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Anticosti: A fantasy-based economy

In our blog, columnist Hugo Séguin writes, "The possibility that there might be commercially viable oil reserves on Anticosti Island in the St. Lawrence Gulf has people dreaming. To hear what some politicians have to say, our economy depends on it.

But we don’t know how much oil there is. Or whether it is economically viable for extraction.

Premier Marois has suggested that with $45 billion of potential benefits, it would be completely irresponsible not to proceed.

No one has yet succeeded in demonstrating the presence of economically exploitable oil on Anticosti. So far, it is considered an “undiscovered resource.” External auditors reported the potential presence of 31 billion barrels of oil on Anticosti, while hastening to say that “there is no certainty that any portion of these resources will be discovered,” and that, “if discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.”

We are talking here about possible reserves. In 2000, the Alberta Securities Commission put it well when they explained that reserves are like fish:

  • Proved + Developed reserves – The fish is in your boat. You have caught the fish. You have weighed the fish. You will eat the fish.
  • Proved + Undeveloped – This fish is on your hook. You are getting read to net him. You can finally get a sense of its real size. It had looked bigger before, from further away.
  • Probable – There are fish in the lake. You may have caught some recently. You might even be able to see them, but you haven’t caught any yet today.
  • Possible – There is a lake. Someone told you that there were fish there. You have a boat with you. You could use it, but you might as well do something more fun instead. Maybe golfing?

In other words, “possible reserves” means that you are swimming in uncertainty and could very well lose your time and money. Oil exploration is risky and expensive. Unable to raise the necessary funds in the private sector, companies Petrolia and Junex have turned to the government of Quebec to finance this risky endeavour.

In the event that we discover significant quantities of commercially exploitable oil, it will take a decade before we begin to reap the benefits in the form of dividends, royalties and tax revenue. Meanwhile, Quebec’s economy is at the mercy of the changing global economy. 

Jacques Parizeau recently commented that this is the first time in 30 years that he’s worried about the economic future of Quebec. He cited recent studies shoving the erosion of business productivity, falling private investment, and declining exports. He might have added that from 2000 to 2010, Quebec’s manufacturing sector shrunk by 30%.

In a highly competitive environment, business productivity and our work force, our ability to innovate and create the businesses that will fit into globalized value chains are better guarantees of long-term economic health than sitting on a big oil bubble.

It is unclear how a possible – and distant – oil exploitation with highly uncertain economic and environmental benefits would support the real economy and help our businesses find their place in the international market.

As is explained in Quebec’s new industrial policy, our companies are facing ruthless competition at the international level, and only the most productive, the most innovative and the most flexible companies will win. The policy also says that faced with the rising costs of energy and raw materials, companies from all sectors and regions must innovate and make significant productivity gains.

It remains to be seen what political parties and economic decision makers will favour in the coming months: a fantasy economy that monopolizes much of the economic debate, or the real economy of today and tomorrow.

The dream of our very own petro-state must be seen for what it is: a peripheral issue that diverts attention from more important, fundamental issues, for the benefit of a very small number of individuals and companies wishing to use public funds to support their highly speculative investments."