Oil and Gas Sector-Politics and Image

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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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.

OTTAWA—Prime Minister Stephen Harper for the first time sounded a cautious note about the approval process for the highly controversial Northern Gateway pipeline that would carry oil sands-derived crude from Alberta to the British Columbia coast.
 
Harper’s government has been a strong supporter of the proposed pipeline and has given itself the power to make the final decision on whether the $6-billion project should go ahead regardless of the outcome of an independent environmental review process by federal regulators.
 
But on Tuesday he appeared to backpedal as he qualified his commitment to Northern Gateway, which polls show is widely unpopular in B.C. “The only way governments can handle controversial projects of this manner is to ensure that things are evaluated on an independent basis scientifically, and not simply on political criteria,” Harper told reporters during a visit to B.C.
 
“And as I’ve said repeatedly, the government does not pick and choose particular projects,” the prime minister said.

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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.

VANCOUVER — There’s a lot of talk in British Columbia these days about Enbridge Inc. and its challenges advancing its Northern Gateway pipeline project.

But Roger Harris offers something extra to the conversation. From 2008 to 2010, the one-term BC Liberal MLA for Skeena was working for Enbridge, mostly as a vice-president of aboriginal and community partnerships. He says he left, by mutual agreement, because he advocated a broader approach to engaging with communities and stakeholders than the company was interested in.

Now, the consultant to business, government and first nations says Gateway may be beyond saving – though he continues to believe in shipping Canadian energy to foreign markets.

Is it reaching the point where this project is going to be a non-starter? If Enbridge continues to do probably a number of things, [this project] has the potential to meet the legal threshold and, with the current federal changes to the environmental assessment, the political threshold that would allow someone to say, ‘You will get a permit to build this. It will have some conditions on it, but here it goes.’

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

If Christy Clark, premier of British Columbia, hoped that picking a fight with Alberta would help improve her dismal standing in the polls, the latest numbers are bound to be disappointing.

The new poll, by Forum Research, shows that the B.C. NDP would win 79 of the 85 seats in the provincial legislature if an election were held today. Ms. Clark’s Liberals, who rank barely ahead of the moribund provincial Conservative party, would be reduced to four seats.

Such bleak figures must be particularly galling to Ms. Clark given that another recent poll shows almost 60% of voters agree with her opposition to the Northern Gateway pipeline, which is at the heart of the dispute with Alberta. The survey by Angus Reid found that 35% of respondents were dead set against the pipeline under any conditions, while 24% could be swayed – i.e. bought off – if Ms. Clark succeeded in extorting billions of dollars from Alberta in exchange for dropping her opposition.

It appears that B.C. voters are just fed up with the Liberals, who have been in power for more than a decade, and aren’t going to change their minds in the absence of extraordinary circumstances.

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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.

The small northern B.C. town of Smithers, population 6,000, is thousands of kilometres from Battle Creek, Mich. But the spill from an Enbridge Inc. pipeline that dumped 840,000 gallons of heavy crude oil into Michigan’s Kalamazoo River on July 25, 2010 was very much on the minds of people in Smithers when Ottawa’s regulators came to town.

“There will always be a question in our minds,” Mayor Taylor Bachrach this week told the federal hearings on a pipeline to carry Alberta oilsands crude to supertankers on the B.C. coast.

“Will this be the day that we turn on the radio and hear that there’s been a pipeline rupture and that oil is gushing into the Morice River or the Copper River or the Kitimat River?”

“And people in Kitimat Village and Hartley Bay will wonder, is this the day that a tanker runs off course and hits the rocks?” Bachrach asked the three-person panel.

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