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The Oil Sands Weekly

The Oil Sands Weekly

IN THE NEWS THIS WEEK:
  • Osum plans next phase of growth in Cold Lake
  • Teck's take on the business of bitumen
  • TransCanada pulls the plug on Energy East
  • Pembina and Veresen become one despite concerns from Competition Bureau
  • Petronas plans to exit Alberta, but stay in BC
  • Big week for BC's natural gas processors
  • US crude exports surge to record highs
  • Another hurricane heads to Gulf Coast
  • US carbon emissions keep falling
  • Norway bets big on carbon capture
  • Exxon comes up roses in Guyana, again
  • Saudis strengthen ties with Russia ...
  • ... and raise hopes for extending OPEC production cuts.

ALBERTA

Osum charts a "clear path for positive growth" in Cold Lake
Privately-held Osum Oil Sands has approved another expansion phase at it Orion Project, an in-situ extraction facility located about 40 km northwest of Cold Lake, Alberta. Orion currently produces 7,500 to 8,000 bbl/day of bitumen from the Clearwater Formation using steam-assisted gravity drainage (SAGD). A recently completed Phase 2A expansion will add another 1,500 bbl/day over the next 12 months. The newly-sanctioned Phase 2B expansion will add another 3,000 bbl/day of capacity by the middle of 2019.

Teck chair "very happy" to be in the bitumen business
Teck Chairman Norman Keevil tells the business community he's "very happy" with the upcoming Fort Hills oil sands mine. Keevil says Teck's expertise in the mining industry make it an ideal partner for Suncor, since mining activities make up about 40% of total production costs. The project also provides asset diversification for Teck, whose current business model is focused on zinc, copper and metallurgical coal. Teck has a 20% stake in the 194,000 bbl/day facility, which is expected to start-up before the end of this year. Keevil is the author of a new book, Never Rest on Your Ores, which outlines the history of the family-run company.

Pembina and Veresen officially become one
Pembina Pipelines and Veresen officially closed on their $9.4 billion merger, announced last May. Pembina CEO Mick Dilger says this "marks another significant milestone" for the company," creating a "highly integrated asset base" with "extended geographic reach." However, the Canadian Competition Bureau (CCB) flagged concerns over the lack of competition in Canada's ethane transportation business. CCB says it has one year after a transaction closes to "take action," which could include an order for Pembina to sell some of its business units.

Petronas plans exit from Alberta, but remains committed to BC
Malaysia's Petronas has hired BMO Capital Markets to sells a huge chunk of its natural gas assets in Alberta, held by wholly-owned subsidiary Progress Energy. The sale represents 160,000 hectares of land (40,000 net) and 5,500 boe/day of production. The company says the Alberta assets are "non-core" and it remains committed to its North Montney natural gas assets in northeastern BC.


CANADA

Big loss for Canada, big win for the Liberals
After "careful review of changed circumstances", TransCanada officially announced the cancellation of its Energy East Pipeline and Eastern Mainline projects. The Liberals were set to decide on the $16 billion project just before the next federal election. The pipeline faced its most vocal opposition in the voter-heavy province of Quebec. The National Energy Board (NEB) was forced to restart regulatory hearings after allegations of conflict of interest and imposed new hurdles on the environmental review process for Energy East. TransCanada says the decision was based on "substantial uncertainty around the scope, timing and cost" associated with the revised regulatory review process. The company did not disclose whether it had adequate shipper commitments on Energy East in light of Keystone XL's unexpected presidential approval last year.

Getting value-add from abundant natural gas in BC - Part 1
AltaGas announced the completion of commissioning at its Townsend 2A natural gas processing facility, located adjacent to the Townsend Facility in northeastern BC. The company expects the 99 MMcf/day processing plant to be fully operational by the first quarter of 2018. AltaGas also says its 10,000 bbl/day North Pine NGL Separation Facility near Fort St. John is now expected to come online in early December 2017, a few months ahead of schedule. Construction also continues to progress at the Ridley Island Propane Export Terminal in Prince Rupert (RIPET). RIPET should be operational by the first quarter of 2019.

Getting value-add from abundant natural gas in BC - Part 2
Birchcliff also announced the start-up of the 80 MMcf/d Phase V expansion of its natural gas processing plant in Pouce Coupe, increasing capacity of the overall facility to 260 MMcf/day. Pouce Coupe is located in the Montney/Doig Resource Play near Dawson Creek, BC.

Getting value-add from abundant natural gas in BC - Part 3
Just weeks after starting up the Tower processing plant, Encana announced the start-up of its Sunrise facility last week, under budget and one month ahead of schedule. Sunrise and Tower are located on the BC side of the Montney formation, with a combined processing capacity of 360 MMcf/day of natural gas and 15,800 bbl/day of NGLs and condensate. A third processing plant, Saturn, remains on track for start-up before the end of the year. The Towerbirch lateral pipeline, which connects all three facilities, also began operation last week.


USA

Another hurricane on the radar screen
Several oil majors, including ExxonMobil, Anadarko and ConocoPhillips have cut production and reduced staff in the Gulf of Mexico ahead of Tropical Storm Nate. The deadly storm is expected to be upgraded to hurricane status sometime this weekend, as it makes its way to the Louisiana coast early Sunday. According to the Bureau of Safety and Environmental Enforcement, 1.25 million bbl/day of oil production was taken offline in the Gulf of Mexico going into the weekend, representing over 70% of the region's output. Louisiana's Gulf Coast is also home to 18 refineries with a total capacity of 3.3 million bbl/day, as well as large marine terminals and chemical plants.

Energy sector carbon emissions continue to fall
According to the US Energy Information Agency (EIA), energy-related CO2 emissions declined 1.7% last year to 5,170 MMmt despite a 1.5% increase in GDP. The EIA attributes the decline to a 1.4% decline in energy intensity and increased use of natural gas for power generation, decreasing coal consumption. The US transportation sector still produces the highest emissions. Emissions from gasoline and jet fuel rose last year while diesel emissions declined 2.7%. US carbon emissions from the energy sector have declined in 6 out of the past 10 years, and now sits 14% below 2005 levels.

Bringing natural gas from the Permian to the Gulf Coast
Kinder Morgan, DCP Midstream and a subsidiary of Targa Resources have partnered up on the Gulf Coast Express Pipeline Project (GCX). GCX will be designed to transport 1.92 Bcf/day of natural gas from the Permian Basin to the Texas Gulf Coast. The system is expected to be put into service in the second half of 2019 pending a positive final investment decision by all three parties. Kinder Morgan owns 50% of the project, and has agreed to build and operate the line. DCP and Targa each hold a 25% stake.


US PRODUCTION & INVENTORY DATA

US crude exports surged to yet another record high last week as the wide WTI discount to Brent continues to increase demand for US crude. Total crude imports declined slightly but imports from Canada continue to recover, now back to 3.56 million bbl/day.

Baker Hughes reported another decline in oil rig counts this week, falling by two in the US and one in Canada.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

OCT 4, 2017

US crude exports surge to record highs as wide WTI discount drives up foreign demand

 

AROUND THE WORLD

Change of plans in Thailand
Royal Dutch Shell has cancelled plans to sell its Thai operations to Kuwait's national oil company, citing difficulties in getting timely approvals from the Thai government. The US$900 million deal was announced last January as part of Shell's massive US$30 billion divestiture program. The company says it has largely met its divestiture targets and is no longer in desperate need to sell the Asian business unit.

Coming up roses in Guyana, again
ExxonMobil announced its fifth major oil discovery off the coast of Guyana. The Turbot-1 well revealed a 75-foot reservoir of "high-quality, oil-bearing sandstone" similar to its other recent discoveries within the Staroek Block, including Liza, Payara, Snoek and Liza Deep. Exxon says it sees "tremendous potential" in the Stabroek Block and will "continue to further evaluate opportunities." Stabroek encompasses 6.6 million of acres jointly held by Exxon-subsidiary Esso Exploration, Production Guyana, Hess and CNOOC Nexen.

Carbon capture in Norway
Royal Dutch Shell, Statoil and Total have partnered up to develop a full-scale carbon capture and storage (CCS) facility in the Norwegian continental shelf. The government-backed project will have an initial capacity of 1.5 million ton/year, injecting the carbon into offshore injection wells east of the Troll field. Statoil will be leading the project and says it believes that CCS is the only path to meeting the Paris Climate Accord. Shell led the construction of the Quest CCS facility in Fort Saskatchewan, sequestering 1.2 million tonnes of CO2 annually from the Scotford Upgrader. There are currently less than two dozen large-scale CCS facilities operating globally.

Chevron divests South African assets
Chevron has agreed to sell 75% of its South African division and 100% of subsidiary Chevron Botswana to UK mining giant Glencore for US$973 million. The assets include a refinery in Cape Town, 850 retail gas stations and various midstream and infrastructure facilities. The deal is expected to close in the middle of 2018, subject to regulatory approval.

Venezuela has a plan to pay back Russia, but ...
Venezuelan President Nicolas Maduro says his country has every intention of meeting its debt obligations, but also says payments owed to Russia might need to be "restructured." Russia's largest oil producer Rosneft buys a significant volume of Venezuelan crude in exchange for loans to the Venezuelan government, including a recent US$6 billion loan to state-owned PDVSA. The South American country is increasingly relying on support from Russia to keep afloat. Venezuela's oil output has fallen to its lowest level in almost 30 years. Crude sales to the US fell to a 14-year low in September due to hurricane activity and recently imposed sanctions.

Saudis strengthen ties with Russia
Saudi King Salman made a historic first visit to Russia this week, reportedly seeking deeper ties and more private sector investment. King Salman signed several MOUs with respect to nuclear energy development, defence contracts and marine development. State oil giant Saudi Aramco also signed several MOUs this week with various Russian oil majors while Russia's Direct Investment Fund also agreed to cooperate with Saudi's Public Investment Fund on energy services and manufacturing. The cozy relationship is a major blow to the Americans, who were traditionally one of Saudi Arabia's largest trading partners.

Who's afraid of US shale?
Speaking at this week Russian Energy Forum, Saudi Energy Minister Khalid al-Falih says cooperation with Russia has "breathed life back into OPEC" and brightened the outlook for oil. Falih says he welcomes additional US shale production as rising global demand can absorb the additional output. Earlier in the week, Russian President Vladimir Putin said his country would support extending OPEC's production cuts to the end of 2018.


NEXT WEEK'S EVENTS

Monday:

  • TSX closed for Thanksgiving
  • US federal agencies closed for Columbus Day (markets open)

Tuesday:

  • International Monetary Fund releases World Economic Outlook: October 2017
  • Bank of Canada Senior Deputy Governor Carolyn Wilkins delivers speech at IMF in Washington, DC @ 2:00pm ET
  • PM Trudeau heads to Washington, DC for meeting with President Donald Trump
  • API Weekly Statistical Bulletin released @ 4:30pm ET

Wednesday:

Thursday:

Friday:

  • Baker Hughes Rig Count released @ 1:00pm ET
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