31st October 2014

Energy East is worth the fight – by Claudia Cattaneo (National Post – October 31, 2014)

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

TransCanada Corp.’s twin-cities news conference Thursday to announce the filing of its Energy East application to the National Energy Board was pipeline theatre at its finest.

After 18 months of planning, the company presented to the world a 30,000-page document — filling 68 binders in 11 official-looking boxes — to provide evidence in support of the $12-billion project.

The Calgary-based company pulled out all the stops: There were panels of top executives in both Toronto and Quebec City to explain the benefits, representatives of business, trade unions, and municipalities present to demonstrate the depth and breadth of support, simultaneous French/English translation and no question left unanswered — about whether the project threatens beluga whales, whether it contributes to climate change or whether the company deserves to be trusted given some recent incidents in its system.

“At over 30,000 pages, the document is one of the most extensive regulatory applications ever developed in our history,” Russ Girling, president and CEO of TransCanada told media in Toronto. “The final result is a body of work that I believe achieves what we set out to do many months ago, and that is to listen — we listened to communities, businesses, governments, landowners and other stakeholders across this country.” Read the rest of this entry »

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31st October 2014

Alberta pushes for rule change to spur Chinese investment – by Nathan Vanderklippe (Globe and Mail – October 31, 2014)

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.

BEIJING — Alberta’s new political leadership is calling on Ottawa to take another look at foreign investment rules blamed for a dramatic drop in energy investments from China.

When the federal government gave its approval of the $15.1-billion (U.S.) takeover of Nexen Energy ULC in late 2012, it came with a caveat: a raft of new policies intended to ensure such a deal would not happen again. Canada is not “for sale to foreign governments,” Prime Minister Stephen Harper said as he effectively blacklisted state-owned companies from further oil-sands takeovers.

The guidelines sparked worry in China, and prompted warnings from the energy industry, bankers and lawyers. The guidelines, some have said, are discriminatory against China, and have blocked a major source of money that could be used to build a new generation of Fort McMurray-area projects.

Now, the Alberta government itself is taking up those concerns with the federal government, in hopes of again prying open the spigots from China. “We are urging a review of some of the quick changes that were done to our Investment Canada Act,” said Ron Hoffmann, the province’s newly named senior representative for the Asia-Pacific Basin.

Read the rest of this entry »

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28th October 2014

Crude prices dive on Goldman Sachs forecast of $70 oil – by Shawn McCarthy, Carrie Tait and Jeffrey Jones (Globe and Mail – October 28, 2014)

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.

OTTAWA and CALGARY — Crude prices dove below $80 (U.S.) a barrel in trading Monday after Goldman Sachs Group Inc. released a grim forecast that argued prices have further to fall and won’t recover until some U.S. unconventional oil producers are squeezed out of the market.

The United States has been the world’s fastest growing crude producer thanks to the shale oil boom on North Dakota and Texas, but Goldman said the pace will slow as North American crude prices plunge as low as $70 a barrel by next spring. They forecast West Texas Intermediate will average $75 a barrel in the second half of 2015, and $80 in 2016.

“We are lowering our oil price forecast to reflect the required slowdown in U.S. production growth,” Goldman analysts wrote. They rejected any suggestion that top producers from the Organization of Petroleum Exporting Countries, led by Saudi Arabia, would come to the rescue of global producers.

“We believe that OPEC will no longer act as the first-mover swing producer and that U.S. shale oil output will be called upon to fill this role,” they said. Read the rest of this entry »

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23rd October 2014

B.C. remains ‘high-cost environment’ despite lower LNG tax rates, industry group says – by Geoffrey Morgan and Yadullah Hussain (National Post – October 22, 2014)

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

CALGARY/TORONTO – The B.C. government slashed its tax rate proposal for its nascent liquefied natural gas industry in a bid to entice proponents to the West Coast, but some industry players still believe the province has not gone far enough to roll out the welcome mat.

Mike de Jong, B.C.’s finance minister, said he is confident the new rules introduced Tuesday are fair and balanced, but the province is not taking anything for granted. “These proponents have to make decisions worth billions of dollars, and there is still a lot of work to be done,” he said in an interview.

The new Liquefied Natural Gas Income Tax Act would tax an LNG project at a rate of 1.5% when production begins, rising to 3.5% after capital costs are recovered. That rate will rise to 5% after January 1, 2037 — when the government expects the LNG industry will be well established within the province.

“We believe this overall framework strikes the right balance between a competitive and economic environment and a fair return to British Columbians,” Mr. de Jong said in statement announcing the tax.

In February, B.C. floated the idea of a two-tiered tax system for proposed LNG projects, which super-cool natural gas into its liquid state for export off the coast. In addition to adding a third tier, the province Tuesday reduced the rate at which it would tax a project’s net income. Read the rest of this entry »

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23rd October 2014

Oil: Blind-sided by Technology – by Gwynne Dyer (October 19, 2014)

http://gwynnedyer.com/

“The price of oil will hit its floor and it will rise again,” President Nicolas Maduro assured Venezuelans, whose shaky economy depends critically on a high oil price. “Venezuela will continue with its social plans. Venezuela will move forward.”

No it won’t, and neither will Russia, Iran, or Nigeria. The only major oil exporters that are not in deep trouble are the Arab countries, whose governments have some room for manoeuvre because of low production costs, relatively small populations, and big foreign currency reserves.

Since June the cost of a barrel of Brent crude, the benchmark for world oil prices, has fallen by almost a quarter, from around $110 a barrel (where it was stuck for the past four years) to just above $80 a barrel. Last month, for the first time in decades, Nigeria exported no oil at all to the United States. Even at a big discount, Americans just don’t need it. And the main reason for all that is fracking.

American production has almost doubled in the past five years thanks to the new drilling technologies, and the United States overtook Russia last year to become the world’s largest producer of oil and gas combined. (Saudi Arabia comes a distant third.) With production soaring and world demand for oil stalling due to slow economic growth, a collapse in prices was inevitable. The question is how far they will collapse, and for how long.

The answer is probably not much further, for the moment – but they could easily stay down in the $75-$85 range for a couple of years. Read the rest of this entry »

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17th October 2014

Panic time: As oil goes, so does Canada’s economy – by David Parkinson (Globe and Mail – October 16, 2014)

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.

Feel free to panic about oil.

Okay, on a day when the stock market sell-off teetered on the edge of a soul-crushing rout (before bouncing back to merely awful), this might seem like I’m sounding the alarm bell about the wrong market. But it’s not like we’ve never seen an October stock market slump before. ’Tis the season when money managers, eyeing their Oct. 31 fiscal-year-end positions, get nervous and jerky in the knees.

Yes, the Canadian stock market is down 11 per cent since early September, but let’s try to remember that this was after rising 23 per cent in the 12 months prior. This is normal and manageable. A standard-order correction in stocks, even if it’s a sudden and dramatic one, is not likely to undermine Canada’s economic recovery.

But oil just might.

The undisputed champion of fossil fuels is falling like a skydiver with an anvil parachute; down 15 per cent in a little over two weeks, nearly 25 per cent in the past four months. The statement that makes about the spiralling gloom over the global economy is bad enough in itself. Read the rest of this entry »

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17th October 2014

In Alberta, anxiety grows over declining oil prices – by Jeffrey Jones (Globe and Mail – October 16, 2014)

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 — Alberta’s oil patch and government are watching nervously as the slump in world oil markets threatens the province’s economic boom.

The price of West Texas Intermediate (WTI) crude, a grade used as a benchmark in pricing, fell slightly to $81.78 (U.S) a barrel on Wednesday, extending a recent rout that has taken it down 10 per cent this month alone. Oil prices have tumbled as the demand for crude in major economies has fallen and producing countries have stared each other down, refusing to cut output for fear of losing market share.

For Alberta, the oil plunge is rekindling bitter memories. In the financial crisis of late 2008 and early 2009, skidding oil prices and a credit crunch forced the Canadian industry to cancel or shelve as much as $90-billion (Canadian) worth of energy expansion plans, many in the oil sands. At the time, WTI sank below $40 (U.S.) a barrel.

Suddenly, some high-cost projects in Alberta are again at risk, and sustained weak pricing could hamper the industry’s current forecast for oil sands output to double over the next decade. Any cutbacks will reverberate through the Alberta economy, which has driven economic growth in Canada in recent years.

Energy prices weigh “extremely heavily” on the whole Alberta economy, said Douglas Porter, chief economist at BMO Capital Markets. Read the rest of this entry »

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15th October 2014

A market fall – and Canada’s suddenly vulnerable energy sector – by David Berman and Brian Milner (Globe and Mail – October 15, 2014)

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.

Canadian stocks hit a record high six weeks ago, but have been on a downhill run ever since as nervous investors act on growing worries about deteriorating global conditions and their debilitating effect on demand for Canada’s energy and other resources.

When they returned on Tuesday from the Thanksgiving holiday, traders drove down the benchmark Canadian index 190.7 points, or 1.3 per cent, to 14,036.68. The losses mean the Toronto stock market has now fallen 10.4 per cent since the start of September. Crossing the 10-per-cent threshold signals a market correction and puts the TSX halfway down the path to a full-fledged bear market. This is a troubling milestone, because if stocks continue their slide, it will put a severe dent in the value of individual investments as well as the mutual and pension funds that Canadians count on for retirement.

The list of global stresses is long, including a slowdown in China, a dramatic weakening of the once strong German economy, deepening woes elsewhere in Europe, increased strife in the Middle East, and the spreading Ebola scare. And they do not bode well for Canada, because they would force it to become more reliant on the United States, the one major economy still expanding.

If world energy prices keep dropping from weaker demand and a global glut caused partly by a surge in U.S. production that has sharply reduced imports to the United States, the effects will be felt not only in Alberta but across the Canadian economy. Read the rest of this entry »

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14th October 2014

Opposition builds to Energy East pipeline plan – by Shawn McCarthy (Globe and Mail – October 14, 2014)

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.

OTTAWA — TransCanada Corp. faces a rough ride in Central Canada over its proposed $11-billion Energy East pipeline as industrial users and natural-gas distribution companies warn they’ll be short-changed by the company’s plan to switch the pipeline to gas from oil.

Both Quebec and Ontario governments plan to intervene in the National Energy Board review, which will kick off when TransCanada files for regulatory approval later this month. Both provincial governments are being urged to defend their natural gas customers who say their interests are being sacrificed to western oil producers.

Quebec’s regulatory body, Régie de l’énergie, held hearings last week on the Energy East plan, and will provide advice to the Liberal government on whether the project benefits the province.

In the hearing, India-based IFFCO Canada Enterprises Ltd. warned it will cancel plans to build a $1.6-billion fertilizer plant in the province if it can’t secure a reasonably priced source of gas in light of TransCanada’s plan to transform its west-to-east mainline to carry crude.

The province’s biggest gas distributor, Gaz Métro, plans to condemn the project as it is currently structured when it comes before the federal regulator for hearings. Read the rest of this entry »

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9th October 2014

The long and short on the stunning drop in oil prices – by Eric Reguly (Globe and Mail – October 9, 2014)

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.

ROME — The commodities markets can work in mysterious ways, and oil is certainly doing that now. While the common assumption is that the speculative short positions held by the hedge funds are overtaking the market, they are in fact greatly outnumbered by the speculative long positions. That means more hedgies hope to profit from rising prices than falling ones.

That’s a brave bet when oil prices are in something close to freefall. As oil prices plunge, it is the longs, not the shorts, who are looking vulnerable.

In late September, the speculative long positions on U.S. oil prices – West Texas intermediate (WTI) is the benchmark – was about 420,000 contracts (each contract represents 1,000 barrels). The short positions amounted to only about 130,000 contracts, putting the net speculative long position at 290,00 contracts. That net position is extremely high, historically speaking. What do the longs see that the shorts do not? They could be gambling on an imminent bounce-back in prices. Or they could be dead wrong.

To be sure, the oil glut in North America is not as extreme as it appears elsewhere on the planet; fed by surging shale oil production, newly expanded refineries in the United States are running flat out and exporting a lot of their output, narrowing the traditional price gap between WTI and Brent crude, the latter being the effective global benchmark. Read the rest of this entry »

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8th October 2014

How Alberta’s oil patch teamed up with the ‘little guys’ for an end run around Obama – by Rebecca Penty, Hugo Miller, Andrew Mayeda and Edward Greenspon (National Post – October 8, 2014)

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

Bloomberg News – So you’re the Canadian oil industry and you do what you think is a great thing by developing a mother lode of heavy crude beneath the forests and muskeg of northern Alberta. The plan is to send it clear to refineries on the U.S. Gulf Coast via a pipeline called Keystone XL. Just a few years back, America desperately wanted that oil.

Then one day the politics get sticky. In Nebraska, farmers don’t want the pipeline running through their fields or over their water source. U.S. environmentalists invoke global warming in protesting the project. President Barack Obama keeps siding with them, delaying and delaying approval. Keystone has become a tractor mired in an interminably muddy field.

In this period of national gloom comes an idea — a crazy-sounding notion, or maybe, actually, an epiphany. How about an all-Canadian route to liberate that oil sands crude from Alberta’s isolation and America’s fickleness? Canada’s own environmental and aboriginal politics are holding up a shorter and cheaper pipeline to the Pacific that would supply a shipping portal to oil-thirsty Asia. So, instead, go east — all the way to the Atlantic.

Thus was born Energy East, an improbable pipeline that its backers say has a high probability of being built. It will cost $12-billion and could be up and running by 2018. Its 4,600-kilometer path, taking advantage of a vast length of existing and underused natural gas pipeline, would wend through six provinces and four time zones. It would be Keystone on steroids, more than twice as long and carrying one-third more crude. Read the rest of this entry »

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1st October 2014

The great Canadian LNG poker game – by Peter Tertzakian (Globe and Mail – October 1, 2014)

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.

“They’re just playing poker, right?” asked an investor friend of mine who knows how to make a dollar. “Guys like Petronas, Shell and Chevron have already put a bazillion or two on the table,” he said with his furrowed face. “Aren’t their investments to date far too large to just walk away from their British Columbian LNG projects?”

I paused before answering. Petronas had just publicly announced that they were unhappy with Canada. It was a tap of the Malaysian company’s closely held cards signalling they might be willing to pack up their B.C. drill bits and go home in the absence of better liquefied natural gas investing odds.

It’s easy to believe that Petronas’s verbal shots in the public arena were a poker-faced “take-it-or-leave-it” bluff to get better terms on the eve of the B.C. government’s anticipated LNG tax announcement. But Canadians with a stake in the multibillion-dollar LNG business – for example, investors, governments and suppliers – should be cautious about interpreting such statements as hollow bravado.

Deferring to the wisdom of country singer Kenny Rogers, I replied to my friend, “Surely you know the lyrics to The Gambler?” Read the rest of this entry »

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29th September 2014

North Bay residents up in arms over TransCanada plan to switch crude oil for gas in local pipeline – by Raveen Aulakh (Toronto Star – September 28, 2014)

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.

TransCanada Corp. plans to repurpose a pipeline running through North Bay, Ont., from carrying natural gas to crude oil. Locals worry about potential environmental damage.

NORTH BAY, ONT.—From his many-windowed fifth-floor office at city hall, Mayor Al McDonald points to the Laurentian escarpment to the north, then to the shimmering blue waters of Trout Lake to the east. Vast Lake Nipissing is visible to the west, though you have to crane your neck to see it. Below are the Victorian buildings and tree-lined streets of the downtown.

McDonald clearly loves showing off the view. But it also pitches him into anxiety. “If something happens to Energy East here, if there is a spill, we’ll be ruined,” he says. “Who would want to come here then?”

Somewhere near the escarpment and Trout Lake, there is a natural gas pipeline. It has been there for four decades, but has become a source of concern in this northeastern Ontario city.

TransCanada Corp., the Alberta-based oil giant, wants to repurpose the pipeline, now carrying natural gas, to transport crude oil from Alberta’s oil sands to New Brunswick. Dubbed Energy East, the project is TransCanada’s $12-billion oil dream. Read the rest of this entry »

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29th September 2014

David Black faces skepticism over West Coast refinery – by Brent Jang (Globe and Mail – September 29, 2014)

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.

VANCOUVER — David Black is undeterred by skeptics and insists his vision for an export refinery makes sense for British Columbia’s energy market and Alberta’s oil sands.

For the past two years, the B.C. newspaper publisher has been investing his own money to get the ball rolling on Kitimat Clean Ltd., an ambitious project that aims to turn bitumen from the oil sands into refined products, such as gasoline, for shipping in tankers to Asian energy buyers.

“There is money to be made, but I got into this because I want to reduce the environmental risk,” the founder and chairman of Black Press Group Ltd. said in an interview from Victoria. The risk that he is referring to is the fear of a massive oil spill from tankers off the West Coast, a concern that is shared by First Nations in British Columbia.

If a tanker hauling gasoline were to leak in the waters near Kitimat, B.C., it will be easier to contain and clean the spill because the fuel won’t sink to the bottom of the ocean like bitumen would, Mr. Black argues.

His venture carries a hefty $32-billion price tag – $21-billion for the refinery in Kitimat, $8-billion for the pipeline and $3-billion on other infrastructure and a tanker fleet. Read the rest of this entry »

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26th September 2014

Petronas plays hardball with B.C. over Pacific NorthWest LNG – by Brent Jang and Justine Hunter (Globe and Mail – September 26, 2014)

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.

VANCOUVER and and VICTORIA — Malaysia’s state-owned energy company is picking a fight with British Columbia over its handling of the province’s fledgling liquefied natural gas industry, creating a rift that threatens a major project and further clouds Canada’s natural-resource ambitions.

Shamsul Azhar Abbas, the chief executive officer of Petronas, is warning that unless the B.C. government unveils competitive tax and regulatory rules next month, he will cancel plans to spend an estimated $36-billion on the Malaysian-led energy project called Pacific NorthWest LNG. The massive budget includes nearly $11-billion for an export plant to be built at Lelu Island in northwestern B.C.

“Rather than ensuring the development of the LNG industry through appropriate incentives and assurance of legal and fiscal stability, the Canadian landscape of LNG development is now one of uncertainty, delay and short vision,” Mr. Shamsul told the Financial Times. Canada is “already 40 years behind in the game.”

The dispute pits Petronas against a province that has been striving to turn its rich reserves of natural gas into a vibrant new industry that would create tens of thousands of jobs and a lucrative stream of tax revenue. It comes as Canadian energy companies are increasingly running into roadblocks in their efforts to bring more oil and gas to global markets. Major oil pipeline developments have been held up by opposition from environmentalists and First Nations, as well as political conflict. Read the rest of this entry »

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