Why Foreign Investment in Alberta's Oil Sands is a Good Thing

I know, I know, many of you wanted to hear about no net loss wetland policy but that will have to wait for another post. I spent the last two posts and all afternoon at work today on the environment and it's just unsustainable. I need an economic interlude. 


I've been hearing a lot of economic, well, provincialism. Why are we letting Statoil profit from our resources? Why are we letting China, Korea, and Japan have access to our oil sands? It turns out there are a number of good reasons.

Let's start with the obvious one: money. Current oil sands development plans need upfront investment of about $500 billion dollars in capital, according to Tim Lisevich of BMO Capital Markets. That's a lot of money and we just don't have enough in Canada. Even the Ontario Teacher's Pension Plan only has about 96 billion and it doesn't look like they intend to invest it all in the oil sands. The investment of capital in oil sands results in significant stimulation of the Canadian economy. Regardless of where the upfront capital is coming from, Canadians are benefiting from it.

Are foreign interests taking over? Not really. According to Lisevich's presentation at the recent Canadian Heavy Oil Association business conference, Canadian oil sands companies still control most of the resource. There is significant foreign ownership of Canadian oil sands companies but don't worry, the Federal Government that Albertans love so much is helping us out on this one. Foreign investment deals have to be approved through a political process. That means if the people of Canada don't like it, it shouldn't happen. Canada needs money for investment in the oil sands and we have a way of retaining control. Sounds like a good deal to me.

There are other reasons that foreign investment in Alberta's oil sands is a good thing. One of those is the environment. Alberta's environmental regulation of the oil sands is already very stringent by world standards but that doesn't mean we are the world's best environmental stewards. It's just not in our truck-loving nature. In fact, Norway is one of the most advanced countries in the world in terms of environmental stewardship so understand my surprise when people screaming for Green are upset that we let Norway's Statoil invest in our oil sands. Oh my god we might accidentally learn something from them.

There is an interesting balancing act on technology for oil sands extraction. We believe we are the best in the world at extracting bitumen from sand because we are really the only ones doing it. Foreign investors recognize that we do have significant experience that they can benefit from so they are happy to keep us involved in production of our resources. The deep, dark secret is that we don't know everything. There is a lot we can learn and have learned from others. Foreign investment often brings new ways of looking at things and access to technology we didn't know we needed. This means lower costs for oil sands production and that means more taxes and royalty for Albertans.

Let's stop being so provincial and recognize that foreign investment means needed capital, new technology, and world class environmental stewardship practices. All of this means more money for us, and even better environmental stewardship for the next Albertans.