Selling energy to Ukraine a distant hope
The Canadian PressThursday, May 01, 2014
OTTAWA - A lack of pipelines and other infrastructure means Canada has little hope of reaping any kind of energy or resource windfall from the crisis in Ukraine, a group of international energy experts said Thursday.
Analysts and academics from Alberta, Europe and Ukraine itself say Canada remains the better part of a decade away from having the energy network necessary to be any kind of meaningful energy supplier in Europe.
The group was testifying Thursday before the House of Commons natural resources committee, which is exploring whether Canada's oil and gas could help wean Ukraine off its dependence on Russian energy.
"We're still left with a very serious infrastructure deficit," Geoff Hill, an oil and gas expert with Deloitte Canada, told the committee.
"The most aggressive estimates to supply gas to Europe is around five or six, or eight years, during which time we have to be exceptionally busy building the needed facilities, none of which we are currently building at the required pace."
Russia supplies most of Ukraine's natural gas, which gives it a major economic lever over the Ukrainian military — one it is currently exercising.
Russia annexed the Crimean Peninsula last month while pro-Russian gunmen are taking over cities in the country's eastern region.
Thursday's testimony offered a sobering counterpoint to the Harper government's public enthusiasm about increased Canadian energy exports to Europe.
German Chancellor Angela Merkel appeared unenthusiastic about that prospect when she hosted Prime Minister Stephen Harper in March. She, too, noted that Canada lacks the infrastructure to actually move the products.
Michael Edwards, a policy analyst with the firm Fairweather Hill, said Canada could ship liquefied natural gas across the Atlantic, but there isn't enough of it available on the East Coast to justify investing in LNG plants.
That could change if more pipelines could bring more gas into the region, "but that's a five- to 10-year prospect," Edwards said.
Hill said there was room for co-operation between Canada and the United States to work together to increase European energy exports because they have a shared infrastructure, especially on gas pipelines.
And he suggested the approval of the long-delayed Keystone XL pipeline, designed to transport Alberta oilsands bitumen to U.S. refineries on the Gulf of Mexico, could be part of the solution. Canada sells almost no oil to Europe because of its aversion to heavy oilsands bitumen, but pipelines open up alternatives, Hill said.
"Pipelines such as Keystone XL would allow transfer of Canada's heavy oil to the U.S. Gulf ... which could allow the possibility of diverting some existing U.S. imports or even U.S. production of light oil to the EU, which the refineries there are better suited to produce."
Hill and Edwards said Canada could make inroads in Ukraine's energy sector by exporting Canadian expertise on energy efficiency to help it cut its natural gas usage.
That could make a difference, since Ukraine is one of the least energy-efficient countries in the world, said Anders Aslund, a Russia-Ukraine expert with the Peterson Institute for International Economics in Washington.
New Democrat MP Linda Duncan noted that one of the many conditions on Wednesday's two-year, $17-billion International Monetary Fund bailout package for Ukraine requires it to become more energy efficient.
Some MPs expressed skepticism that Canadian companies would be able to offer any significant assistance because Ukraine has a corruption problem.
Conservative MP Brad Trost said many Canadian companies don't like the "business climate" and "corruption issues" in Ukraine.
However, Vitalii Dem'ianiuk, a Ukrainian oil and gas expert based in Geneva, said the new Ukraine government wants to reform.
"Today," he said, "the Ukrainian government is totally open to co-operate."