Alberta’s oilpatch continues to expand around the world, especially when it comes to producing natural gas.

Talisman Energy Inc. captured the spotlight last week by signing a 17-year deal, starting in 2007, to ship 2.3 trillion cubic feet of gas from the Corridor project in Indonesia to PT Perusahaan Gas Negara, the country’s state-owned gas distributor.

But Talisman is just one of 75 Canadian exploration and production companies that had land holdings in 66 countries in 2003, according to the 11th annual Doig’s Digest report, Canadian Energy Ventures Abroad.

Oil production abroad last year from 39 Canadian companies working in 33 countries totalled 855,779 barrels per day (b/d) of crude oil and liquids – a drop of 33,606 b/d compared with 2002, the report says.

Natural gas production, on the other hand, increased. Twenty-two Canadian companies produced 1,385.5 million cubic feet per day of natural gas in 17 countries in 2003 – a jump of 350.2 million cubic feet per day from the previous year.

Ian Doig, who publishes the report, notes that international crude oil and natural gas liquids production abroad by Canadian firms was equal to 19 per cent of the production at home in Canada.

Canadian companies also spent 15 per cent of their capital expenditures outside the country, he says.

The five Canadian companies with the largest international crude oil and liquids production in 2003 were: Petro-Canada, Nexen Inc., PetroKazakhstan Inc., Talisman Energy and EnCana Corp.

In international natural gas production, the top five were: EnCana, Talisman Energy, Petro-Canada and Canadian Natural Resources Limited.

Going Global

It’s not just the majors that are reaping oil and gas profits in foreign lands, either.

Niko Resources Ltd. of Calgary announced new offshore gas discoveries in the D-6 block of property and another gas discovery in the NEC-25 block off the east coast of India this month. It was Niko’s 11th consecutive successful well drilled in the 1.9-million-acre D-block, and the fourth gas discovery in a row in NEC-25. Niko has a 10-per-cent working interest in both properties with the operator, Reliance Industries Ltd. of India.

Another Calgary firm, Calvalley Petroleum Inc., received approval in July from the Republic of Yemen’s oil and minerals ministry to drill two more exploration oil wells and four development oil wells in the Qishn reservoir in Yemen’s Al Rodhat field.

One of the new exploration wells struck oil in the upper portion of the Qishn reservoir, Calvalley reported this month.

The wells are part of Calvalley’s proposed 10-well program for this year to evaluate the commercial potential of the Yemeni property.

Then there’s TransGlobe Energy Corp., which has acquired a 50-per-cent interest in a new oil exploration project in Egypt.

TransGlobe Petroleum Egypt Inc., the Calgary firm’s wholly owned subsidiary, will participate in the project, in Egypt’s Nuqra oil property, with Quadra Resources Corp. and Rampex Petroleum International.

This project, involving two local companies (TransGlobe and Quadra Resources) and a firm headquartered in Cairo (Rampex Petroleum) is just one example of how the oil and gas business has become a global village.

Suncor Squares Off

Energy Minister Murray Smith will be stuck in something far worse than the tar sands if Suncor Energy Inc. can back up its claims in the $250-million lawsuit it has filed against Smith and the Alberta government.

In a lawsuit filed with Alberta Court of Queen’s Bench, Suncor claims that Department of Energy officials “provided reassurance . . . both express and implied” that the firm’s $630-million Firebag oilsands project north of Fort McMurray would be treated as an “expansion” project when it came to how much royalties Suncor would have to pay.

But Suncor then found out, after having already spent hundreds of millions of dollars on Firebag, that the government would treat the development as a “new” project for royalty purposes, the company claims.

The allegations have not been proved in court.

The distinction is crucial because if the province considered Firebag to be an expansion of Suncor’s original oilsands plant, the firm would have to pay only the minimum royalty rate of one per cent of gross revenues. But Suncor doesn’t get that cheaper royalty rate since the government treats Firebag as a new project.

As a result, Suncor, which maintains that Firebag is an expansion project, is expected to owe $200 million more in royalties this year than the $33 million it paid in 2003.

But unless Suncor has that “express” reassurance from the government in writing that Firebag would be treated as an expansion project, it’s hard to see the company winning the argument that Firebag is, technically, an expansion.

For one thing, Firebag uses different technology – steam-assisted gravity drainage – to extract the bitumen compared with Suncor’s older operation, which is an open-pit mine.

As well, Firebag is located about 40 kilometres from the company’s original plant. Suncor argues that the two operations are “connected physically” because both provide bitumen for upgrading.

Just for comparison’s sake, the $250 million Suncor is claiming in damages (if there’s no change in the royalty decision) is $47 million more than the company’s second-quarter earnings of $203 million.

In Energy We Trust

Penn West Petroleum Ltd. is making shareholders shiver with its cold feet when it comes to converting to an income trust.

But maybe the company has been reading a couple of recent investor reports that pour some very chilly water on the oil and gas trusts.

One report says that Bill Wheeler, president of Vancouver-based Leith Wheeler Investment Counsel Ltd., is warning clients that higher interest rates would drive investors away by reducing the trusts’ valuations, and lower commodity prices could dry up cash distributions to trust unitholders.

The 28 Canadian income trusts, the fastest-growing class of oil and gas enterprises, have a combined market capitalization of about $30 billion.

But Kate Warne also doesn’t like them much.

Warne is the Canadian market strategist for the St. Louis, Mo.-based Edward Jones chain of 9,000 stockbroker offices across Canada, the U.S. and the U.K.

She believes the trusts are too risky for investors who need stable income streams for long periods, such as pensioners, because their cash distributions will suffer if oil and gas prices fall.

Still, for the trusts that manage to grow by acquiring new production – since they don’t explore to find new reserves – the short-term future looks pretty good.

Vermilion Energy Trust, for example, saw its second-quarter profit jump to $79.9 million from $30.7 million a year ago. Earnings like that aren’t going to scare many investors away.

BC Hydro Rethinks Peace Dam

BC Hydro is creating a wave of opposition in both B.C. and Alberta against a long-shelved hydroelectric dam. The corporation is re-examining the possibility of building the $3-billion Site C hydroelectric dam on the Peace River near Fort St. John.

BC Hydro began accumulating the land for Site C in 1975, but abandoned the earth-filled dam project in 1993 after concluding it was “too costly” and “environmentally unacceptable.”

Almost 6,000 hectares of Peace River valley would be flooded or developed to create an 85-kilometre-long reservoir on the Peace.

The project would produce about 5,000 gigawatts of electricity per year and boost Hydro’s total capacity to produce power by five per cent. Demand for power in the province is expected to grow by 40 per cent over the next 20 years.

Environmental groups, farmers and aboriginal communities want the remaining B.C. stretch of the Peace River left in its natural state.

In northern Alberta, aboriginal communities say the existing W.A.C. Bennett Dam on the Peace has reduced water flows into the Peace-Athabasca delta and destroyed the trapping economy.

In B.C., the West Moberly First Nation blames the Bennett Dam and its Williston Reservoir for contaminating fish with mercury and cutting off migrating herds of woodland caribou that once were a critical food source.

The Alberta government is pushing for a bilateral agreement with B.C. that gives Alberta a say in how much Peace River water it gets and when, what kind of quality this water will be, and how this water will affect ecosystems in the province.

But there’s also a huge and important role here for the federal government, which has authority over fisheries and navigable waterways such as the Peace.

The Paul Martin government should say where it stands on Site C before this dam proposal gets too far along.

(Mark Lowey can be reached at mark@businessedge.ca)