Chevron made waves in the business world when it announced its October 6 sale of 30-percent of its holdings in the Alberta-based Duvernay Shale basin to Kuwait Foreign Petroleum Exploration Company (KUFPEC) for $1.5 billion.

It marked the first North American purchase for the Kuwaiti state-owned oil company and yields KUFPEC 330,000 acres of Duvernay shale gas. Company CEO and the country's Crown Prince, Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah, called it an "anchor project" that could spawn Kuwait's expansion into North America at-large. 

Kuwait's investment in the Duvernay, at face-value buying into Canada's hydraulic fracturing ("fracking") revolution, was actually also an all-in bet on Alberta's tar sands. As explained in an October 7 article in Platts, the Duvernay serves as a key feedstock for condensate, a petroleum product made from gas used to dilute tar sands, allowing the product to move through pipelines. 

And while Kuwait — the small Gulf state sandwiched between Iraq and Saudi Arabia — has made a wager on Alberta's shale and tar sands, Big Oil may also soon make a big bet on Kuwait's homegrown tar sands resources.

"Kuwait has invited Britain’s BP, France’s Total, Royal Dutch Shell, ExxonMobil and Chevron, to bid for a so-called enhanced technical service agreement for the northern Ratqa heavy oilfield," explained an October 2 article in Reuters. "It is the first time KOC will develop such a big heavy oil reservoir and the plan is to produce 60,000 bpd from Ratqa, which lies close to the Iraqi border [in northern Kuwait]…and then ramp it up to 120,000 bpd by 2025."

In the past, Kuwait has said it hopes to learn how to extract tar sands from Alberta's petroleum engineers.

Canadian Tutelage

Back in 2007, Kuwait had much more ambitious plans for the Ratqa oil field.

Though the current goal is to suck 120,000 barrels per day of heavy oil out of the field, back in 2007 the goal was 900,000 barrels per day by 2020. And Alberta's petroleum engineers would lend their expertise to the cause, or at least that was the plan for Kuwait Oil Company at the time. 

"Unless we seek the experience of the industry here, we will not be able to reach our target," Ali al-Shammari, at the time the deputy managing director for finance for the Kuwait Oil Company, told the Calgary Herald. "We will need [international oil companies'] help in developing the reservoirs and may also consider the options of signing enhanced technical services agreements."

Kuwait's entrance into Canada depicts how important Alberta's tar sands have become for the global geopolitical landscape. And Kuwait opening its doors to the oil majors depicts the country as an emerging player in the global oil market.

Geopolitics At Play 

The Islamic State — formerly known as the Islamic State in the Levant (ISIL)— has established what it calls a Caliphate in both northern Iraq and large swaths of Syria.

Fueled by $25 to $60 per barrel oil sold on the black market, Kuwait has largely escaped from the day-to-day newscycle. But as the famous Mark Twain quip goes, "History doesn't repeat itself, but it does rhyme."

The Ratqa oil field is the same geological formation as the Rumaila oil field, which sits in southern Iraq. Iraq and Kuwait fought a war over the field in early-1990s, in which the United States led the call to arms against former President Saddam Hussein: Operation Desert Storm, the first Gulf War. 

In 2010, Iraq and Kuwait signed an agreement — an armistice really — to share the border oilfield. 

Further, Wikileaks U.S. Department of State diplomatic cables made public by whistleblower Chelsea Manning show that the U.S. government has kept a close eye on the Ratqa oil field, as well as on which U.S.-based oil companies stood to win and lose if developed. 

Though almost two and a half decades have gone by since Operation Desert Storm and Saddam Hussein is no longer even alive, one thing remains constant: oil still runs the show in the Persian Gulf region. And this time around, it's tar sands oil — the same oil running the show in Alberta.

Photo Credit: esfera | ShutterStock

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The Globe and Mail’s Report on Business reported Friday that investors are reconsidering the viability of the Alberta tar sands as a worthy venture.

After putting numerous assets up for sale earlier this year, tar sands companies have so far come up empty-handed. With operating costs constantly rising, unstable oil prices and dropping revenues, major energy corporations are losing deals due to skittish investors.

They are being forced to hold off on selling what they anticipated would be valuable assets after receiving less than enthusiastic bids.

Suncor Energy Inc., Canada’s largest oil company has scaled back its spending by $1 billion from last year as a means of offsetting lagging revenues.

Recent predictions by the International Energy Association and British Petroleum show that instead of a rise in the demand for Canadian crude oil, Canada’s prime export destination—the United States—is on its way to becoming the world’s largest energy producer, potentially becoming energy self-sufficient by 2020.

There are American companies, such as Murphy Oil based in El Dorado, Arkansas, who are considering selling off their stake in Canadian oil companies. The Houston-based Marathon Oil Corporation spent the last seven months in talks to sell part of its 20-percent stake in the Athabasca Oil Sands Project before the deal fell through. The company has declined to say what went wrong.

Environmental journalist Andrew Nikiforuk warned Canadians almost three years ago that government overspending to develop fossil fuels and a failure to diversify would lead to the industry’s collapse. In an opinion piece for The Tyee, he wrote about the dangers of allowing the Canadian dollar to become to closely tied to the price of oil, something that was already beginning to happen at the time:

“For better or worse Canada's economic fate is now chained to oil exports and oil price shocks. That's what happens when a nation supplies the United States with 20 per cent of its oil and refuses to have a national conversation about the consequences.”

Recent stocks reports show that Canada’s biggest oil companies have taken a turn for the worse.

In April, major companies including Shell, Exxon and BP, were trading at the lowest numbers seen in nine months.

These numbers cast doubt on the Harper government’s assertion that oil sands production will triple by 2035. If BP's predictions are correct, some say Canada will be lucky to hold steady at current levels of export to the US, let alone increase it by millions of barrels per day.

The fossil fuel industry may in fact be undermining its own economic viability. The rise of natural gas production via hydraulic fracturing is at least partially to blame for the drop in demand for crude oil down south – due to the high volume and availability of shale gas.

Investors' wariness will also have a huge impact on development should the Canadian and America governments approve the Keystone XL and Northern Gateway pipelines.

With willing investors dwindling, it's hard to say who will be willing to risk the money to build more tar sands insfrastructure.

Image Credit: Kris Krug via flickr, used with permission.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.