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The Oil Sands Weekly

The Oil Sands Weekly

IN THE NEWS THIS WEEK:
  • JACOS reports first oil from Hangingstone
  • NEB approves Wyndwood Pipeline Expansion
  • Alberta NDP two years later
  • BC NDP on track to wipe out $50B worth of projects in 3 weeks
  • SK Premier Brad Wall set to retire in the fall
  • Nebraska governor remains hopeful on Keystone XL
  • EIA lowers expectations for natural gas prices
  • US files paperwork for Paris Accord withdrawal
  • UAE eyes major expansion in crude output
  • Russia threatens to restart idled oil fields

ALBERTA

Hangingstone produces first oil
Both Nexen and JACOS (the Canadian subsidiary of Japex) reported first oil production from the new Hangingstone Project, located about 100 km south of Fort McMurray, AB. JACOS says production is currently estimated at 1,000 bbl/day. The facility is expected to reach its nameplate capacity of 20,000 bbl/day by the end of next year. The company also says it has no plans to restart its adjacent Demo plant, which was shutdown last spring during the Wood Buffalo wildfires.

Don't expect a big pay raise next year
According to HR firm Morneau Shepell, the average Canadian will see a 2.3% pay increase next year, slightly better than the 2.2% increase handed out this year. Albertans will likely see the smallest pay raises next year, expected to average only 1.8%. Workers in the mining and energy sectors are expected to receive only a 0.8% increase next year.

Alberta the new Ontario?
After more than two years at the helm of Alberta, the Fraser Institute compares the Alberta NDPs to both the Ontario NDPs under Bob Rae and the Saskatchewan NDPs under Roy Romanow in the early 1990s. The think tank says Notley's NDP have more closely followed Rae's tax and spend policy, piling on more and more debt. The authors say it's unfortunate the Alberta government has rejected Premier Romanow's model of budget restraint, leaving Albertans "to feel the consequences of these decisions and outcomes for many years to come."


CANADA

Husky awards contract for White Rose CGS and living quarters
Husky Energy has awarded the contract for its White Rose concrete gravity structure (CGS) to a consortium comprised of SNC-Lavalin, Dragados Canada and Pennecon. The 145 meter tall structure will be built in Argentia, on the SW coast of Newfoundland, before being moved 350 km offshore. Husky also awarded the contract for the platform's living quarters to Kiewit Offshore Services. First oil from White Rose is expected in 2022. Suncor Energy holds a 27.5% interest in the $3.2 billion development.

NEB approves Wyndwood Pipeline Expansion
The National Energy Board has approved Spectra Energy's Wyndwood Pipeline Expansion Project subject to 32 conditions. The $170 million 27-km extension will mostly run parallel to the existing natural gas line near the town of Fort St. John, BC and add 50 MMcf/day of capacity. The conditions include the development of a landowner monitoring plan and minimizing disturbances to caribou habitat.

BC premier takes aim at another mega-project
Only a few weeks after the cancellation of the $36 billion Pacific Northwest LNG project and threatening to pull the plug on the $9 billion Site C hydroelectric dam, the BC government is now looking to make life very difficult for the $7 billion Trans Mountain Expansion. The government is joining several municipalities in the Lower Mainland and First Nations group in their legal challenge against the project, seeking intervenor status and hiring a former judge to provide legal advice. BC's environment minister is also vowing to hold back several permits required to begin construction on public lands later this year. NDP and Green Party voters are concentrated in the Vancouver and Victoria area, leaving the rest of BC very vulnerable to the government's whims. Alberta's NDP government has also been granted intervenor status in support of the pipeline.

Pétrolia settles with the Quebec government
Junior E&P company Pétrolia has reached a $20.5 million settlement with the Quebec government after the province pulled its exploration license and terminated its contract for oil production activities on Anticosti Island. Last week, the Quebec Liberals announced a ban on all oil and gas exploration in the area, estimated to hold 46 billion barrels of recoverable reserves. The company says it is "deeply disappointed" with the government's decision and will now refocus its attention on its pending merger with Pieridae.

Saskatchewan's premier gives up on politics
Saskatchewan Premier Brad Wall announced his retirement this week, after serving as premier for almost 10 years. Wall says it's time for his party, the government and the province to elect a new leader. The 51-year old premier gave no reason for his departure, nor indication of future plans. Under the premier's watch, Saskatchewan's population has grown 16% to almost 1.2 million. Wall will stay on as premier until a new leader is selected in the fall.


USA

Nebraska governor remains hopeful
Nebraska Governor Pete Ricketts was in Toronto this week, discussing trade with Finance Minister Bill Morneau. Ricketts says Keystone XL is good for Nebraska, generating jobs and tax revenues for both the state and 11 counties in the pipeline's path. The governor says he is confident the Public Service Commission (PSC) will approve the project. A decision from the PSC is expected sometime in the fall.

Rover construction restarts in West Virginia
West Virginia's environmental regulator has lifted its stop order on two segments of the Rover Pipeline, currently under construction. The Department of Environmental Protection (DEP) halted construction after operator Energy Transfer Partners (ETP) was accused of spilling sediment into creeks and streams. The DEP says those violations have since been corrected. Rover is a US$4.2 billion 713-mile (1,150 km) natural gas pipeline, bringing production from Marcellus and Utica Shale into the Dawn Storage Hub in Ontario for redistribution to markets across the US. ETP hopes to put the line into service by November.

Another pipeline gets the green-light
Andeavor (formerly Tesoro Corp) says it has received sufficient commitments to green-light its Conan Crude Oil Gathering Pipeline system in the Delaware Basin. The 130 mile (210 km) line will transport crude oil from New Mexico and Texas to a terminal to be constructed in Loving County, Texas. The first phase will have a capacity of 250,000 bbl/day, expandable to 500,000 bbl/day. The line is expected to be put into service in the middle of next year.

US files paperwork for Paris Accord withdrawal
The US has filed the appropriate paperwork to formally kick-off its withdrawal from the Paris Accord. The Department of State says the President remains open to "re-engaging in the Paris Agreement if the United States can identify terms that are more favorable to it, its businesses, its workers, its people, and its taxpayers." Despite the withdrawal, the government says it will continue to participate in international climate change negotiations and meetings. US diplomats have been instructed to side-step the topic of climate (if asked) and reiterate the government's focus on balancing climate policy with economic growth and energy security.

Solar eclipse to test resilience of US power grid
The US is expecting a total solar eclipse next Monday (August 21), the first in 99 years. Solar power plants in various regions will be partially or totally obscured during the event, causing a sudden shift in power loads for up to several hours. States with the most installed solar power are planning to ramp up back-up power (mostly natural gas) to ensure stability of the grid. Utility operators across the US and in Canada (specifically Ontario) are so far not expecting any issues.

EIA adjusts expectations for natural gas
In this month's Short Term Energy Outlook, the US Energy Information Administration (EIA) has tweaked its forecast for 2017/18 crude oil production to 9.35 and 9.91 million bbl/day, respectively (up 0.1% from its July forecast) but raised its forecast for natural gas production by over 1% to 77.34 Bcf/day in 2018. The EIA has therefore lowered expectations for natural gas prices in 2017/18, now expected to average US$3.06 and US$3.29/MMBtu, down 1.4% and 3.2% from its previous forecast. Natural gas prices averaged US$2.63 and US$2.51 in 2015 and 2016, respectively.


US PRODUCTION & INVENTORY DATA

Commercial crude oil inventories declined for the sixth week in a row last week, on big drawdowns in the Gulf Coast. Production out of the Lower 48 rose another 15,000 bbl/day. 

Gasoline stockpiles surged 3.4 million barrels, the first increase in 2 months. The increase is being blamed on stubbornly high imports, which more than doubled last week to 1.1 million bbl/day.

Baker-Hughes reported 3 more oil rigs in service this week in the US, bringing the total to 768. Canada also added 3 rigs, bringing the total to 127. The US lost 8 natural gas rigs this week. 

 
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WEEKLY US INVENTORY REPORT

AUG 9, 2017

CRUDE STOCKPILES POST SIXTH CONSECUTIVE WEEKLY DECLINE ON CONTINUED DRAWDOWNS IN THE GULF COAST

 

AROUND THE WORLD

Pernis refinery plans restart
After a fire crippled Shell's Pernis refinery last week, the company says it is ready to restart one of two idled crude units this weekend. Shell says it hopes the facility can return to normal operation by the end of the month. Pernis is the largest refinery in Europe, with a processing capacity of 404,000 bbl/day.

New oil field in Argentina
Argentina's GeoPark and Germany's Wintershall announced the discovery of a new oil field in the Neuquen Basin, located in the Mendoza Province of Argentina. The company says testing continues to determine the size of the field.

Higher gas prices in Australia
Australia's Competition and Consumer Commission is warning that BP's purchase of 527 gas stations from Woolworth may drive up prices at the pump. Chairman Rod Sims flagged concerns that BP may not offer the same price discounts as the supermarket operator, who currently offers a 4¢/L discount to its customers. BP says it will continue to work with the competition bureau to get the A$1.8 billion merger approved.

Expanding oil production from the UAE
The UAE's state-owned Abu Dhabi National Oil Company (ADNOC) released an aggressive plan to boost production capacity from 3.0 to 3.5 million bbl/day as part of its 2030 growth strategy. The plan involves bringing in global oil majors as partners on the development of offshore oil fields. The OPEC member committed to capping production to 2.874 million bbl/day last November.

Re-opening old pipelines in Iraq
Iraq is mulling the restart of an old pipeline that used to transport Iraqi crude through Saudi Arabia. The line was shutdown in 1990 after Saddam Hussein invaded Kuwait, and later confiscated by Saudi Arabia in 2001 as compensation for unpaid debts.

Russia threatens to increase production
Russia's Gazprom jolted oil markets this week after it says it would be "economically feasible" to resume production in mature fields after its agreement with OPEC expires.

From cutting output to cutting exports
State-owned Saudi Aramco says it will cut sales to its international customers by at least 520,000 bbl/day in September, including a 10% reduction in Asia. Saudi Arabia has taken about 600,000 bbl/day offline for most of this year, which only temporarily helped lift oil prices.

What to do with non-compliant states
OPEC and non-OPEC members met in Abu Dhabi this week to discuss compliance, or more specifically, lack of compliance from Iraq, Kazakhstan, Malaysia and the UAE. Iraq and the UAE are claiming the benchmark production rates, upon which the cuts are based, were underestimated. OPEC released a statement calling the discussions "constructive" and "fruitful." The next compliance meeting will be held on August 21 in Vienna, Austria.

World oil markets according to OPEC
In this month's Oil Market Report, OPEC says its members produced 32.87 million bbl/day in July, an increase of 173,000 bbl/day from the previous month. The cartel also upped its projections for 2017 demand by 0.1 to 96.49 million bbl/day on better than expected data out of OECD countries. Demand is expected to rise to 97.77 million bbl/day next year. Non-OPEC supply expectations were lowered by 28,000 bbl/day this year to 57.77 million bbl/day, rising to 58.87 million bbl/day next year. Supply increases will be driven by the US, Brazil and Canada.

World oil markets according to the IEA
The International Energy Agency (IEA) also released its August Oil Market Report this week. The IEA "adjusted" its forecast for world oil demand to 99 million in 2018, reaching 100 million bbl/day by the end of next year. World oil supply jumped 520,000 bbl/day from June to July, the third consecutive monthly increase, driven by both OPEC and non-OPEC producers. OECD oil stockpiles declined over 19 million barrels in June and are expected to fall again in July.


NEXT WEEK'S EVENTS

Monday:

  • Q2/2017 earnings: Pengrowth Energy, RMP Energy, Spartan Energy

Tuesday:

  • API Weekly Statistical Bulletin released @ 4:30pm ET
  • Q2/2017 earnings: Storm Resources

Wednesday:

  • NAFTA negotiations begin in Washington, DC
  • FOMC minutes from July 25/26 meeting released @ 2:00pm ET
  • EIA Weekly Petroleum Status Report released @ 10:30am ET

Thursday:

Friday:

  • July Consumer Price Index released by StatsCan @ 8:30am
  • Baker Hughes Rig Count released @ 1:00pm ET
The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

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