Canada builds oil link with China after Obama Keystone 'slap'

Canada builds oil link with China after Obama Keystone 'slap'
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buy this photo President Barack Obama and Canadian Prime Minister Stephen Harper take part in a joint news conference Friday at the White House complex in Washington. (PABLO MARTINEZ MONSIVAIS / The Associated Press)

OTTAWA — Prime Minister Stephen Harper is gaining support among Canadians for his plan to ship oilsands crude to China after President Barack Obama rejected TransCanada Corp.'s $7 billion Keystone XL pipeline to the Gulf Coast.

Harper will meet President Hu Jintao in China next month, when he may tout Enbridge Inc.'s proposed Northern Gateway pipeline that would let crude flow to Asia from Alberta's oilsands via a Canadian port.

"The Keystone decision was a slap in the face to Canada and it's making Canadians rethink the relationship," said Jack Mintz, head of the School of Public Policy at the University of Calgary. "Harper probably wants to put out a sign that we're open for business for Asia."

Harper is pushing energy exports to Asia to reduce the country's reliance on the U.S. and make Canada a global energy "superpower." Tapping markets in Asia may raise the price received by Canadian producers by $13.60 a barrel by 2030, according to a University of Calgary study. About 99 percent of Canada's crude exports go the United States.

"The Keystone ruling shows that we need to diversify away from the U.S. to Asia," Richard Waugh, chief executive officer of Bank of Nova Scotia, the country's third-biggest bank, said in an interview. "The Prime Minister appreciates that and it is no doubt a key purpose of his trip" to China.

Harper expressed his "profound disappointment" Jan. 19 after the U.S. rejected Keystone, telling Obama that Canada will "continue to work to diversify its energy exports," according to details provided by Harper's office.

Efforts to boost support for selling oil to China may be having an impact. Opposition to the Northern Gateway pipeline has weakened in recent weeks, according to a survey by Toronto- based Forum Research.

The share of Canadians who oppose the plan has fallen to 43 percent in a poll conducted Jan. 13, down from 51 percent in a December survey. Support for the project increased to 37 percent from 35 percent. The percentage of those who say they are unsure rose to 20 percent from 15 percent. The poll of 1,211 Canadians has a margin of error of 2.8 percent.

"It looks like a group of people are giving it a second look," Lorne Bozinoff, president of Forum Research, said in a telephone interview, adding Harper may have "got people thinking."

Other Canadian policy makers, including Bank of Canada Governor Mark Carney, have said Canada will need to increase its exports to emerging markets.

"If you look at the nature of the U.S. recovery right now, our exports are $30 billion lower than they otherwise would be," Carney said in a Monday interview on CTV Television's Question Period. "The Chinese market is a tremendous opportunity for Canada. We're under-represented there relative to other countries."

Canada's benchmark stock index lagged behind the S&P 500 last year for the first time since 2003, as producers of raw materials and energy dropped on concern that slow global growth will limit demand for commodities and erode their prices. The industries make up about 47 percent of Canadian equities by market value, according to data compiled by Bloomberg.

Alberta Premier Alison Redford reacted to Obama's announcement by saying the province will now focus on opening markets in the Asia-Pacific region. Asia is Alberta's second- largest export market, accounting for about 10 percent of C$78 billion ($77.2 billion) in total exports in 2010.

Canada has already begun regulatory hearings on Enbridge's proposed Northern Gateway pipeline. CEO Pat Daniel said the U.S. rejection was "horrible for our industry and it's a horrible precedent. It will only embolden those opposed to Gateway and other new project developments."

Canada "can continue to be supportive as they always have" on Northern Gateway, Daniel said Jan. 19 at a conference in Whistler, British Columbia. The federal government has "done a good job calling out the issues around the regulatory process."

Harper has said building the capacity to sell the country's oil to Asian markets is in the national interest, and the government will aim to speed the regulatory-approval process for large energy projects. Harper has also said "foreign money" from environmental groups is being used to try to influence regulators.

"Just because certain people in the United States would like to see Canada be one giant national park for the northern half of North America, I don't think that's part of what our review process is all about," Harper said in a Jan. 16 interview with CBC television.

"This contrived funding 'debate' is a red herring," Merran Smith, director of Tides Canada's Energy Initiative, said in a Jan. 10 statement. Natural Resources Minister Joe Oliver has cited Tides Canada as a group that's channeling U.S. money to pipeline opponents.

Regulators have received 4,507 requests by individuals to testify at public hearings on the project that began this month. Environmental and aboriginal groups say the project will increase the risk of an oil spill off the coast of British Columbia. The regulatory panel reviewing the pipeline last month pushed back its timeline for reaching a decision to the end of 2013.

Harper's drive to sell oil to China comes as the Asian nation steps up foreign investment. Chinese companies have purchased more oil and gas assets in Canada from 2005 to 2011 than acquirers from any other country, according to Bloomberg Government.

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Van Loon reported from Calgary. Andrew Mayeda, Greg Quinn and Ilan Kolet contributed from Ottawa.

Copyright 2012 JournalStar.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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