Oil and Gas Sector-Politics and Image

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

Local media magnate David Black picked up the phone and called reporters himself, suggesting they meet him Friday morning at a downtown hotel. He had something to share about a new business venture. Something huge. “And it’s not a media deal,” he said.
 
Which was curious, because Mr. Black publishes newspapers, more than 150 of them, in Canada and the United States. That’s all he does. Black Press Group Ltd., his private, Victoria-based company, has revenues of some $500-million a year. Newspapers have made him a very wealthy man.

But Mr. Black wants to expand his horizons and buttress his legacy. Hence his shock announcement Friday: He plans to build the “cleanest oil refinery ever built in the world,” on B.C.’s West Coast. A $13-billion behemoth, built expressly to refine every drop of heavy Alberta crude oil squeezed from Enbridge Inc.’s proposed Northern Gateway pipeline.
 
It’s an audacious scheme. Visionary, perhaps. And likely doomed to fail. “I just don’t think the pipeline is going to get built in the first place,” said Eric Nuttall, energy portfolio manger with Sprott Asset Management in Toronto.

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

Alberta’s oil sands producers have some very ambitious output forecasts that could see them producing about a sixth of what OPEC now pumps out on a daily basis by the end of the decade. But there are some potentially nasty roadblocks that could force the Canadian producers to slash millions of barrels per day from those targets, not the least of which is transportation.

“Oil sands companies that are making big capital allocation decisions have to be that much more confident in the macro environment to hit the button,” Andrew Potter, managing director, institutional equity research at CIBC World Markets Inc., told the Financial Post.

But confidence is in short supply as events appear to have conspired against Canadian producers. The higher-cost oil sands have to compete with U.S. and Canadian tight oil for pipeline access. In addition, the dreaded double discount on Canadian crude compared with oil produced elsewhere has restrained profits and new pipeline plans are being put in question by environmentalist opposition and warring provinces.

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United Church publicly opposes Northern Gateway project

Rev. Logan McMenamie is speaking out against the proposed Northern Gateway pipeline, saying it doesn’t respect the interconnectedness of living things. McMenamie, of Christ Church Cathedral on Burdett Avenue, is one of many religious leaders across Canada focusing on the pipeline – something McMenamie says concerns “the sanctity of the Earth.”
 
“What I preached on was my own perspective,” he said of his Sunday sermon, adding that he doesn’t speak on behalf of the Anglican Church of Canada. “I think [the sermon] resonated with many in the congregation.”
 
He’s not alone in bringing the debate to a religious forum. On Tuesday, the United Church of Canada decided to publicly oppose the project. The pipeline proposed by Calgary-based Enbridge Inc. would do severe environmental damage, traversing waterways where salmon spawn, said Ray Jones, the chair of the church’s aboriginal ministries council. And the potential for an oil spill in the port of Kitimat is very real, he said.

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Calvin Sandborn is legal director of the University of Victoria Environmental Law Centre.

In July 2010, an Enbridge oil pipeline ruptured near Michigan’s Kalamazoo River. Three million litres of oil spilled into the river, causing extensive damage, killing fish and wildlife, and leading to the evacuation of local homes. The spill cost $800 million to clean up – the most expensive onshore spill in U.S. history.
 
It looks like one of the biggest victims of this spill will be Enbridge’s Northern Gateway pipeline proposal. But the more important lesson is being missed. For the Michigan disaster highlights Ottawa’s supreme folly – dismantling our environmental laws at the same time as it approves dramatic expansions in resource industries.
 
Last month, the U.S. National Transportation Safety Board issued a scathing report on the Kalamazoo spill, concluding:
 
-Enbridge failed to fix the corroded pipe for five years, even though they knew about the corrosion problem.

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

Speaking with reporters in Vancouver on Tuesday morning, Alberta premier Alison Redford flatly, and rightly, rejected calls by British Columbia premier Christy Clark to cut B.C. in for a share of the profits from the Northern Gateway pipeline.

As important as it is to develop the infrastructure necessary to carry Canadian energy products to market, from Alberta or elsewhere, such pipelines cannot be built at any price to satisfy opportunistic leaders looking for a quick buck or a bump in the polls. Ms. Redford did the right thing, for Alberta and Canada, by refusing to deal with Ms. Clark on the latter’s terms.
 
The Northern Gateway pipeline, which is still awaiting regulatory approval, would ship petroleum products from the Alberta oil fields across British Columbian soil to ports on the Pacific Coast. From there, tankers would haul Alberta’s oil to the growing, and energy starved, markets of Asia. There are risks to this plan. The pipeline itself could rupture and cause a spill — Enbridge Inc., the company that would build and operate Northern Gateway, has done itself no favours through its shoddy handling of similar spills involving pipelines it operates in the U.S.

And even if the pipeline itself functions perfectly, there is the potential for the tanker ships that would transport the oil to foreign ports to wreck and spill their cargoes. These are legitimate issues that should concern B.C. voters, and Ms. Clark was not wrong to speak out forcefully on her province’s behalf.

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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.

When the prime minister gets out of the nation’s capital and sees how his policies affect people lives, welcome changes occur.  They’re often subtle and sometimes hard to interpret. But Stephen Harper listens to local opinion, allows questions from the media (which he almost never does in Ottawa) and adjusts his course ever so slightly.
 
Last week’s West Coast visit was an interesting example. Harper went to Vancouver to attend Senator Gerry St. Germain’s barbecue, a 28-year Conservative tradition, and to re-announce his party’s plan to offer paid leave to parents who take time off work to care for a child with a life-threatening illness.
 
But British Columbians wanted to talk about the North Gateway project, a 1,172-kilometre pipeline proposed by Enbridge to carry bitumen from Alberta’s oilsands to tankers plying the dangerous waters between Kitimat and the Queen Charlotte Islands. And talk they did, giving him an angry earful.
 
In Ottawa, Harper had been adamant that he wanted the $6-billion pipeline built and clear that he was prepared to use his executive power to dislodge obstacles and prevent delays.

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Founded in 1928, Canadian Business is the longest-publishing business magazine in Canada.

Two hundred and twenty five bucks. In April 2008, Jeff Rubin, chief economist at CIBC World Markets, predicted a barrel of oil would cost $225 by 2012. With oil at $118, it was a controversial call.

But Rubin, the best-known bank economist in Canada at the time, was no stranger to risky predictions. In 1989, he announced that the Toronto real estate market was about to crash. It did. In 1992, he said the Canadian economy was about to boom. It didn’t. In 1997, he tangled with manufacturers and fellow economists by declaring that the Canada-U.S. free trade agreement had not improved our productivity. As it happens, last month the Organization for Economic Co-operation and Development reported that “Canada’s key long-term challenge is to boost productivity growth”—so chalk that up as a win for the provocative Rubin as well.

But back to oil. These days, it’s trading under $90 a barrel. So not only was Rubin off by a huge margin, he got the direction wrong. And for Rubin, the stakes couldn’t be higher.

In 2009, he famously quit CIBC to publish his first book, Why Your World Is About to Get a Whole Lot Smaller. It was a No. 1 bestseller and won the National Business Book Award. Rubin argued peak oil supply and rising prices would push up transportation costs and slam the brakes on globalization.

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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 — Canada is in the throes of an energy identity crisis. The Northern Gateway pipeline project is in trouble in B.C. and the Chinese are stalking Alberta’s oil patch. In the East, Quebec and Newfoundland are sniping over oil and hydro reserves, and Ontario’s dream of being a green energy leader is fading.

It’s hardly what you would expect from a country that aspires to be an energy superpower. With still untapped potential in oil, shale gas and hydro, energy can drive the Canadian economy for decades to come. A recent University of Calgary School of Public Policy study estimates the potential economic boost at nearly $10-billion a year between 2016 and 2030. Or not.

There’s been a lot of talk, but so far little evidence of a long-term plan or a strategy at work. That’s unfortunate.

Fast-tracking environmental reviews isn’t a strategy on its own. Nor is blocking the oil sands’ access to world markets, as many environmentalists want.

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

Can the proposed Northern Gateway pipeline be saved?
 
After more than seven months of hearings along the 1,172-kilometre pipeline route that provided a soapbox for opponents, proponent Enbridge Inc. hopes the momentum shifts in its favour as the regulatory review moves to a new phase on Sept. 4 when the company will get to present its case.
 
The review, conducted by a Joint Review Panel of the National Energy Board and the Canadian Environmental Assessment Agency, wrapped up community hearings in Comox, B.C., on Friday. The round started in January in Kitimat and continued in northern British Columbia and Alberta in communities affected by the pipeline, which would take Alberta oil through to Kitimat and then on to foreign markets.
 
The next round is expected to last three months. Hearings in Edmonton, Prince George and Prince Rupert will involve a more formal phase at which Enbridge and intervenors will be cross-examined. “This is an opportunity for us to answer our critics and we are fully prepared to do that,” Enbridge spokesman Paul Stanway said from Comox.

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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 – The spending spree in Canada’s fast-growing oil sands is slowing as some of the country’s largest energy companies trim capital budgets and question the fate of some of their most important projects. Money continues to pour into the oil sands, where $1-billion is spent every two and a half weeks in the rush to add millions of barrels of capacity. But that spending has been under increased scrutiny.

The latest blow comes from Canadian Natural Resources Ltd., which said Thursday it has cut capital spending this year by $680-million or 10 per cent – much of that from its Horizon oil sands project. The company is attempting to hold the line on spending, while acknowledging that new projects will need oil prices of nearly $80 (U.S.) a barrel – not far from current levels – to turn a minimum acceptable profit.

The move comes amid what’s being called a “big rethink” of the oil sands, where costs have risen so high that new projects are increasingly vulnerable to crude prices at the same time as environmental pressures place question marks over the pipelines intended to take new barrels to market.

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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.

Forget America’s fiscal cliff, Europe’s currency troubles or the emerging-markets slowdown. The most important story in the global economy today may well be some good news that isn’t yet making as many headlines – the coming surge in oil production around the world.

Until very recently, our collective assumption was that oil was running out. That was partly a matter of what seemed like geological common sense. It took millions of years for the Earth to crush plankton into fossil fuels; it is logical to think that it would take millions of years to create more. The rise of the emerging markets, with their energy-hungry billions, was a further reason it seemed obvious that we would have less oil and gas in 2020 than we do today.

Obvious – but wrong. Thanks in part to technologies such as horizontal drilling and hydraulic fracking, we are entering a new age of abundant oil. As the energy expert Leonardo Maugeri contends in a recent report published by the Belfer Center at the John F. Kennedy School of Government at Harvard, “contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption.”

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

It’s tough to get a word in edgewise as U.S. producers beat their chest over their shale oil and gas finds and impending energy independence, but one analyst has managed to deflate some of the hype. Bob Brackett, an analyst at New York-based Bernstein Research, says oil wells in Montana, part of the giant Bakken shale basin, are rapidly deteriorating.
 
“Something is rotten in the State of Montana and it smells like moldy shale,” Mr. Brackett wrote in a note to clients. “Montana production of oil is down 38% from its 2006 peak of more than 100,000 barrels per day.”
 
The state, which shares the Bakken with North Dakota and Saskatchewan, produces between 1% and 2% of U.S. output and is home to two of the largest oil fields in the country. More important, Montana is home to Elm Coulee field, the poster child of Bakken potential and was expected to recover more than 200 million barrels.
 
But Montana’s oil boom cycle appears to have flamed out pretty quickly. As a result, Montana’s economy, which outpaced the U.S. economy during the mid-2000s, is expected to post just 0.9% growth this year, according to JPMorgan Chase & Co. estimates.

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

While politicians argue over the risks and benefits of proposed oil sands pipelines crossing British Columbia, the market has tuned into a different fight. It’s about control of the province’s natural gas assets and could involve two oil heavy weights — Exxon Mobil Corp. and Royal Dutch Shell PLC.
 
Analysts say there are telltale signs the race to capture B.C.’s natural gas resources and to own liquefied natural gas (LNG) terminals on the northern coast is heating up.
 
The battle for intermediate gas producer Progress Energy Resources Corp. has left an unsuccessful suitor rumoured to be Exxon, a regulatory filing by Shell for the LNG Canada terminal that suggests it will need more resource to keep full, and the Kitimat LNG plant struggling to find long-term Asian buyers.
 
“I think that there are going to be big deals done in northeast British Columbia,” said Chris Theal, president and CEO of Kootenay Capital Management Corp., an energy hedge fund based in Calgary. Producers from Encana Corp. to Talisman Energy Inc., or their B.C. assets, could be in play, as well as the proposed Kitimat LNG plant owned by Apache Corp., Encana and EOG Resources Inc., he said.

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

The proposed $15.1-billion takeover of Calgary-based Nexen Inc. by majority Chinese state-owned CNOOC has inevitably brought out the reflexive economic nationalists, wailing collectivists, fretters about “hollowing out,” champions of “national champions” and peddlers of muddled metaphors.

Certainly, there is legitimate cause for concern about the degree to which Beijing might dictate to CNOOC, but the takeover in no way represents a “predator” stealing “our” oil. The Nexen board has approved the deal, which offers shareholders a 60% premium over the pre-bid price. Alberta and Ottawa retain significant power over Nexen, from ownership of the resource through regulation of exploration and development to stock market oversight and corporate taxation.

One of the more bizarre criticisms of the deal is that CNOOC’s preferential access to capital might put it in a position to outbid rivals. But should shareholders worry about the possibility of being overpaid?

One pundit suggested that it was “ironic” that Calgary was ostensibly welcoming CNOOC after the hard time it allegedly gave to Canadian state oil company PetroCanada when it turned up in the 1970s.

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