U.S. tycoons Bill Gates and Warren Buffett tour Alberta oilsands

As reported in the Calgary Herald

by Jon Harding

Two of the world’s richest people, Microsoft Corp. founder Bill Gates and his friend, American investment magnate Warren Buffett, quietly flew into northeastern Alberta on Monday, where they took in the oilsands, apparently with awe.

Buffett and Gates — No. 1 and 3, respectively, on the world’s richest people list in the March edition of Forbes magazine — were hosted by a group that included Canadian Natural Resources Ltd. and the Canadian Association of Petroleum Producers at Canadian Natural’s $9.3-billion Horizon oilsands development.

Representatives from CAPP made a presentation to the American power duo, who were pegged by Forbes in the spring as having a collective net worth of a cool $120 billion US and who could be looking for secure places to make resource-related investments now that the U.S. dollar seems to be recovering.

“We were asked to come up and give a general overview on the oilsands and Canada’s role in the world of energy in general, which we did,” said Greg Stringham, CAPP’s vice-president. “They were exercising curiosity, basically saying, ‘Wow, this is neat.’ ”

The two tycoons were hosted by, among others, Canadian Natural vice-chairmen Murray Edwards and company chairman Allan Markin, who are among Canada’s wealthiest people.

According to Forbes’ March list, Buffett, 77, known widely as America’s most beloved investor and whose assets are largely held within his Omaha, Neb.-based insurance firm Berkshire Hathaway, was worth an estimated $62 billion US. Computer wizard Gates, 52, who had been the richest man on the planet for 13 straight years, had a net worth of $58 billion US.

The prestigious group made its way to the Horizon site about 100 kilometres north of oilsands hub Fort McMurray. Horizon will be Alberta’s fourth major oilsands mine when first production begins this fall.

The Horizon project has a landing strip, which has been used by Canadian Natural to shuttle thousands of workers to and from the project during its four-year construction.

Canadian Natural spokesman Rob Larson confirmed the tour involving Gates and Buffett happened, but he said Canadian Natural management would not comment beyond that.

One source said Gates and Buffett, who in recent months said he favours investing in the Canadian oilsands because it offers a secure supply of oil for the United States, visited the booming hub to satisfy “their own curiosity” but also “with investment in mind.”

As of 2006, Buffett was an investor in American oil giant ConocoPhillips, which owns sizable oilsands assets in a partnership with Canada’s largest oil company by market value, EnCana Corp.

Alberta’s Athabasca oilsands are one of few oil basins in the world where production is slated to grow in coming years and the massive play has been the focus of global attention.

While the thick, oil-soaked sands are expensive to process — some observers now say oil prices have to be above $70 to $80 US a barrel to make oilsands economics work — there has been a rush by companies into the sector over the past half-dozen years.

There is presently $125 billion worth of new construction being planned, which when combined with operating expenses add up to a whopping $215 billion over the next five years.

In June, CAPP reduced its estimate for oilsands production about 10 per cent to 4.8 million barrels per day by 2020 from a previous estimate of 5.3 million bpd, due to “constraints” unrelated to oil prices. Today, production stands at a little over one million barrels a day.

Labour availability and inflation around labour and materials such as steel stand to create a lag in previous growth forecasts.

The past few months have been particularly tumultuous for the oilsands industry.

Shares of companies active in the region have been hammered alongside falling oil prices, but are considered to be blue-chip, long-term investments.

The industry has also been under siege from environmental groups and foreign governments, including U.S. mayors, who voiced concerns about the industry’s impact on air quality due to its level of emissions, on water quality in the Athabasca River and about the slow rate of land reclamation by industry players.

Industry stalwarts Suncor Energy Inc. and the Syncrude Canada Ltd. joint venture have been mining oilsands crude for more than 30 years, followed more recently by Royal Dutch Shell PLC.

Fort McMurray Mayor Melissa Blake was not aware of the visit by Gates and Buffett, but the politician had been in Victoria since the start of the week.

She said the profile of one of the world’s largest emerging energy plays continues to grow and visits to the area by high-profile investors, politicians and even royalty have become common.

“It’s astounding to me, frankly, the calibre of these individuals to just seem to arrive quietly in our community,” said Blake.

Buffett told Fortune magazine in 2006 that he would begin giving away 85 per cent of his wealth, with most of it going to the Bill & Melinda Gates Foundation, the world’s largest philanthropic organization.

One Response

  1. Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

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