Canada borrows a page from Mexico on oil control
Is Canada planning to become a Mexico of the north on oil policy, with Petro-Canada its state oil corporation and expanding duplicate of Pemex, Petroleos Mexicanos?
Pemex is the vast government monopoly formed from the nationalization of all foreign oil companies in March 1938 to control Mexico's oil industry, now one of the world's largest.
Some days ago, Petro-Canada announced its third purchase of the Canadian operations of a foreign oil company, this time the integrated refining and retailing facilities in Canada of Belgian-owned Petrofina.
The Petrofina purchase will provide Petro-Canada with a refiner in Montreal and a gas station chain serving Quebec, Ontario, and the Atlantic provinces. Petro-Canada's earlier takeovers of once US-owned Atlantic Richfield and Pacific Petroleums, in 1976 and '78, gave the state oil company Western Canadian operations. So Petro-Canada, like Pemex, will soon have a nationwide gas station chain.
Petro-Canada joins the ranks of the largest oil companies herE, all American-owned. These include Imperial Oil Ltd. (Exxon in the United States), Gulf, Shell, and Texaco. Petro- Canada's total assets will still be smaller than any one of the US giants in Canada, however.
Many Canadians don't like this comparison with Mexican ownership of their oil industry, a nationalization produced long-lasting anti-American overtones. But the Trudeau government's interventionist National Energy Program, announced Oct. 18, follows on the Mexican model with Petro- Canada's mandate to roam the country and buy out foreign-owned oil companies as only one part of the package.
In a manner of speaking, the Canadian government plans to travel halfway along the Mexican route of total domestic ownership. During both last winter's federal election and in the National Energy Program, Trudeau has promised that the Canadian oil industry, now 70 percent foreign-owned, would be 50 percent Canadian by 1990.
A major differences from the Mexican formula is that expanded Canadian ownership need not be by the government; it can also be private.
An though Petro-Canada is so far the only company to buy out foreign oil companies here, rumors abound that Brascan Ltd., a large, private, integrated energy operator with a lot of cash, and Canada's state-owned and well-run Canadian National Railways are eyeing the likes of Gulf Canada and Texaco for further takeovers.
But Canada's version of the Mexican model goes much further than company takeovers (which will be through an evolutionary process rather than the Mexican revolutionary one.)
For example, by applying a complex formula, the new energy policy will transfer the generous depletion allowances for frontier exploration from the foreign-owned companies to those proving 75 percent Canadian ownership.
In addition, companies exploring for oil on federal frontier properties (renamed in nationalistic style "Canada Lands") must not only prove 50 percent Canadian ownership, but assign 25 percent of all their discoveries to the federal government.
Among the hardest-hit by the new energy program could be the US multinational oil companies deeply involved in exploring the Hibernia offshore Atalantic Ocean operation close to Newfoundland. It is already touted as being larger than the North Sea petroleum reserves in British and Norwegian waters.
Some random surveys indicate that the Canadian man in the street likes the idea of buying his gas from PEtro-Canada, even though Canadanians will have to pay for Petro-Canada's $1.2 billion buy-out of Petrofina through a nationwide increase in the present federal gasoline tax.
Executives of the foreign oil companies are charging in public that the parliamentary act leading to 50 percent Canadian ownership of their oil industry is merely a substitute for old-fashioned corporate expropriation.