As concerns over global oil supply pushed the price of crude past $51 US per barrel last week, the head of Canada’s largest independent energy company said North America lags behind the world’s developing countries in building up reserves.
Gwyn Morgan, chief executive of Calgary-based EnCana Corp., said Canada and the United States are not thinking enough about the security of energy supply.
“North Americans are still the largest users of energy, and they still are not doing anything particular about their own supply,” Morgan said outside of a meeting of Canada’s top business leaders.
In recent years, the state-owned oil firms of countries such as China, India and Indonesia have been actively buying up large producing oilfields. And they are often able to operate in politically tricky regions where public companies have troubles.
Two years ago, Calgary-based Talisman Energy (TSX:TLM) sold its prolific oil interests in Sudan after tiring of criticism levelled at the company for producing oil in a country ravaged by civil war.
Even though Talisman maintained it was helping the country, it sold out to India’s state-owned oil company, ONGC.
The Indian oil company has recently been reported to be bidding for EnCana’s Ecuador assets, along with Petro-China, for a speculated price of about $1.5 billion US.
While Morgan will not comment on whether the Ecuador properties are for sale, he reiterated that the political risk in the South American country is far higher than its main holdings in Canada, the U.S. and the North Sea.
“Some of these emerging Asian countries are very about their supply and they’re going out and trying to buy assets and do various things,” said Morgan.
China’s interest in commodities doesn’t stop at the oilpatch either. Noranda Inc., one of Canada’s biggest and best-known miners, recently acknowledged that it is in negotiations to be acquired by the Chinese government- controlled China Minmetals Corp.
The deal, while not complete, has been rumoured to carry a sticker price of a slight premium from its $6.7-billion stock market value.
Morgan said North America has the ability to generate more production and “do more things to start to take control of more of the agenda.”
Specifically for EnCana, that means seeing energy legislation passed in the United States that would allow more drilling.
In the U.S. Rocky Mountains region where EnCana (TSX: ECA) has centred its North American natural gas expansion, nearly half of the energy resources are currently off- limits to drilling.
“It’s interesting to think that the people that are perhaps the most vulnerable are doing the least.”
Meanwhile, as oil prices continued to set new record highs, experts continued to debate the lasting impact on the Canadian economy.
It’s causing a transfer of wealth from energy-consuming regions to energy producers, said Craig Wright, the Royal Bank’s chief economist. And that’s happening globally as well as in Canada.
“It’s going to be a more challenging environment definitely for Ontario and Quebec,” said Wright.
“But if ever there was a good time for oil prices to be as high as they are, it’s now when global growth has been strong and the U.S. economy has been robust.”
