOC Nexen Bid Part 3: Macleans Talks With Debra Steger

Check out Erica Alini's great Q&A with UOttawa professor, and former trade negotiator for Canada, Debra Steger.

Two main Steger snippets:

Compared to the U.S. and Australia, Canada’s Act, with the two review processes for “net benefit” and “national security,” is confusing and difficult to apply in practice, as in this case involving CNOOC. The “national security” process is also highly non-transparent in that there are no criteria specified for a review and no decisions are ever made public. The U.S. has one test for direct acquisitions: national security, with a list of 12 factors. These are wide-ranging and include: domestic production for national defence requirements, potential effects on U.S. technological leadership in areas affecting national security, potential effects on critical infrastructure in the U.S., long term projection of U.S. requirements for energy and other critical resources and materials. The U.S. approach is more specific, transparent, and integrated than the Investment Canada scheme. The U.S. CFIUS model also requires nine agencies to work together to carry out reviews. This would appear to allow for a broad range of views and better decision making than the Canadian approach in which Industry Canada plays the lead role.

...

My prediction is that the government will allow the investment, albeit with a requirement for undertakings designed to ensure that the resulting business operates in a transparent and commercial manner in accordance with Canadian corporate governance norms and likely to provide net benefit to Canada.

Keystone XL: The Roar of 2012, Now the Yawn of 2013?

"Canada needs pipe – and lots of it..."  -Andrew Potter, managing director, Equity research, CIBC

"[I]t [Keystone XL] looks… well, not irrelevant, but certainly much less important."  -Erica Alini, Macleans

Erica Alini blogged yesterday on the "much less important" Keystone XL pipeline project.  From her post:

Just over a year later, though, it looks… well, not irrelevant, but certainly much less important. “Even if the current Obama administration gives its final assent to the Keystone XL pipeline this will not resolve Canada’s export challenge,” notes a new CIBC report that came out yesterday. And it’s not just because we should really stop depending on a single buyer of our most prized export and diversify by catering to oil-thirsty Asian countries. It’s also because “US energy production is increasing at a pace that few, if any, saw coming,” reads a foreword penned by none other than Jim Prentice.

Instead, pipeline politics will be Pacific Canada's chief cause of concern, writes Alini.  From the excellent BIBC Alini links to in her post:

2013 WILL BE A DEFINING YEAR FOR CANADIAN PIPELINE POLITICS

Pipeline capacity out of western Canada is adequate for the short term, but substantial progress must be made on this front in 2013.  Progress (or lack thereof) will have a big impact on sentiment towards Canadian oil producers. we estimate that pipeline capacity out of the western Canadian sedimentary Basin (wCsB) could effectively be full in the 2014 time frame (our production forecasts are higher than consensus), suggesting little room for error/politicking in bringing on new pipeline capacity. 

There are ~2.9 mmbbl/d of long-haul pipeline proposals on the table (out of western Canada). that sounds like a lot until one considers that two of the largest (the proposed  525,000 bbl/d Gateway and 450,000 bbl/d tmX expansion through BC) face ever-increasing political risk; we assign no better than 50/50 odds that these pipes are built before the end of the decade. the proposed transCanada mainline conversion (estimated ~600,000 bbl/d) is compelling but very early stage and could also provoke some political backlash in Québec.  We also note that the 2.9 mmbbl/d proposed capacity is quickly depleted given our forecast of 100,000 bbl/d per year growth in Canadian conventional oil and 230,000 bbl/d per year growth in oil sands (or ~300,000 bbl/d when blended).  Canada needs pipe – and lots of it – to avoid the opportunity cost of stranding over a million barrels a day of potential crude oil growth.   [Source: A Look to the Future 2013 Edition, CIBC, Page 42]