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The emerging energy superpower

Canada's oil and gas industry is surviving the economic downturn. The boom times may be over, but stories of a bust are wide of the mark

AS A MEMBER of the G8, Canada is an anomaly: it is the only member of the rich nations' club that depends on a resource-based export industry to support its economy. Oil and gas are both central to this and Canada's energy sector increasingly influences the way it deals with the world. Prime minister Stephen Harper calls his country an "energy superpower". Notwithstanding the temporary slowdown in the US economy, Americans increasingly depend on imports of Canadian energy to support their lifestyle.

And, like much of the rest of the world, Canada depends on the US: its consumers almost monopolise Canadian energy exports and the political decisions made in Washington – like whether to adopt a cap-and-trade system to fight carbon emissions – will shape the Canadian energy industry and politics.

All of the big issues affecting the global energy industry also affect Canada's. The twilight of the easy-oil era is a boon to Canada's oil sands, where not-so-easy oil is plentiful. The resource nationalism that has limited Westerners' access to oil and gas reserves elsewhere has pushed international oil companies to Canada's upstream. All of the majors and several national oil companies are in the oil sands. Those that are not want to be.

And Canada's will be an important voice at the global warming summit in Copenhagen later this year. The country's per capita emissions are among the highest in the world. And the country's record on fighting climate change has, so far, been dire. Environmentalists say it pumps almost 30% more carbon dioxide into the air than it did in 1990; it could find itself isolated in Denmark.

A climate accord – which looks less likely as Copenhagen approaches – would have profound implications for Canada; and not just for its energy sector. If the federal government commits to an agreement, or even if one emerges bilaterally with the US, experts on the Canadian constitution say there could be an almighty battle between the provinces and the central government in Ottawa. Energy resources belong to the provinces; but the environment is the federal government's responsibility.

So these are uncertain times for Canada and the way it produces and consumes energy. And it is all unfolding as the country deals with the economic downturn, which has afflicted the energy hub of Alberta, now the engine of the country's economy. Yet the silver lining to these clouds is the opportunity for Canada to take stock of its policy and of the path it wants to follow as the world's emerging energy superpower.

Petroleum Economist's Derek Brower and WJ Simpson spent several weeks in July and August speaking to people in the Canadian energy sector, from roughnecks in Fort McMurray to executives in Calgary, to environmentalists, to government officials. This survey of the Canadian energy sector – covering natural gas in British Columbia, Alberta's oil sands, Saskatchewan's upstream, the stuttering refining sector, the Atlantic offshore and the environment – shows that Canada's oil and gas industry is surviving the downturn.

Consolidation has already begun in the oil sands and more will follow. Developers in the world's most expensive upstream frontier have tightened their belts. Some projects have been shelved. But there is a chance that a steadier, more sedate and more crash-proof pace of development will emerge from the downturn.

That will serve everyone well, because until the petroleum age ends, the world is likely to depend on Canadian energy every bit as much as the oil and gas from the planet's other suppliers.

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