(Developments in Saudi Arabia have renewed interest on Albertan oil)
Canada’s energy producers got an unexpected boost in marketability last week, but is it possible to capitalize?
Last Saturday,
drone attacks on Saudi Arabia severely damaged the country's largest oil plant, interrupting an estimated 5.7 million barrels of crude oil production per day and spiking crude prices. The plant was responsible for more than 5% of the world daily cure production.
Following the attack, the country reassured that it can quickly recover and temporarily tap into a reserve of 1.8 billion barrels from within the country and abroad to meet global demand. In addition, US President Donald Trump authorized the usage of the country’s own energy supply, bringing prices back down.
The question for a lot of analysts, however, is how
valid the reassurances are. Even if Saudi Arabia is able to follow through on its promise of quick recovery, the drone attack only served to escalate tensions in the region. Yemen’s Houthi rebels claimed responsibility for the drone attacks, and there’s fear that they could strike again. At the same time, the US and Saudi Arabia blamed the attack on Iran and might look to retaliate.
Oddly enough, the disruption was perfectly timed for Alberta Premier Jason Kenney,
who was in New York as part of an investment pitch tour. He looked to win over investors by presenting Alberta as the comparatively safe, responsible, and dependable source of oil, and looked to boost oil output following the attacks.
The problem for investors, he said, was that Alberta needed a better way to move products. Currently the
province’s exports are at capacity and the government is forced to work with oil-by-rail deals until additional pipelines are built. The most imminent is the Enbridge Line 3 replacement, which was delayed to 2020 and is set to carry 760,000 barrels per day to Wisconsin once completed.
In the past, major investors were weary of investing in Alberta over the difficulties of operating cleanly in the oil sands at a low price, but they’re starting to turn their eyes back.
A strong push for cleaner technology that reduces carbon footprints is a big helper, and alongside the increasing likelihood of volatility in Middle-Eastern supply, the higher costs are becoming more manageable.
It still needs a few more pushes, but the potential in Alberta is getting harder to ignore for major investors. That’s why Chinese companies have
stayed committed to the oilsands and are patiently waiting for production capacity to increase. Between undervalued energy stocks and low provincial real estate prices, it’s easy to see that Canadian oil is on the precipice of renowned global interest.