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.

CALGARY— Oil producers have thrown their support behind the proposed Trans Mountain pipeline expansion to the West Coast, but the latest project aimed at providing much-needed shipping capacity for the oil sands industry now faces regulatory hurdles and growing resistance to pipelines.

Kinder Morgan Inc. $3.8-billion plan to double the amount of oil it can move from Alberta to the Pacific has garnered “strong” support from shippers and the company will now carry on with engineering and planning, it said Tuesday.

The momentum means the Trans Mountain pipeline expansion will attract greater scrutiny – something it has largely avoided as local communities and environmental groups turned Enbridge Inc.’s (ENB-T38.870.350.91%) proposed Northern Gateway pipeline into an international debate. The federal government supports greater access to the West Coast, but arm’s-length regulators must deliver their verdicts before the projects can proceed.

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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— Canada’s government, which has threatened a trade war over a proposed European rule to penalize oil-sands crude in a bid to clean up transportation fuels, has a powerful new argument in its favour, as new research shows other energy sources are far more dangerous to the climate.

On Thursday, a committee of the European Union will vote on a proposed fuel-quality directive intended to reduce the carbon footprint of gasoline and diesel on that continent. The directive directly penalizes oil-sands crude for its high-emissions content, using language that oil-sands supporters and others have called “flawed,” “discriminatory” and worse.

If passed, such a directive could set a precedent for other international fuel rules that challenge oil-sands products, a prospect that has deeply alarmed Canada’s political and corporate leadership. Officials have waged a years-long lobbying campaign to have it changed, enlisting the help of European nations with oil-sands interests such as Britain and the Netherlands.

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

Funny, isn’t it, that just as investment in Canada’s vast reserves of oilsands hits a new high—$134 billion worth of projects under construction or soon to start—we should be struck by an unexpected question: Does anyone even want our oil? Given recent events, you couldn’t blame us for wondering.

For virtually all of the oilsands’ 45-year operating history, the overwhelming challenge was at the upstream end, finding technically and economically viable ways of getting the oil out of the sand, and coaxing brave investors to fund them. In the blink of an eye, the greatest obstacle has drifted downstream to the relatively simple matter of getting the stuff to market.

The obvious solution is to build pipelines emanating from northern Alberta to deliver more of our crude to the world. But recent events have shown that to be more problematic than anyone could have guessed.

Certainly the announcement on Jan. 18 was an abrupt and unexpected reality check. Forced to render an immediate decision on the controversial Keystone XL pipeline proposal by Republican opponents in Congress, U.S. President Barack Obama turned down would-be builder TransCanada Corp.’s application.

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

CALGARY – Tight oil, the new oil source unlocked by new drilling technologies, is bearing such good results it could quickly compete with Canada’s oil sands as a top secure supply of North American oil.

With companies like Devon Energy Corp., Talisman Energy Inc., Encana Corp. and Exxon Mobil Corp. pushing big spending toward tight oil, analysts are ratcheting up their production forecasts for the supplies, which are largely based in the United States.

“Tight oil is changing the landscape in North America,” Steve Fekete, managing consultant at Purvin & Gertz, said at an oil sands industry conference in Calgary this week.

The international energy consultancy predicts production of tight oil in the United States alone could reach between 1.4 million barrels a day and 2.4 million b/d by 2020 – from about 600,000 b/d today derived in large part from the Bakken field in North Dakota.

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

Getting swept up in U.S. Presidential politics can’t be high on the list of any Canadian corporation, but TransCanada Corp. isn’t backing down from its plans to build the Keystone XL oil sands pipeline.

The Calgary-based company said Tuesday it’s gearing up to file for a new permit “in the near future,” is anticipating obtaining Presidential approval in the first quarter of 2013, expects it will take two years to build it and plans to start shipping 830,000 barrels of oil from the oil sands in Alberta to the U.S. Gulf Coast in 2015.

“We are into it to the tune of $2.4-billion, we have secured about 95% of the right of way, the pipe is all sitting on the ground and the pumps are all ready to be hooked up. For all intents and purposes we are ready to go,” president and CEO Russ Girling said in a conference call to discuss the company’s results for the fourth quarter.

What it won’t do is get involved in the U.S. election, which Mr. Girling feels is not his company’s business.

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

Rick Perry is the Governor of Texas.

Prime Minister Stephen Harper was in Beijing recently signing an agreement and touting his country’s growing energy partnership with China. It’s good news for Canada, which is rightfully looking to grow markets for its sizeable oil reserves. And it’s particularly good news for China, which needs to keep tapping into fresh supplies to feed its growing economy and mounting demand for oil.

Unfortunately, it’s bad news for Americans, particularly when you consider that one of the main reasons China has become such an attractive market to Canada was President Barack Obama’s recent rejection of the Keystone XL Pipeline. This crossborder connection would have provided a golden opportunity to partner with our neighbours to the north in producing massive amounts of energy, both for our country and the globe.

It seems unimaginable, yet President Obama refused TransCanada’s request to run its pipeline across the border from Canada to the Texas Gulf Coast. This extensive pipeline holds the potential of moving up to 830,000 barrels of crude oil per day – including oil produced in North Dakota and Montana – to refineries here in Texas.

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

CALGARY — Barely five years ago, Oilsands Quest Inc. proved there are oil sands in Saskatchewan and wanted to build the province’s first major project.

Today, the company is in bankruptcy protection in Canada and the United States and is looking for a buyer, keeping on hold the province’s ambition to be a part of the booming industry.

As established oil sands companies announce big profits and big expansions, Oilsands Quest’s story is a reminder that a lot can go wrong, fast, in the business, including running out of cash, mounting costs, poor geology or simply being ahead of the times.

Still, Garth Wong, president and CEO of the company, is hopeful Saskatchewan’s oil sands will get a second chance as the company waits for the outcome of a sales process now under way, in an improving investment climate and as other companies move close to its edge of the basin.

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

The Prime Minister’s visit to China netted more than a couple of pandas for a decade. It got Washington’s attention. The optics, notably concerning the oil sands, were the main aim of the high-level visit. And it worked.

The threat that Canada would divert energy to China instead of to the United States led Mitt Romney to hoist approval of the Keystone XL pipeline to the top of his political agenda.

There is little doubt that a new version of the Keystone, with a different route or by train, will be approved even if U.S. President Barack Obama wins a second term. The Keystone project was ill-conceived from beginning. The route was foolish. Moreover, oil sands production should be upgraded in Canada or shipped by looping existing pipelines from north to south.

The timing made it impossible for any sitting president to approve, especially when to do so would alienate a large chunk of the base of his support. Any mega-project should be broken down into bitesized pieces, avoid election cycles and operate under all radars.

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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.

The census confirmed what everyone knew: The population is growing faster in Western Canada than elsewhere. The issue for the fastest-growing provinces, Alberta and Saskatchewan, is what to do with the challenges of growth. Their populations are expanding, pure and simple, because of natural resources, notably oil (mostly from the tar sands), natural gas and potash.

There are long-term development issues swirling around the nature of their economies. Are they going to be classic rentier economies, extracting resources and shipping them? Or are they going to try to process more of the resources at home? Thus far, the answer has been the former.

With more people come demands for a necessary expansion of public services: schools, serviced land, police, roads and, of course, health. Outside Alberta, for example, people hear about right-wing politics, the populist Wildrose Alliance (quietly supported by many federal Conservative MPs), the perpetually governing Conservatives, low taxes, small government.

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

The widening discounts dragging down the price of Canadian oil are providing a glimpse at what the future looks like if new pipelines like Keystone XL aren’t built.

The discounts were adding up this week to about $30 to $40 for a Canadian oil sands barrel relative to the price it would have fetched in world markets.

It’s the outcome of rising production from Canada’s oil sands and the Bakken tight oil field in North Dakota and too little pipeline space to move it to refiners, causing oil to be backed up in the U.S. Midwest.

The surprise is that existing pipelines are filling up well before the 2015/1016 time frame, when they were widely expected expected to hit their capacity.

“We are at the wrong end of multiple discounts,” said Mike Tims, chairman of Peters & Co., the Calgary-based energy investment dealer.

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

As plans to build a natural gas liquefaction (LNG) hub on the British Columbia coast move closer to reality this year, the market is buzzing with talk of new partnerships and takeovers involving Western Canadian gas producers, potentially sweeping up big names like Encana Corp.
 
The trend has the makings of the next big thing and could shake up the natural gas sector in Western Canada, where prices are languishing at disastrous levels and cash-strapped producers are motivated to make deals.
 
Oil majors like Royal Dutch Shell Group PLC and national oil companies like Malaysia’s Petronas are evaluating as many as five plans to build terminals in the Kitimat area to export LNG to Asian markets and will need to secure supplies to keep them full.
 
So far, they have secured about 17.8 trillion cubic feet (tcf) of resources in Western Canada, but will need 39 tcf to meet current plans, CIBC World Markets estimates in a recent report.

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

The Keystone killers are waiting to ambush the Northern Gateway

This week, Prime Minister Stephen Harper went to Beijing to deliver a message to the U.S. , while Alberta Energy Minister Ted Morton came to Toronto to speak to B.C. Mr. Morton faced the tougher sell, which he attempted to soften, but further confused, by throwing “national energy strategy” into the pot.

The Chinese are gung-ho for Canadian oil, as are most Americans. However, Ontario’s Premier Dalton McGuinty has installed an expensive policy based on weaning the province off “dirty” oil to save the planet. As for B.C., it is at least as green but more crucial to the market diversification plans of Edmonton and Ottawa because no Alberta oil can reach China — or any non-U.S. market — that doesn’t pass through the province.

Opposition to a new trans-B.C. pipeline, Northern Gateway, is significantly related to the success of environmental NGOs in mounting a global campaign of demonization and disinformation against the oil sands. That campaign forced President Obama to kill/delay the $7-billion Keystone XL line, sponsored by TransCanada Corp., to ship up to 830,000 barrels of oil — mostly from the oil sands — to the Gulf Coast.

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

Thanks to acquisitions in the last few months, the three top state-controlled Chinese oil companies have become full participants in the Canadian oil and gas scene and are in control of projects in a Western industrialized economy for the first time.

But being in control doesn’t guarantee success. Now that they are in charge of their Canadian operations, Chinese players are facing the same hurdles as other foreign acquirers to make them work – plus a few more due to cultural differences.

“They are still on a learning curve. The jury is out on how they are going to manage those companies,” said Gordon Houlden, a former senior Canadian diplomat in China who is the director of the China Institute at the University of Alberta.

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