Oil and Gas Sector-Politics and Image

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.

Oil’s retreat from the $110-a-barrel (U.S.) mark this year may have helped fend off a deeper global economic slump, but for Canada the benefits of lower energy prices come with a serious cost.

The drop in the cost of crude to about $87 currently has made it cheaper for companies to run their plants and has saved drivers some money at the pumps.

But Canada’s manufacturing sector continues to struggle with a high dollar and lower-cost Asian rivals, and the oil-price pullback highlights how dependent the country’s economy has become on the energy sector for growth.

Few countries feel the rise and fall of oil prices more than Canada, and a healthy oil industry is crucial to ensure the country’s modest growth outlook doesn’t turn into something worse. Consider that oil and gas exports and investment in machinery and infrastructure in the oil sands accounted for fully one-third of Canada’s economic growth in 2010 and 2011.

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

OTTAWA – Enbridge Inc. made a mounting public relations disaster worse this week by not immediately accepting blame in its official statement issued after an outspoken U.S. regulator compared one of Canada’s energy giants to the “Keystone Kops” due to Enbridge’s bungled response to a massive pipeline spill in Michigan, experts say.

National Transportation Safety Board chairwoman Debbie Hersman’s scathing assessment of Enbridge’s 2010 spill response has also raised questions over whether Prime Minister Stephen Harper needs to distance his government from Enbridge’s proposed $5.5-billion oil sands pipeline megaproject from Alberta to the B.C. coast.

Enbridge’s Pat Daniel, voted the 2011 Canadian chief executive of the year by the consulting firm Caldwell Partners, said in his initial formal response that company personnel “were trying to do the right thing” but encountered “a series of unfortunate events and circumstances [that] resulted in an outcome no one wanted.”

There was no apology or acknowledgement of wrongdoing in the release, though a company official said Mr. Daniel – who was not made available for an interview with Postmedia News – apologized when speaking to reporters in Washington, D.C., after the NTSB event.

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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.

Someone needs to save Canada’s two largest pipeline operators from themselves. Enbridge Inc. and TransCanada Corp., both based in Canada’s greatest city, as Stephen Harper recently labelled his adopted Calgary hometown, have been doing giant work giving this country a black eye.

And they may have driven a stake through their plans for two pipeline megaprojects – combined cost, $13-billion-plus. One of them is to span the length of the U.S. to deliver Athabasca crude to refineries on the Texas Gulf Coast (TransCanada’s Keystone XL). The other is to navigate the mountain ranges of B.C. and Alberta to convey Athabasca crude to Asian markets (Enbridge’s Northern Gateway) as an alternative to a U.S. market that now takes practically all of Canada’s oil exports.
 
Even before this week’s report by the U.S. National Transportation Safety Board (NTSB) excoriating Enbridge over its reckless disregard and ineptitude with its massive leak in Michigan in 2010, controversy had dogged these two planned projects since their inception.

Then came Tuesday’s widely reported NTSB findings on the rupture of an Enbridge pipeline that spilled about three million litres of oil in one of the most heavily populated U.S. states, in the Kalamazoo River some 70 km. west of Detroit.

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

With NDP leader Thomas Mulcair seizing on the oil spill in Michigan to demand that the Northern Gateway oil sands pipeline be spiked, Enbridge Inc.’s incoming CEO promised to do a lot better in the future and to deliver a world class project for British Columbia. It’s the right type of message from Al Monaco, who replaces the retiring Pat Daniel this year and will have to stickhandle the project.
 
It’s one that has turned into a political flashpoint that seems to be propelling the opposition, anti-pipeline NDP into power in B.C. and has handed Mr. Mulcair another divisive platform to fend off the energy superpower ambitions of Conservative Prime Minister Stephen Harper.
 
But the message needs to come with results for the Calgary-based company. Public trust in its pipelines has been depleted by its handling of the proposed $5.5-billion project across northern B.C. as well as its response to a major spill from its Line 6B in Michigan two years ago.

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

CALGARY — How does Enbridge Inc. maintain trust in its oil pipelines — existing and proposed — in the face of its embarrassing handling of a major oil spill in Michigan two years ago?
 
While the pipeline giant patted itself on the back for its response, the U.S. National Transportation Safety Board (NTSB) came to a much different conclusion on Tuesday.
 
Its extensive investigation into the spill from Line 6B — the largest and costliest in the U.S. onshore — put the blame squarely on the Canadian company for the disaster, citing a failure to fix known and growing cracks in the 50-year-old pipeline due to corrosion, inadequate training of personnel, deficient integrity-management procedures, and an oil spill response plan that wasn’t good enough for a major incident.

Investigators, who provided a rare picture of the organization’s behavior, found lack of communication between different parts of the company, employees who were reluctant to report errors out of fear of getting fired, first respondents who failed to respond, and a lack of learning from previous incidents.

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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.

WASHINGTON — A “tragic and needless” 2010 pipeline rupture in Michigan became exponentially worse after an astonishing 17-hour delay to stop the flow of oil, raising concerns about proposed pipelines from Keystone XL to the Northern Gateway.

Canada’s Enbridge Inc. was in the hot seat Tuesday as regulators in Washington delivered a withering broadside, warning that disasters like the oil spill in the Kalamazoo River will continue until the pipeline industry pursues safety “with the same vigour as they pursue profits.”

Environmental groups on both sides of the border seized upon the findings, calling the report a watershed moment in their efforts to limit wholesale expansion of Alberta oilsands. Likening the Calgary company’s management of the disaster to the “Keystone Cops,” National Transportation Safety Board Chairman Debbie Hersman said Enbridge failed to adequately address well-known corrosion problems as far back as 2005.

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

STAVANGER, Norway — Some Albertans may fancy themselves to be the blue-eyed Arabs of the north. If Norwegians were not so modest about their place in the world that boast would make the five million citizens of this overwhelmingly blue-eyed nation laugh.

A digital counter at the Norwegian Petroleum Museum tells the happy story: It turns over so quickly counting petro-kroners from the North Sea that all but the biggest numbers on the screen are a constant blur.

At a time when most of Norway’s European cousins confront grave economic problems and Canadians are fearful of being sucked into the continent’s financial quicksand, this Scandinavian nation remains an oasis of stability and calm. The reason, plainly, is that it has more than 3.5-trillion kroner ($600 billion U.S.) in the bank and counting.

Norway’s Government Pension Fund is only 20 years old but is more than 30 times the size of Alberta’s Heritage Investment Fund, which former premier Peter Lougheed started for “a rainy day” back in 1975. It is also bigger than Saudi Arabia’s and a close second in size to the one run by one of the sheikdoms of the United Arab Emirates.

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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 — They are the little brothers and sisters of the pipeline world. Some are barely large enough to jam a hand into, but they do the dirtiest work in the energy business, ferrying great volumes of raw oil and gas from wells to processing plants.

And though they are small, they often carry large risk, an issue of mounting concern in Alberta, a province that has seen a series of spills train a global spotlight on pipeline safety.

These smaller pipes can often be overlooked, next to the big ones that garner attention when they rupture into the Kalamazoo River – an accident that cost Enbridge Inc. a historic $3.7-million (U.S.) fine this week, on top of $725-million in cleanup costs – or at an Alberta pumping station where the company recently had another large spill.

But in Alberta, the pipe is almost all small. Some 327,000 kilometres of pipe that is eight inches and smaller in diameter spread across the province like a network of veins. It is roughly 90 per cent of all pipe in the province, a vast web of steel that is uniquely vulnerable to problems, and uniquely difficult to both oversee and maintain.

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

CALGARY — Plans for a new industry to sell Canadian natural gas to Asia moved a lot closer to take off with two big moves by Petronas, the Malaysian national oil company.
 
The Kuala Lumpur-based giant offered Thursday to take over Calgary-based natural gas producer Progress Energy Resources Corp. for $5.5-billion, or $20.45 a share in cash — a 77% premium over Wednesday’s closing price. The deal builds on last year’s $1.07-billion joint venture between the two companies to develop Progress’s Montney shale assets in British Columbia.
 
Petronas also said it plans to build a liquefied natural gas (LNG) plant on Lelu Island near Prince Rupert, on the northern British Columbia coast, to ship 7.4 million tonnes a year from two trains, with the first cargo bound for Asia in 2018.

With Petronas’s advance, there are now three major LNG projects moving head in the B.C. coast, representing a solid platform for the emerging industry and providing a new market for depressed Western Canadian gas. Asia’s gas prices are much higher because they are linked to oil prices and there is demand to absorb huge supplies from shale fields such as the Horn River and the Montney.

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

The global economy may throw a few curve balls, just as it did in the 1980s
 
I suggested recently in this space that the Canadian petroleum industry is more politicized than at any time since the 1980 National Energy Program, although the politics are different. Then it was the fight between Pierre Trudeau’s Ottawa and Peter Lougheed’s Alberta over sharply higher prices. Now, it is the Harper government’s energy-superpower visions versus a transnational environmental movement that wants to block pipelines and kill the “dirty” oil sands.
 
In one respect, however, there is a considerable similarity between the Harper Conservatives and their dirigiste counterparts of 30 years ago: Both projected a boom in oil sands production. How great a danger is there that Mr. Harper’s aspirations may be undone — as were 1980s projections — by a market downturn?
 
Oil from the oil sands, whether mined or produced underground by heat injection, is, due to its elaborate production process, expensive oil. With current world prices flagging, Canadian oil subject to further discounts due to pipeline constraints, and considerable global economic uncertainty, might Mr. Harper’s strategy come undone?

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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, Calgary – Encana Corp. has launched an internal investigation after the State of Michigan said it is examining allegations that the company worked with rival Chesapeake Energy Corp. to avoid competing in state land auctions for shale gas.

Michigan’s Department of Natural Resources said it is working with the Attorney-General’s Office to review a series of e-mails, published by the Reuters news agency, that purport to show executives from the two companies discussing joint approaches to bidding.

“Our department is committed to ensuring the integrity of its auctioning process and to receiving fair market value for resources on public land,” Ed Golder, a spokesman for the Department of Natural Resources, said Monday. An official from the U.S. Justice Department declined to comment on whether its antitrust division is looking into the matter.

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

CALGARY – For the past seven years, the mining community of Baia Mare in Romania’s northern interior has eagerly stepped up to alleviate Alberta’s labour shortages. For Joe Giusti, founder and CEO of one of Western Canada’s largest construction companies, it was a long way to travel to search for workers.
 
It was hard, too, once he found them. His firm, Giusti Group, had to teach recruits basic English so they would understand safety regulations. They had to meet rigid immigration requirements for temporary foreign workers. They had to be moved to an unfamiliar work environment, and sent back home just as they were getting used to their new jobs and way of life.

Yet Mr. Giusti was so encouraged by the enthusiasm shown by hundreds of young people who answered his calls for carpenters, cement finishers and general labourers, and by their performance in Alberta, he led recruitment missions there several times. Meanwhile, he was pleased to notice how the local community’s economy flourished from a steady influx of Alberta oil cash, as people dressed better, bought new furniture and renovated houses.
 
“When I went to Romania the first time, it brought me back to the 1960s in Italy,” said the builder, who since moving to Western Canada four decades ago from Treviso, near Venice, completed more than 50,000 multi-family units and took on some of the West’s biggest industrial projects, even as he fine-tuned a passion for oil painting using Titian’s colour techniques.

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

CALGARY — As oil prices continue to teeter, slumping Wednesday to their lowest level since October, provincial governments that have traditionally padded their budgets with resource royalties are facing the unpleasant prospect of ever-more glaring deficits in the coming months.
 
Saskatchewan is already creating contingency plans in case crude prices fall, as Newfoundland and Labrador premier Kathy Dunderdale warned voters that the province could be facing hard times if the price per barrel continues to dip. Alberta insists it’s too early in the fiscal year to panic, however its budget may be in for a rethink by the end of the first quarter.

Global Brent crude prices closed at US$92.57 per barrel on Wednesday, well below Newfoundland’s forecast of about US$124 per barrel. Both Saskatchewan and Alberta base their forecasts on the cheaper West Texas Intermediate benchmark, which closed at US$81.45 per barrel — again at a steep discount to the values predicted by budgetary bean counters.

Jurisdictions that rely on volatile commodity royalties often overshoot estimates, making it easier to justify more ambitious spending. Projections that look fine on paper during optimistic budget planning meetings, however, can end up in disastrous budgets if prices collapse. In 2008, the Alberta government’s $8.5-billion surplus projection shriveled to a nearly $1-billion deficit when recession hit and energy prices collapsed.

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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.

As crews work to mop up more than a million litres of oil that has spilled in Alberta in a month, Premier Alison Redford is steering the province toward a safety review of its 377,000 kilometres of pipeline.

Ms. Redford has charged her ministers of energy and environment to investigate whether a larger provincial response to the spills is merited. The leaks have come at an alarming pace in recent months, while the government is attempting to persuade its neighbours across Canada and the United States to accept pipelines carrying Alberta crude.

The Premier’s statement on Wednesday, two days after 230,000 litres leaked from an Enbridge pipeline system, that she is “certainly not opposed to the idea” of a more comprehensive review, is her strongest support yet for the notion.

Ms. Redford has long defended Alberta’s pipelines. The province is looking for new markets – the U.S. Gulf Coast, Asia, California, Ontario and Atlantic Canada – to sell the dramatic growth in the output of its oil sands. But wherever it has sought to place new steel into the ground, it has run up against concerns about safety from first nations in B.C., ranchers in Nebraska and farmers in Ontario.

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