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The Oil Sands Weekly

The Oil Sands Weekly

IN THE NEWS THIS WEEK:
  • Frontier's encroachment on national park in the spotlight
  • NEB expands focus for Energy East
  • Alberta dips into contingency fund
  • Petronas not giving up on Canada just yet
  • Irving Oil invests in Atlantic Canadian students
  • ETP turns the tables on Greenpeace
  • Hurricane Harvey wrecks havoc in the Gulf Coast
  • US courts overturn FERC pipeline approvals
  • BHP changes its mind about US shale
  • US Administration cracks down on biodiesel imports
  • Statoil dips toe in Argentina
  • French-energy giant Total plunges into the North Sea
  • Mexican oil output hits 13-year new low
  • Saudis kick-off bidding process for massive petrochemical plant
  • Shell shrinks in Argentina and expands in Russia and Nigeria

ALBERTA

Teck to consider Frontier's encroachment on national heritage site
The federal government has instructed Teck Resources to consider any potential impacts its Frontier Oil Sands Mine would have on the Wood Buffalo National Park World Heritage Site, including environmental and social ramifications. The UN began monitoring the park after receiving complaints from First Nations members about encroaching development. The UN submitted a list of 17 recommendations and has threatened to downgrade the park to its list of "in danger" heritage sites. The 4.5 million hectare national park is the second largest national park in the world, straddling the Northwest Territories border. Frontier is located 30 km south of the park's southern border, 110 km north of the city of Fort McMurray. If constructed, it would be the most northern oil sands mine in the Athabasca region.

Alberta dips into contingency fund
Finance Minister Joe Ceci delivered the province's first quarter update this week, delivering a mixed bag of good news and bad news. The good news - Alberta's economy is doing better than expected, now forecasted to grow 3.1% this fiscal year, revised higher from a previous forecast of 2.6%. The bad news - oil prices are expected to remain "lower-for-longer" taking a $2 billion bite out of royalty revenues. Expectations for oil prices have been revised lower from US$55 to US$49 WTI. The 2017/18 deficit remains unchanged at about $10.5 billion, but $250 million has been taken out of the province's $500 million "Risk Adjustment" bucket.

Labour market improving, very slowly
Almost 70,000 Albertans received employment insurance (EI) benefits in June, a decline of 3.3% from the previous month and almost 15% lower from 12 months earlier. This is the eight consecutive monthly decline for the province. Nation-wide, the number of EI recipients declined 1.3% to 517,000.


CANADA

NEB expands focus for Energy East
The National Energy Board (NEB) says the upcoming assessment for TransCanada's Energy East Pipeline will provide "more visibility" on the "potential consequences, the proposed mitigation and response measures" associated with spills and malfunctions, including preventative programs. In addition, the regulator will now need to quantify "incremental indirect greenhouse gas emissions ... including from incremental upstream gas production and processing and incremental downstream end-use." Environment and Climate Change Canada (ECCC) already undertake an assessment of upstream GHG emissions as part of the federal government's "interim measures" for restoring confidence in the Canadian regulatory process. It is unclear how the NEB's assessment of GHG emissions will be different than the ECCC report. The NEB has yet to publish a new schedule for the hearings.

Petronas not giving up on Canada yet - Part 1
The Globe and Mail is reporting that Malaysia's Petronas is considering the purchase of Korea Gas' 15% stake in the LNG Canada project, led by Royal Dutch Shell. Shell committed to making a go/no-go decision on the $40 billion project sometime in 2018. Other partners in the JV include PetroChina and Mitsubishi Corp.

Petronas not giving up on Canada yet - Part 2
Petronas CEO Datuk Mohd Anuar Taib also hinted that his company is looking for "partners or parties" to build a new pipeline to help develop its existing oil and gas assets in Western Canada. Petronas’ gas resources are located in North Montney area, operated by Canadian subsidiary Progress Energy. The area has been producing gas since 2012 and holds an estimated 22.3 trillion cubic feet of proven unconventional gas reserves. The CEO says Canada is "sitting in one of the largest markets in the world and there must be ways [...] to monetise those resources." Petronas also says production costs must come down in order to remain competitive.

2016 not a good year for Canadian energy
According to S&P Global, nine Canadian oil and gas firms defaulted in 2016, representing almost 78% of all defaults across all sectors. The ratings agency says the credit quality of Canadian energy companies "deteriorated" through 2016, with downgrades outnumbering upgrades by a ratio of almost 3-to-1.  Globally, energy and natural resources firms accounted for 50% of all bankruptcies last year, the highest concentration in history.

Irving invests in Atlantic Canadian youth
Irving Oil has donated a total of $2.2 million to Dalhousie University to support the school's Innovation and Design in Engineering and Architecture Project. $1.5 million will go directly towards the construction of design labs, engineering facilities and learning spaces. Over $700,000 will be made available in scholarships to students over the next 10 years, with recipients being offered co-op opportunities with Irving Oil.


USA

US regulator gets mixed messages on pipeline approvals
A US appeals court has overturned the Federal Energy Regulatory Commission’s (FERC) approval of three natural gas pipelines, known collectively as the Southeast Market Pipelines Project, intended to increase natural gas supply to power generators in Florida. The legal challenge was launched by several non-profits and landowners, who argued that burning natural gas will hasten climate change. The project’s developers argued that increasing gas supply to the region will allow utility companies to retire old coal-fired power plants, therefore reducing GHG emissions. The project includes the 500 mile Sabal Trail pipeline which is already partially operational. US courts had previously ruled that FERC did not have to consider impacts to climate change in the case of LNG export terminals. The ruling is expected to be appealed.

This week's "man bites dog" story
Energy Transfer Partners (ETP) has filed a lawsuit against Greenpeace, accusing the group of eco-terrorism, racketeering and breaking federal organized crime laws in its campaign against the Dakota Access Pipeline. ETP calls Greenpeace a "rogue eco-terrorist" group who's ultimate goal is to raise funds by generating a media frenzy. Canada's Resolute Forest Products went after Greenpeace in 2013 after the firm branded Resolute a "forest destroyer." Greenpeace later admitted its campaigns merely reflect the group's opinions and are not intended to be interpreted as facts. Resolute's $300 million lawsuit is still pending in California courts.

BHP has a change of heart around US shale
BHP dropped a bombshell this week, announcing it was "actively" pursuing the divestiture of its US shale oil and gas business, assuming it can find the right buyer at the right price. The world's largest miner has been under pressure from activist investor Elliott Management who called the US shale business a capex hog. BHP says it will work towards the divestiture over the next two years, estimated to be worth about US$7.5 billion.

US Administration slaps duties on biodiesel imports
The Commerce Department has imposed steep duties on imports of biodiesel from Argentina and Indonesia after it concluded the fuel was being unfairly subsidized. The complaint was lodged by the National Biodiesel Board (NBB) who accused both countries of undercutting US producers. The US consumes about 2 billion gallons of biodiesel annually, about half imported, with Argentina accounting for two-thirds of those imports. NBB says the US has the capacity to produce as much as 4 billion gallons of biodiesel annually and its members could easily make up any shortfalls. The import tariffs range from 41 to 68%.

Gulf of Mexico braces for Hurricane Harvey
Shell, Anadarko and Exxon Mobil have curtailed production in the Gulf of Mexico due to Hurricane Harvey, the most powerful storm to hit the US in over a decade. Marathon Oil and ConocoPhillips have also scaled back operations in the Eagle Ford shale region of Texas. Several refineries in the Corpus Christi region were taken offline as a precautionary measure, causing a spike in gasoline prices. Harvey hit the mainland as a Category 4 hurricane late Friday, and is expected to move through Texas and Louisiana over the weekend. Both states are expecting heavy flooding and have declared states of emergency.


US PRODUCTION & INVENTORY DATA

The US Energy Information Administration (EIA) reported the eighth consecutive weekly decline in crude oil stockpiles, falling another 3.3 million barrels last week. Domestic production rose another 26,000 bbl/day, split evenly between Alaska and the Lower 48 region.

 
steelwork-1031485_1280.jpg

WEEKLY US INVENTORY REPORT

AUG 23, 2017

US CRUDE STOCKPILES POST EIGHTH CONSECUTIVE WEEKLY DECLINE DESPITE HIGHER OUTPUT AND RISING IMPORTS

 

AROUND THE WORLD

Total plunges into the North Sea
French energy giant Total has agreed to buy Maersk's Norwegian and UK producing assets for US$7.45 billion in shares and debt. The acquisition makes Total the top producer in the North Sea, overtaking Royal Dutch Shell.

Mexican output touches new low
According to state-owned Pemex, Mexico's oil output in July fell below the 2 million bbl/day mark for the first time since 1995. Outdated technology has caused production to steadily decline from a high of 3.4 million bbl/day reached in 2005. The government is hoping to reverse that trend by opening its energy sector to private sector investment in 2014.

Saudis get the ball rolling on massive petrochemical plant
State-owned Saudi Aramco and Saudi Basic Industries Corp (SABIC) have kicked-off the bidding process for engineering work on their joint COTC petrochemical complex. The US$20+ billion facility will be designed to process 400,000 bbl/day of Arabian Light and Extra Light crude, producing as much as 18 million tonnes of petrochemicals annually. Bids for pre-FEED and FEED close in late September. Construction is expected to begin sometime in 2020 with an in-service date of late 2024.

Cambodia gets into the oil business
After three years of negotiations, the Cambodian government and KrisEnergy has signed a fiscal and technical agreement to develop the country's first commercial oil field in the Gulf of Thailand. The Apsara project will be developed in three phases, with the first phase capable of producing 30,000 boe/day.

Statoil dips toe in Argentina
Statoil and Argentina's YPF have signed an agreement to jointly explore for hydrocarbons in the country's Vaca Muerta formation. Vaca Muerta is one of the world's largest shale deposits, estimated to contains 16.2 billion barrels of tight oil and 308 trillion cubic feet gas. This is Statoil's first entrance into the South American country.

Shell close to divesting retail business in Argentina ....
Reuters is reporting that Royal Dutch Shell is close to selling its 630 retail gas stations in Argentina to Brazil's Raízen Energia. Raízen owns Brazil's second-largest chain of retail gasoline stations, operated under the Shell banner.

... while expanding retail business in Russia
Shell also announced plans to double the number of gas stations in Russia, from the current 227 to about 450. Shell operates over 43,000 gas stations around the world in more than 80 countries.

... and expands natural gas output from of Nigeria
Shell's Nigerian subsidiary announced the start-up of its Gbaran-Ubie Phase 2 project in Niger Delta region. The combined facility should reach its peak production capacity of 175,000 boe/day sometime in 2019. Gbaran-Ubie is a joint venture between Shell, Total, Eni and the Nigerian government, producing both natural gas and condensate.

Libya's Sharara shut-in again
Libya's National Oil Corporation (NOC) declared force majeure on loadings of Sharara crude again this week after the country's largest oil field was shut-in due to protests by armed groups and oil workers. Sharara had been producing 280,000 bbl/day before the incident, bringing Libya's total output to over 1 million bbl/day at the end of June.

Congestion on the high seas
Ten American sailors are presumed dead after an oil tanker hit a US Warship in waters just east of Singapore. The USS John S. McCain collided with a Liberian-flagged tanker carrying 12,000 tonnes of crude, tearing a whole on the side of the warship. This is the fourth incident involving the US Navy in Pacific waters so far this year. The waterways around Singapore are some of the most congested in the world, responsible for about on-third of all global shipping trade.

No news is not good news, in this case
A technical meeting between OPEC and non-OPEC members yielded no news this week. The next joint technical compliance meeting will be held in Vienna on September 22. According to Kuwait's oil minister, OPEC will make a decision on extending production cuts at its "formal" annual meeting to be held at the end of November.


NEXT WEEK'S EVENTS

Tuesday:

  • July industrial product & raw materials price index released by StatsCan @ 8:30am ET
  • API Weekly Statistical Bulletin released @ 4:30pm ET

Wednesday:

Thursday:

Friday:

  • NAFTA negotiations Round #2 kick-off in Mexico City, Mexico
  • 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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