Canadian Oil Sands: An Introduction

By Chris Pedersen

Over spring break, a group of nine students and I from the Center of Global Affairs took part in a field-intensive study to the oil sands in northern Alberta, Canada.  With the support of a grant from the Canadian government, we spent a week in Fort McMurray to see the oil sands production process and then visited Calgary, Canada’s booming energy metropolis.  Why Canada and the oil sands?  The United States imports more oil from Canada than any other country in the world.  Canada’s oil reserves are the second largest in the world, leading one to believe that the US-Canada energy relationship will be crucial in overall bilateral relations and geo-politics on a global scale.

First, some facts on Canada’s oil sands.  When one thinks of oil, they usually visualize a desert somewhere in the Middle East with oil rigs pumping oil out of the ground.  This type of oil is a light sweet crude oil, the easiest oil to turn into gasoline.  In contrast, Canada produces oil from a rock-like material called bitumen.  The bitumen is processed and turned into synthetic crude oil in two ways.  The first is mining the earth, using the world’s largest trucks to dig up the earth that contains varying amounts of bitumen.  Massive diggers load dump trucks that drop their loads of soil into a processor that breaks down the earth.  As the earth is broken down into smaller pieces, boiling water is mixed with the earth.  The water separates the bitumen (oil) from the rest of the dirt.

Mining Process

CAT 797 Dump Truck

The second way to get bitumen out of the ground is a process called “in situ” which means drilling in place.  Like surface mining, the bitumen that is deeper under ground is solid and needs to be heated so that it can be extracted.  To heat the oil, one pipeline delivers natural gas down to the bitumen area until it heats up into liquid from.  Then a second pipeline takes the hot liquid bitumen underground and delivers it to the surface to be processed.  The oil sands produce 1.3 million barrels of oil each day and about half of that goes to the United States.

In-Situ Process

It is expensive and energy intensive to turn bitumen into synthetic crude oil.  Until recently, the oil sands were not economically viable because low oil prices and worldwide availability to produce oil was much easier in other parts of the world.  To produce a barrel of light sweet crude in Saudi Arabia costs around 10 dollars and the infrastructure is already in place.  To produce a barrel in the oil sands costs around 35 dollars and only recently has the infrastructure to produce large amounts of oil come online.  And then there is the environmental issue.  Producing a barrel of oil in the oil sands emits between three to five times as much green house gases as oil produced in the Middle East.  Hence, Canada’s oil has been labeled “Dirty Oil.”

One argument that Canada and the oil sand producing companies (all the major oil companies) use to defend their dirty oil production is the idea of national security.  Do you want your petrol-dollars to be turned over to a democratic country that shares similar ideas and morals as the United States or to an autocratic government that represses their population and funds terrorism?  After hearing this argument I was reminded of the New York Times foreign correspondent David Rhode, who was kidnapped by the Taliban in Afghanistan for seven months last year.  Speaking at NYU, one of his concluding remarks stated that he was not concerned by how much oil Saudi Arabia has, but how Saudi Arabia spends their petrol-dollars.

The oil sands create tens of thousands of jobs in the United States.  The synthetic crude oil that is produced from bitumen in Canada is sent to Texas and Oklahoma to be refined. The massive trucks are built in Illinois and the tires they drive on are manufactured in South Carolina and sell for $65,000 apiece. From an economic viewpoint, the oil sands is a mutually beneficial relationship between the United States and Canada that has great potential to create even more jobs in the future.

What about renewable energy?  In the United States, 95 percent of the energy used for transportation is with fossil fuels.  As tough as it is to hear, oil will be around for a long time.  I fully support R&D, feed-in-tariffs, and other subsidies to encourage renewable energy development, but it is important to be realistic in the expectations of “green energy”.  Green energy sources such as wind, biomass, and electric all use fossil fuels as a necessary component in energy production.  Phasing out of fossil fuel in the next few generations is simply unrealistic.  A more feasible challenge would be to incrementally increase the amount of renewable energy the world uses, taking market share away from fossil fuels.

Lastly there is the geopolitical issue.  Today, it is a luxury to be environmentally conscious.  What does this mean?  The countries that demand and need energy to keep their economy growing do not have a consensus on human rights or the environment.  Sudan is an example.  There were many human right activists in the United States that lobbied and fought to kick out US oil companies from the Sudan.  Although these activists had good intentions, their results proved to be ineffective and maybe even detrimental.  The US companies left the country and China stepped in.  Today, China has a monopoly and dependable oil source from the Sudan.  In return, the Sudanese government receives large revenues to continue the atrocities that Western activists deplore.  In Canada, we heard from both environmentalists and industry leaders of the growing demand and interest from China and other Asian nations in the oil sands.  If the United States decides to stop or slow importing “dirty oil” for environmental reasons, China and the rest of Asia will be more than happy to take “dirty oil.”  The infrastructure and capacity to export to Asia is not there at the moment, but if Canada continues to feel pressure from the United States, it will begin to look for a new buyer in the East.

I invite readers to leave a comment and share their view on the issue of oil sands.  Which way do you lean: Do you support the oil sands for national security and job creation or are the environmental effects a greater issue?

Additional information:

• Pembina Institute: http://www.oilsandswatch.org/
• Canadian Association of Petroleum Producers:http://www.capp.ca/Pages/default.aspx#OHufxhvGa6lI
• The Oil Sands Developers Group: http://www.oilsandsdevelopers.ca/

Afghanistan’s Police Force

By Chris Pedersen

So often in the news the issue of the US and NATO involvement in Afghanistan is a topic that brings out strong emotions from both those that support and oppose the idea of military involvement. With such a grand question, it is futile to argue such a big issue without breaking down the US-Afghan issue into smaller pieces,limiting the number of variables. Let us focus on the US and NATO role in training Afghan police officers. With troops planning on withdrawing in July 2011, this is a very important task.
The US and Allied forces that are in charge of training the new Afghan recruits face some challenging tasks to say the least. These new recruits have some astonishing characteristics that include:

• One in five recruits test positive for drugs.
• Fewer than one in 10 can read and write, making the simplest tasks of writing down a license plate an obstacle.
• Taliban infiltration is a constant worry. Last November, five British NATO officers training a police unit in Helmand Province were killed by one of their trainees. Taliban later claimed the attack.

Afghanis off the street can become a police officer in under 3 months of training . Recruits are given an eight week training course and then placed throughout the country. With poor pay, the highest death rate of all security forces and lack of equipment, a quarter off all officers quit within a year. Recognizing the inadequacies of the current police training force, the US has tried to address some of the concerns of finding new instructors and creating programs that would raise the moral and identity of the Afghan police force.

Instead of the military or State Department taking the role of training the police force, the US government has hired a private contractor, DynCorp, to take on the large endeavor. The actions of the US should speak for itself of the limit to which the US military is stretched and the unwillingness of NATO allies to commit additional resources to the Afghan campaign.

DynCorp, after receiving a large contract by the US has sent a unit that mainly consists of retired police officers to train the police force. Since arriving, the officers have complained that they are overwhelmed by recruits incompetency and facing challenges in communicating information. NATO officers working with DynCorp complain that shortly after arrival, DynCorp contractors had lost motivation and have shown unprofessional attitudes because of lack of managerial oversight. Brig. Gen. Carmelo Burgio, an Italian Carabinieri NATO force contends that one of the biggest failings of the training program was the State Department’s over reliance on private contractors, whom he described as often over-aged, under-motivated, and expensive. Burgio says, “For the cost of 10 DynCorp, I can put 30 Carabinieri (NATO) trainers in and save money.”

Like many other parts of the region, family structure and reliance between family members for survival is crucial. Loyalties between family and the police force has been an issue where family ties prevail. For example, if one family member is in the police force and another in the Taliban, communication will not even seize and usually grow. NATO commanders have been frustrated with failed missions where police forces have planned to ambush the Taliban only to find out that Taliban forces have been tipped off by the Afghan police forces themselves.

This brings me to my last point: When President Obama addressed the world with his future plans of US involvement in Afghanistan, one of the key points that he brought up was the idea of withdrawing in July 2011. Although we will continue to have a presence, both with boots on the ground and monetarily beyond 2011, what confidence does that bring to the Afghan people, whose trust the US and Allied forces have worked so hard to win? If you were in the boots of an Afghan police man, which side would you lean to support, the Taliban who show no signs of leaving their native land or a police force that is backed by an Allied foreign military that will begin its withdrawal in 18 months?

Equatorial Guinea, Have You Heard Of It?

Equatorial Guinea (E.G.) is a small country in Western Africa, not even the size of Maryland. Gaining their independence in 1968 from the Spanish, the new government inherited similar challenges that were faced by other African states. In the mid 1990′s, this all changed with the discovery of huge oil reserves along E.G’s coastline. Since this discovery, western oil companies have done further exploration and concluded that 10% of the world oil reserves could be under E.G.

When it comes to dictators, it is hard to top E.G.’s president, Teodoro Obiang, who has been in power since 1979. Obiang has been on the shortlist of dictators, often compared to the likes of Libya’s Gadaffi, Congo’s Mobutu, and Zimbabwe’s Mugabe. The reason why the west has not heard much about the brutality of Obiang is the United States has close ties with Obiang. Since the discovery of oil, the United States has been an integral part of funding and supporting Obiang. It has not always been this way though. In 1995 (before the discovery of oil) the Clinton administration closed the embassy and seized funding to the dictatorship, but since the oil has been found, a rosier picture has been painted by the United States of E.G.

With an estimated $4 billion dollars in revenue coming in annually from oil, little development has been made to help the locals. Family members and cousins hold top public offices. Obiang himself trusts nobody in his country to protect him so he hires bodyguards from Morocco. On the streets of Malabo, E.G.’s capital or any other city for that matter, there are no ATM’s, not a single bookstore or newspaper stand (foreign journalists were banned), and only 8,000 lucky residents are fortunate enough to have the internet (censored and monitored). In sum, $4 billion dollars does not leave the hands of Obiang and his close family and friends.

So what is Obiang doing with these billions of dollars? Presently, Chinese laborers are building what is known locally as Malabo II, a futuristic new capital that is rising from the jungle, stretching for miles. Obiang’s pet project, includes a louvered-glass headquarters for the state-owned radio and TV station, a gleaming oval home for the state-owned oil company, and an ostentatious blue-topped building set to house the prime minister’s office. But there are no signs yet of hospitals, schools, and other services likely to help the average Equatoguinean. The project does call for 10,000 moderate-income housing units, but critics still insist that the whole thing is a misguided use of megafunds in a country that desperately needs a health-care system, housing, education, rural roads, and a reliable power supply — not to mention an oil refinery that could keep the price of gas low for the locals.

With emerging superpower China entering the oil arena, the United States is stepping up its effort to show E.G.’s dictator just how much they appreciate him. Recently, a private U.S. security firm won a contract last year — approved by the Pentagon — to train E.G.’s army and Presidential Guard. With so much U.S. investment on the ground, keeping Obiang well protected is apparently essential.

Those that have been following the whole China-United States-Equatorial Guinea debacle from the beginning have pointed out some similarities of today’s situation compared to the cold war. This time, instead of facing the Soviets for political influence, the United States is facing the Chinese, both struggling to secure energy to secure future economic growth. Nobody is more aware of this than president Obiang himself. In late 2005, he visited China and, on his return, announced, “From now on, China will be our principal partner for the development of Equatorial Guinea.” Then, expertly playing the two sides against each other, Obiang visited Washington in early 2006, where Condoleezza Rice welcomed him as “a good friend” of the United States. Within months of that visit — despite its annual reports portraying E.G. as a land of corruption, arbitrary arrests, scant human rights, and freedoms denied — the State Department installed its first resident ambassador in E.G. in 12 years. It even gave the okay to open a consulate stateside, in Houston.

With the gloomy world economic outlook and unemployment figures snatching up most of the worlds press, the well-known humanitarian issues, Darfur, Congo, and Burma have been pushed to the back pages of the papers and turned into quick sound bites on local news. To find out where Equatorial Guinea fits in, it might get about as much press as the size of the country, very little.

[Chris Pedersen]

Buffett Buys Railroad

By: Chris Pederson

Warren Buffett, known in the finance world as the “Oracle of Omaha” turned many heads yesterday when he bought the 131-year-old Burlington Northern Santa Fe Corporation. Buffett is betting billions that future U.S. transportation will be carried out by railroads. The newly acquired railroad, traveling throughout the Midwest and to both borders carries grain, timber, and imports from Canada and Mexico. Although the east coast is littered with passenger and cargo trains, the vast Midwest and western coast has great potential for a more development and growth regarding railroad infrastructure. What does this mean for America and our future? Buffett, who has invested in oil and natural gas all over the world, has now looked for alternative ways to invest. As investors from all over and bankers on Wall Street obsess over each of Buffett’s moves, this could be a great sign for railroads and other alternatives to cars and trucks. With Buffet financial backing in the railroad industry, great strides and innovation can be made so that the U.S. can start diversifying the way goods are transported. It also sends a clear message to the world of oil investors, hinting that this might be the right time to diversify your investment. As the investments trickle into non-automotive companies that are looking for ways to move people and cargo, the U.S. can finally start moving in a direction where tires are not needed, only track.

China’s Blind Eye

On December 22, 2008, Guinea’s longtime dictator Lasana Conte died. Since then, military officers led by Captain Moussa Dadis Camara staged a coup and Camara declared himself president. In the months since Camara has been in charge there has been outrage from the African Union, European Union, the United States, and from the Guinean people. All had different ideas of where the country should go, but they all agreed that there was a very small window for an end to dictatorship and a chance towards democracy. Camara and his military cronies had just about enough on September 28th when 55,000 demonstrators showed up at the national stadium in Conkary rallying for democracy. Guinea’s answer was violence, 157 unarmed civilians were either shot or trampled while trying to flee the stadium while the army openly fired on innocent victims. There were reports of rape, torture, and inside sources say that Camara himself was the one that ordered the shootings. While the rest of the world was in disbelief, China made a move before the dust even could settle.
15 days after the killings in the stadium, the junta government announced a $7 billion deal with China. The deal includes oil and mineral rights in return for infrastructure This is a win-win situation for both countries. Camara and his thug government now have some cash and international credibility while China, unshaken by the brutality of the government they are doing business with now have new resources to feed their booming economy. The Chinese government has long proclaimed a policy of non-interference, making parts of Africa ripe for China’s picking. While the human rights agencies of the west fight ferociously to stop western firms from supporting brutal dictatorships across the world, China is now coming in and squashing any real progress. And who is feeding China’s desire for natural resources? Take a look at yourself in the mirror, actually take a look at the back of your mirror. It is probably made in China, as well as your sneakers and most of the other items that fill the room you are in. If something was going to stop China from working with bad governments it would have to be the west boycotting the materials being made in China. With the recession taking place in the United States and one on the forecast in Europe, dollars are going to be stretched and the way you make the most out of your buck is usually buying something with a label saying “MADE IN CHINA”.
By Chris Pedersen