MONTREAL – A plan launched by the Quebec government to help fund oil exploration on a remote Gulf of St. Lawrence island is raising concerns the province is taking too big a risk with taxpayer cash.
Premier Pauline Marois announced Thursday her government would finance up to $115 million in joint ventures with several oil companies to drill on Anticosti Island, an endeavour she says could bring $45 billion in benefits to Quebecers over the next 30 years.
Marois unveiled the project at a time when her minority Parti Quebecois government is facing attacks over its economic record. It also came amid the expectation she will call an election in the coming weeks.
But one critic of the project says the amount of recoverable unconventional oil locked underneath Anticosti has been exaggerated, insisting no more than 1.5 per cent of its estimated 30-billion-plus barrels can actually be extracted.
Marc Durand, a retired geological engineer, says the government’s plan has the potential to bring in around $40 billion.
But he added it would cost roughly three times that amount — $120 billion — to employ the technology needed to get it out of the ground and to market.
Durand urged the PQ to exercise more caution when it comes to the taxpayer’s dime.
“We are so far from any possible profitability in Anticosti that investing public money is like saying, ‘I will fix my budgetary problems by buying a lottery ticket,’ ” Durand, a former professor at Universite du Quebec in Montreal, said Friday.
“There’s much less than a one-in-1,000 chance of recouping this investment and these are public funds.”
Quebec Liberal Leader Philippe Couillard said Friday his party supports exploiting fossil fuels in a responsible manner, but he criticized the PQ plan for putting most of the risk on the public’s back, rather than on the private sector.
“What we have in front of us is a hastily concocted project, where we don’t know enough about the nature of the resource (and) the profitability,” said Couillard, who added the initiative appears to signal that an election call is imminent.
“I think the electoral result was much more important for that government than the financial result.”
At Thursday’s announcement, Marois herself acknowledged the Anticosti ventures have their risks.
“There are much bigger risks taken on other projects that also have hypothetical potential,” the pro-independence leader said.
“We’re talking about $45 billion in potential benefits. I think that’s enough to make some people dream.”
Quebec’s deals involve oil companies Petrolia Inc. (TSXV:PEA), Corridor Resources Inc. (TSX:CDH), Junex (TSXV:JNX) and Maurel & Prom.
Petrolia’s vice-president of business development said the company estimates between two and five per cent of the Anticosti reserve can be exploited.
Even if only two per cent can be recovered, Isabelle Proulx said the deposit would still turn a profit.
“If we have success, it will be profitable,” said Proulx, who noted there are many steps to the project.
“At this stage, there’s always a risk associated with financing. But as Ms. Marois said yesterday, this financial risk is small compared to what we can get out of it.”
Meanwhile, the Quebec government’s announcement also caught the attention of the oil industry in Western Canada, where the long-dismissed Anticosti reserve jumped onto investors’ radar screens, says one Calgary-based analyst.
David Popowich of Macquarie Securities said the PQ’s allocation of public funds to drill for unconventional oil is unique in North America.
He added the move is even more unusual because, unlike most unconventional plays, the sparsely populated island, known for its flora and fauna, has no existing infrastructure.
Popowich described Quebec’s decision as a gamble, since no one knows how much of the oil is recoverable.
“Oil and gas exploration is just inherently risky, so it is kind of unusual that they’re participating in it, but every business has its risks, I guess,” said Popowich.
“There have been lots of examples of unconventional oil plays where they haven’t worked out … It’s not a negligible possibility that this could be a non-economic play.”
Popowich, however, said the project could renew the industry’s interest in Quebec. He thinks many companies were spooked last year when the government introduced a moratorium on shale-gas exploration and drilling activities in the St. Lawrence River valley.