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The Oil Sands Weekly

The Oil Sands Weekly

IN THE NEWS THIS WEEK:
  • Alberta's natural gas basically selling for free
  • Keyera scores big contract with Chevron
  • Husky cleared to start Saskatchewan pipeline
  • Trans Mountain hearings wrap-up in Vancouver
  • BNP Paribas blacklists oil sands and shale enablers
  • Enbridge makes their case in Minnesota
  • Lawyers hit a wall on Keystone XL and DAPL
  • US begins repeal of Obama's Clean Power Plan
  • Trump goes nuclear on Iran
  • LNG expansion continues in US and Australia
  • WorleyParsons makes big move into UK North Sea
  • Mother of all IPOs being questioned by Saudi Kingdom
  • OPEC makes plea to US shale "friends"

ALBERTA

Directive 085 gets a minor makeover
The Alberta Energy Regulator (AER) has released a new revision of Directive 085: Fluid Tailings Management for Oil Sands Mining Projects. A draft version of the document was released in January. The AER says the final revision incorporates feedback received through the winter months. Revisions include simplified wording, more consistent terminology and an additional focus on public awareness.

Keyera scores big contract with Chevron
Keyera Corp announced a 20-year midstream agreement with Chevron to process and store NGLs from Chevron's Kaybob Duvernay operations near Fox Creek, Alberta. Chevron has committed about 50% of its NGL production to Keyera for fractionation and storage at its Fort Saskatchewan energy complex. Keyera says they are "pleased to have been selected" and may need to expand its fractionation plant if Chevron commits more volumes.

Alberta gas prices hit ... zero?
Ridiculously low AECO natural gas prices is expected to translate into a big drop in government revenues this next quarter. The Alberta government had banked on $2.60/GJ for Alberta's natural gas (AECO), but prices have been near-zero, zero and even negative due to maintenance outages on TransCanada's NOVA Gas Transmission network (NGTL). Some producers, such as Encana and Kelt Exploration, have opted to shut-in production due to the weak pricing. The Alberta Treasury Board says the government may need to revise its forecast in its November budget update. It's important to note that most Western Canadian producers hedge a good portion of their natural gas production, leaving them far less exposed to spot prices.


CANADA

And that's a wrap for TMEP
A Vancouver court has wrapped up hearings on the TransMountain Expansion Pipeline (TMEP) this week. Various litigation teams representing special interest groups, First Nations peoples and several levels of government have ganged up against Kinder Morgan, the National Energy Board and the federal government in an attempt to get TMEP's approval overturned. There is no deadline for rendering a decision although construction on the expansion has already begun on public lands. Regardless of the outcome, the decision is expected to go to appeals court.

Husky cleared to restart Saskatchewan pipeline
The Saskatchewan government has cleared Husky Energy to restart the pipeline that leaked into the North Saskatchewan River in July of 2016. Husky's investigation concluded that the line buckled due to ground movement. The company has accepted responsibility for the incident and is hoping to learn from the experience to improve operations. The government says additional precautions have been taken to reduce the risk of another failure at the same spot, including increasing the wall thickness of the pipeline and monitoring any ground movement. Saskatchewan's Justice Ministry has yet to decide if any charges will be laid.

BNP Paribas blacklists ... pretty much everybody
In the name of climate change, Paris-based BNP Paribas says it will "no longer do business" with companies who explore, produce, distribute or trade oil or gas from shale and/or "tar sands", including ceasing financing for any pipelines that transport shale products and crude from the oil sands. Companies that explore in the Arctic have also been blacklisted, as well as companies that export LNG produced from shale. CEO Jean-Laurent Bonnafé says the world must reduce its dependence on fossil fuels, and the bank has decided to start with shale fracking and the oil sands, who allegedly emit higher levels of GHGs versus "regular" oil and gas. The bank says it has earmarked €15 billion for renewable energy projects through 2020. BNP Paribas has a presence in Toronto and Montreal, serving Canadian financial institutions, large corporation, as well as an "Energy & Commodities" division.


USA

Gulf of Mexico returns to normal, again
Output in the Gulf of Mexico (GoM) is slowly returning to normal after Hurricane Nate took over 1 million bbl/day of crude production offline. According to the Bureau of Safety and Environmental Enforcement (BSEE), 98% of manned platforms in the GoM are back in business and only 12% of oil production is currently offline (as of Friday). BSEE says no damage from the storm has yet been reported.

Enbridge delivers their side of the story in Minnesota
Enbridge got a chance to present its side of the story this week, disputing a claim from Minnesota's Commerce Department that Line 3 doesn't need to be replaced and doesn't provide any benefit to the state of Minnesota. Representatives for the pipeline operator pointed out that the line only runs at half capacity due to its age, and most of the extra oil would be destined for refineries in the Gulf Coast. Replacement of Line 3 has already commenced in Canada and Wisconsin, but still awaits a decision from the Minnesota Public Utilities Commission, expected to be delivered next April.

Dakota Access lives to fight another day
A federal judge has rejected a request to shutdown the Dakota Access pipeline pending the results of yet another environmental assessment. Lawyers for the Standing Rock Sioux and three other Native American Tribes had asked for flow in the line to be stopped while the Army Corps of Engineers re-examine a pipeline crossing under Lake Oahe. Attorneys for the Corps maintain the pipeline poses no environmental threat and expects to have this latest environmental review completed by next spring. Dakota Access was put into service last June despite ongoing legal disputes.

Pipelines and constitutional rights
Attorneys for the Trump Administration claim a federal judge does not have the legal authority to pull Keystone XL's presidential permit, claiming the US Constitution gives the President authority over matters of foreign affairs and national security. Various groups have taken their case to a Montana court, asking for the permit to be revoked due to changes in "market conditions." Keystone XL has already been approved in the states of Montana and South Dakota but still awaits a final ruling from Nebraska's Public Service Commission, expected to be rendered by November 23, 2017.

Really big LNG facility gets a little bigger
Cheniere Partners announced the substantial completion of its fourth LNG train at Sabine Pass in Cameron Parish, Louisiana. First commercial delivery is expected in March 2018. Train 5 is currently under construction while Train 6 is in the planning phase. Each train has the capacity to export 4.5 million tonnes/year of LNG, making Sabine Pass one of the largest operating LNG facilities in the world.

Trump goes nuclear on Iran
President Trump put Iran on notice this week, accusing the country of sponsoring terrorism and "not living up to the spirit" of the its nuclear agreement. The President did not pull the US out of the deal but gave Congress 60-days to decide whether to re-instate sanctions. The agreement to lift sanctions was signed between Iran, the US, UK, Russia, France, Germany and China in January of 2016. The UK, Germany and France say they are "concerned" by Trump's decision but remained committed to the deal despite "shared concerns about Iran's ballistic missile programme and regional activities." Sanctions imposed on Iran in 2006 prevented the country from selling its oil on international markets. The country's crude output has increased by 1 million bbl/day since the sanctions were lifted almost two years ago.

EPA advances Trump's America First Strategy
The US Environmental Protection Agency (EPA) announced plans to formally withdraw from President Obama's Clean Power Plan. The Clean Power Plan required states to meet carbon emission targets in an effort to combat climate change. Trump calls the plan a "jobs killer," unfairly targeting the coal industry. The EPA accuses the Obama Administration of pushing the "bounds of their authority," calling the plan "inconsistent" with the Clean Air Act. Several states and environmental groups are already planning to challenge the repeal in federal courts. Despite the repeal, some of the largest utility companies in the US say they have no plans to change course in their transition away from coal-fired power.

EIA more bullish on oil prices
In this month's Short-Term Energy Outlook, the US Energy Information Administration has revised its 2017 Brent forecast to US$52 a barrel, $1 higher than its previous forecast, rising to US$54 in 2018. The WTI discount to Brent was also revised higher from US$2 to US$3.50/bbl. The EIA says September crude production was dented by Hurricane Harvey, and revised their 2017 average production lower from 9.3 to 9.2 million bbl/day. Next year's forecast was unchanged at 9.9 million bbl/day, surpassing the 1970 record of 9.6 million bbl/day.


US PRODUCTION & INVENTORY DATA

Gasoline inventories unexpectedly rose again last week, despite lower production and higher exports. After declining through much of 2017, gasoline stockpiles have risen over 5 million barrels since the middle of September.

Crude stockpiles at the Cushing storage hub are also slowly creeping higher, climbing another 1.3 million barrels last week. Cushing has seen an inventory build of 7.5 million barrels since late summer.

Baker Hughes reported another decline in oil rig counts this week, falling by 5 in the US. Rig counts were unchanged in Canada.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

OCT 12, 2017

ANOTHER HURRICANE CUTS PRODUCTION IN THE LOWER 48

 

AROUND THE WORLD

Reshuffling continues in EPC world
Amec Foster Wheeler has sold most of its UK North Sea operations to Australia's WorleyParsons for about £228 million in cash. The divestiture was required to satisfy anti-competition concerns in the UK after John Wood Group's take of AMEC. Wood Group says the acquisition of AMEC is now complete and the integration of the two companies is "well progressed."

Anadarko moves into Peru
Anadarko Petroleum announced plans to invest US$200 million to develop a field off the northern coast of Peru. Peru's total crude output is just 40,000 bbl/day, about one third of what the country produced in the 1970s. Last May, the Peruvian government struck a US$2 billion deal with China's CNPC to develop an oil and gas block in the southern part of the country. 

Total moves into Mexico ...
Following in the footsteps of Shell and Andeavor, French energy giant Total purchased the rights to rebrand 250 service stations in the Mexico City area under the Total brand. The company says it is looking to "capitalize on the deregulation of the country’s fuel sales ... to significantly expand its activities there."

... and Guinea
Total also signed an agreement with the government of Guinea to evaluate the feasibility of deep and ultra-deep offshore production in the West African country. Total has been given one year to evaluate well data and has also agreed to share its technical know-how with Guinea's National Office of Petroleum. Total is already active in the adjacent Mauritania/Senegal basins, which have proven to hold substantial reserves.

Chevron gets another massive LNG project off the ground in Western Australia ...
Chevron announced the start-up of its Wheatstone LNG facility in Western Australia. The company expects its first cargo to be shipped "in the coming weeks." Wheatstone's two train LNG facility has a nameplate capacity of 8.9 million metric tons per year for export to customers in Asia. The US$34 billion project is a joint venture between Chevron, Kuwait Foreign Petroleum Exploration Company, Woodside Petroleum, Kyushu Electric and PE Wheatstone.

... and exits Southern Australia
Following in the footsteps of BP, Chevron has cancelled plans to explore off the coast of Southern Australia this week. The Great Australian Bight holds an estimated 1.9 billion barrels of recoverable oil, but the region is also an ecologically sensitive area. The company says the decision was commercial, and "not due to government policy, regulatory, community or environmental concern."

Mother of all IPOs being questioned
UK's Financial Times is reporting that Saudi Aramco is considering a Plan B to its 5% IPO, originally planned for sometime in 2018. Sources say the company is looking at selling a stake to sovereign wealth funds and institutional investors, including the Chinese government who have expressed a keen interest. Saudi Aramco has an estimated value of US$2 trillion, which would make a 5% stake the largest IPO in history. The company says no decision has been made just yet.

OPEC sings a familiar tune ...
OPEC Secretary General Mohammad Barkindo says "a rebalancing process is under way" but more "extraordinary measures" may be required in 2018 to restore stability in the markets. Those measures could include extending production cuts past March, deepening the cuts, or bringing more countries into the agreement. 

... and seems really unclear on the concept
Barkindo also called on US shale producers to do their part to cut production, pleading "We urge our friends, in the shale basins of North America to take this shared responsibility with all seriousness it deserves, as one of the key lessons learnt from the current unique supply-driven cycle." The OPEC head says he plans to meet with independent producers and hedge funds later this year or next to explain the current "energy transition." Collusion for the purposes of inflating prices à la OPEC is against the law in most countries, including the US.


NEXT WEEK'S EVENTS

Monday:

Tuesday:

  • Q3/17 earnings: Kinder Morgan
  • API Weekly Statistical Bulletin released @ 4:30pm ET
  • Last trading day for November WCS, Canadian Light and Edmonton Condensate contracts

Wednesday:

Thursday:

  • August Employment Insurance data released by Statistics Canada @8:30am ET
  • August retail sales released by Statistics Canada @8:30am ET
  • EIA Weekly Natural Gas Storage Report released @ 10:30am ET

Friday:

  • September inflation data released by Statistics Canada @8:30am ET
  • August retail sales released by Statistics Canada @8:30am ET
  • Baker Hughes Rig Count released @ 1:00pm ET
  • Q3/17 earnings: Schlumberger
  • Last trading day for November WTI contract
The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

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