4th September 2015

‘Window of opportunity’ for new LNG projects is gone because of supply glut, consultancy says – by Yadullah Hussain (National Post – September 4, 2015)

The National Post is Canada’s second largest national paper.

The window to build liquefied natural gas projects in Canada and elsewhere has closed amid a global supply glut, says global energy consultancy Wood Mackenzie.

“There is a clear reluctance by companies to stand down, but the reality is that the window of opportunity closed over six months ago for everyone, not just for Canada,” Noel Tomnay, vice-president global gas and LNG research for Wood Mackenzie said in an interview.

Qatar and Australia led the first two waves of LNG development with the U.S. spearheading the third wave, even as Canadian and East African proposals were stalled.

“Canada’s biggest competitor is not the U.S. — it is probably Mozambique,” Tomnay said, noting that these two regions would probably the play the role of niche, “strategic resources” for investors in the next wave of development that will cater to demand after 2022. Read the rest of this entry »

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2nd September 2015

Canada Illustrates Plight of Rich but Resource-Dependent Countries – by Kim MacKrael, Rhiannon Hoyle and Kjetil Malkenes Hovland (Wall Street Journal – September 1, 2015)

http://www.wsj.com/

Tepid economy, like those of Australia, New Zealand and Norway, shows perils of commodity swing

Ottawa, Sydney and Oslo – For a small group of the world’s most resource-dependent rich countries, the stalling economy of one of its members,Canada, is a stark reminder of how China’s slowing growth stands to shape the coming years.

The energy- and mineral-rich country’s economy contracted for a second consecutive quarter between April and June, as low prices for base metals and crude oil erode business investment and exports. Gross domestic product fell 0.5% on an annualized basis in the second quarter, Statistics Canada said Tuesday, and the first-quarter decline in GDP was revised to a 0.8% drop from an earlier estimate of a 0.6% contraction.

Output expanded in June, making the quarterly decline less sharp than many economists forecast, and the Bank of Canada has said it expects statistics to improve during the second half of 2015. But it has already lowered its growth forecast for the year to 1.1%, down from a previous forecast of 1.9%.

As the economies of the U.S. and many other wealthy countries begin to pick up speed, Canada’s woes so far this year are a harbinger of what could come for a small clutch of advanced economies that rely heavily on commodity exports—and demand from China—for their economic growth. Read the rest of this entry »

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2nd September 2015

Fresh wave of layoffs hits oilpatch, as Penn West, ConocoPhillips cut 900 jobs: ‘Good luck to all of us’ – by Claudia Cattaneo (National Post – September 2, 2015)

The National Post is Canada’s second largest national paper.

As Canada’s oil industry resizes itself to fit a sub-US$50 oil world, Penn West Petroleum Ltd. and ConocoPhillips’ Canadian unit announced 900 combined layoffs Tuesday, kicking off what is expected to be another wave of belt-tightening.

Also Tuesday, Pengrowth Energy Corp. joined Penn West in cutting its dividend.

In the early days of the oil price collapse last winter, the downsizing came reluctantly after years of labour shortages and largely did away with excesses.

As hopes for a quick price recovery evolved to consensus that OPEC’s price war to recapture market share from North American producers could mean low oil prices for years, the axe kept swinging and aimed at more targets — dividends, non-core assets, office space, perks.

Nine months into the oil price collapse, after a summer of still-worsening conditions, downsizing announcements have the feel of desperation. Canada’s oil and gas industry, powerless to influence global oil prices, is dismantling by a thousand cuts what took decades to build. Read the rest of this entry »

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1st September 2015

Why the Resource-Rich Canadian Government Is Always Poor – by Gabriel Yiu (Huffington Post – August 31, 2015)

http://www.huffingtonpost.ca/

Canada is the second-largest country in the world by total area. It has plentiful natural resources and a relatively small population of 35 million. Yet our government always claims it is short of money. Education funding has to be cut, healthcare resources are said to be insufficient, eligibility for Old Age Security is postponed from 65 to 67 and even Canada Post cannot afford to deliver mail to our homes.

Canada might be the first major western country that cannot afford to deliver mail to the homes of its people.

If you tell your friends overseas our situation, they might think that you’re joking.

Many Canadians accept the situation as normal, something that can’t be changed. Yet they do not question the absurdity of this reality.

Here are the world rankings of Canada’s natural resources:

Potash, #1
Uranium, #2
Oil, deposit #3 (production #6)
Nickel, #4
Diamond, #5 Read the rest of this entry »

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1st September 2015

Tragic story in Alberta government’s first fiscal update: A $6-billion deficit and soaring unemployment – by Claudia Cattaneo (National Post – September 1, 2015)

The National Post is Canada’s second largest national paper.

Alberta’s first fiscal update under the new NDP government paints a tragic picture of the once-booming oil province: a deficit of nearly $6-billion, and growing, despite higher income and corporate taxes; soaring unemployment; slumping manufacturing; and an expected 0.6% GDP contraction in 2015.

If that weren’t bad enough, the province is also reeling from a drought that is hurting its large agricultural sector as well as devastation from forest fires, which boosted the government’s disaster assistance expenses.

“There is no doubt that our big challenge is commodity prices that the government of Alberta does not control,” Alberta Finance Minister Joe Ceci told reporters after presenting the first-quarter forecast for 2015/2016 fiscal year revenue and expenses. “We all know that the price of oil has dropped dramatically in August. Nobody expected global oil prices to reach the levels they are at today.”

Indeed, Ceci suggested the deficit projection could swell to $6.5-billion by the time his government tables its first budget in October, and that the books won’t be balanced until 2018/2019. Read the rest of this entry »

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28th August 2015

Oil surges in best day since 2009 – by Jeff Lewis (Globe and Mail – August 28, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

CALGARY – Oil prices surged more than 10 per cent as world stock markets recovered from a sharp sell-off, lifting Canadian energy shares despite lingering concerns over wobbly Chinese demand and a worldwide supply glut.

In a sharp reversal, West Texas intermediate oil on Thursday jumped 10.3 per cent after U.S. oil inventories posted a surprise drop of 5.5 million barrels and data showed stronger U.S. economic growth. WTI closed at $42.56 (U.S.) a barrel. Brent, the global benchmark, rose $4.42 to settle at $47.56 a barrel.

The rally capped a string of losses that saw U.S. oil prices touch a 2009 low of $37 a barrel this week as fears over China’s economic health sent global markets into a tailspin.

The S&P/TSX capped energy index, composed of oil producers and service company providers, climbed 6.6 per cent as investors bought into a market that analysts said was oversold. Read the rest of this entry »

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27th August 2015

Keystone XL’s final blow from Barack Obama could come by Labour Day weekend – by Claudia Cattaneo (National Post – August 27, 2015)

The National Post is Canada’s second largest national paper.

As if conditions in Canada’s oilpatch weren’t bad enough, more pain could flow north from Washington, D.C., before the Labour Day long weekend, when President Barack Obama is expected to finally deny a permit to the Keystone XL pipeline.

The latest in the United States capital is that an announcement will be made next Thursday or Friday, when many are out of town, reducing potential for blowback, said a well-connected source.

After seven years of review and despite widespread U.S. public support, the President is expected to offer a convoluted rationale for spiking the Canadian project: that approving KXL would facilitate oil sands growth and make it more challenging for him to rally countries to unite for a greenhouse gas reduction deal in Paris in December; and that there is no need for it because the U.S. has plenty of oil of its own.

A denial has been widely expected since Senator John Hoeven, the North Dakota Republican, said last month that Obama would turn down the project in August. Obama has also been repeatedly dismissive of its benefits and earlier this year vetoed a Republican-backed bill that would have bypassed his State Department’s review. Read the rest of this entry »

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25th August 2015

Global commodity slump could hit parts of Canada hard – by Ian Bickis (Canadian Press/Toronto Star – August 25, 2015)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Petro-provinces like Alberta, Saskatchewan and Newfoundland will be especially hard hit as oil prices keep sliding amid fears about China’s economy.

Global commodity prices are tanking and they’re bringing Canadian markets down with them, though experts say certain provinces are going to feel the pinch more than others.

“It’ll feel like a recession, depending on where you live in the country,” said John Stephenson, chief executive of Toronto hedge fund Stephenson & Co. Capital Management.

He said everything from oil to metals to lean hog prices are dropping as weaker growth globally weighs on demand — a downward trend that took its toll on the world’s stock markets Monday.

“Virtually everything is down in price — and significantly down, not just a little bit,” said Stephenson. Read the rest of this entry »

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21st August 2015

Oil nears longest losing streak since 1986 as markets fall in worst bloodbath of the year – by Marc Jones (National Post/Reuters – August 21, 2015)

The National Post is Canada’s second largest national paper.

LONDON — World stock markets tumbled towards their worst week of the year on Friday and commodities got another kicking, as more alarming data from China sent investors scurrying to the safety of bonds and gold.

The data from China showed its giant manufacturing sector slowing at the fastest pace since the depths of the financial crisis in 2009, confirming the worries about its health that have preying on economist’s minds for months.

Emerging market assets took another hammering and oil prices were on track for their longest losing streak since 1986, as fears of a China-led deceleration in global growth gripped sentiment.

“The market is stuck in a relentless downtrend,” said Robin Bieber, a director at London brokerage PVM Oil Associates. “The trend is down — stick with it.”

China’s woes continued to roil commodities. Oil resumed its downward trend. U.S. crude was at a more than 6-year low, on track for its eight straight weekly decline as it slipped 0.5 per cent to $40.85. Brent nudged $46 a barrel. Read the rest of this entry »

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21st August 2015

Twilight over COP 21 – by Peter Foster (National Post – August 21, 2015)

The National Post is Canada’s second largest national paper.

If wind and solar were uneconomic when oil was $100 a barrel, they are wildly uneconomic now

A decade ago, Houston investment banker Matt Simmons (since deceased) received a too-respectful hearing from a bunch of Harvard alumni in Toronto for his theories about “peak oil.” His take, outlined in his book “Twilight in the Desert,” was that the Saudis, the world’s largest producers, had been lying about their reserves, which were on the point of catastrophic decline.

He predicted oil prices would hit $200 a barrel by 2010 (all prices in US$). His “solution” was Soviet levels of control of people’s lives. Simmons confirmed that peaksters neither understand nor like markets, which he described as a “500-pound wrecking ball.”

Canada acquired its own peak fanatic in the shape of Jeff Rubin, sometime chief economist at CIBC, who provided further proof that anti-consumerist moralism could quickly drain all traces of Economics 101 from even a professional’s noggin.

In the fall of 2007, Rubin predicted $100-per-barrel oil, and sure enough, oil soon hit $100. In January of 2008 he was predicting $150 oil within five years. Read the rest of this entry »

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20th August 2015

Oil producers brace for more cost-cutting ‘pain’ as prices threaten to fall below $40 – by Yadullah Hussain (National Post – August 20, 2015)

The National Post is Canada’s second largest national paper.

Oil’s price plunge to $40 prices this week will force producers to contemplate more cost-cutting measures at a time of great austerity.

The decline continued Thursday with futures sliding as much as 1.4 per cent in New York, trading near US$40 a barrel, after losing 4.3 per cent on Wednesday.

West Texas Intermediate for September delivery, which expires Thursday, declined as much as 59 cents to $40.21 a barrel on the New York Mercantile Exchange, and traded at $40.30 at 11:30 a.m. London time. The contract slid $1.82 to $40.80 on Wednesday, the lowest close since March 2009. The more-active October futures lost 59 cents to $40.68.

The plunge began Wednesday after the U.S. Department of Energy slashed US$6 off its average oil price estimate this year to US$49 per barrel, citing increases in global oil inventories.

“We get down to US$40 level, companies will have a hard time just to sustain their businesses,” Kyle Preston, analyst at National Bank Financial Inc. said in an interview. Read the rest of this entry »

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18th August 2015

Canada’s natural-resource wealth must be included on balance sheets – by Lyn Brown and Julie Desjardins (Globe and Mail – August 18, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Lyn Brown is managing director of the Council for Clean Capitalism. Julie Desjardins is director, reporting and capital markets, of the Chartered Professional Accountants of Canada.

The amount of natural-resource wealth within Canada’s borders is impressive. Natural-resource assets, which include timber, oil, natural gas and other subsoil minerals, have been valued by Statistics Canada at about $1-trillion. This puts Canada in an enviable position relative to other countries.

As with financial and produced or physical assets, natural capital (land, ecosystems and natural-resource stock) generates economic value in various ways. Accounting for Canada’s natural capital enables informed policy and capital-allocation decision making. While Statistics Canada has valued our natural-resource assets, it has not as yet fully incorporated natural capital into its national macroeconomic accounts.

To understand the importance of accounting for and integrating natural capital in public accounts, consider the private sector. Read the rest of this entry »

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18th August 2015

Will a smaller global commodities appetite benefit Canada? – by Jeff Rubin (Globe and Mail – August 18, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Popular opinion suggests any slowdown in resource demand from China, which is becoming more desperate in its attempts to revive its flagging economy, will be especially bad for a commodity-dependent economy such as Canada’s.

That may well be the case, but it does overlook at least one key silver lining. Sharply lower commodity prices are now offering Canada an opportunity to push the reset button on an economy that’s become distorted by an overdependence on resource markets.

Whether you’re talking about oil, coal, or copper, it seems as if all roads have led to China for going on 20 years. With the sun now appearing to set on China’s track record of robust economic growth, questions are now being asked about whether the country might follow the example of Japan’s economy, which set the world on fire decades ago before sliding into a protracted period of stagnation that it’s still struggling to shake off.

Whether it’s stimulus spending, rate cuts or a recent devaluation of the yuan, Beijing’s attempts to prod China’s once seemingly unstoppable manufacturing sector back to its former heights continue to fall short. Read the rest of this entry »

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17th August 2015

Alberta and Norway: Two oil powers, worlds apart – by Brian Milner and Jeff Lewis (Globe and Mail – August 15, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

OSLO AND CALGARY — s world oil production outstrips demand, China’s outlook darkens and prices plumb levels not seen since the Great Recession, energy-exporting countries around the world face a prolonged period of thinner revenues and deepening economic woes.

The chill winds have now reached Norway, long regarded as the world’s most prudent manager of an economy heavily exposed to the ups and downs of commodity prices.

Faced with the steepest decline in oil and gas spending in a decade and a half and the biggest job losses since the global financial meltdown, the centre-right Norwegian government is pledging to tap more of the country’s accumulated resource wealth in an effort to stanch the bleeding.

The sudden decline in its fortunes has put a spotlight on Norway’s unusual handling of its gusher of resource cash over the years, parking 100 per cent of the government’s revenue from royalties and dividends in a fund that is barred from investing a krone in the domestic economy. Read the rest of this entry »

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14th August 2015

Ontario sets stage for Energy East battle as watchdog says pipeline’s risks outweigh benefits – by Yadullah Hussain (National Post – August 14, 2015)

The National Post is Canada’s second largest national paper.

TORONTO – Ontario’s energy regulator has cast doubts over the economic benefits of TransCanada’s Energy East crude oil pipeline proposal, setting the stage for a clash between the province and Ottawa at National Energy Board hearings on the project.

“What we have found is there is an imbalance between the economic and environmental risks of the project and the expected benefits for Ontarians,” Ontario Energy Board vice-president Peter Fraser said Thursday as he released its review requested by the province’s energy ministry on the $12-billion project Thursday.

TransCanada’s proposal to transport 1.1 million barrels of oil per day from Alberta to eastern refineries and an export terminal in New Brunswick partially through an existing pipeline is currently being reviewed by the NEB.

“I can assure you that Ontario plans to be an active intervenor in the National Energy Board approval process and our participation will reflect the concerns of the Ontario public to the federal regulator,” Ontario’s energy minister Bob Chiarelli said in a statement. Read the rest of this entry »

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