The Oil Sands Weekly

The Oil Sands Weekly

IN THE NEWS THIS WEEK:
  • TMEP constitutional hearings continue in Calgary
  • Oil sands camp operators consolidate despite sluggish demand
  • Alberta's economy doing better than expected ...
  • ... but not everyone is impressed
  • Boosting production and lowering emissions at Christina Lake
  • Hebron gets off the ground in Newfoundland
  • Pembina's ambitious plans for 2018
  • Keyera expands Alberta gas plant
  • Ontario set to double ethanol blending mandate
  • TransCanada restarts Keystone pipeline ...
  • ... and provides update on Keystone XL
  • Enbridge's plan to divest $3 billion in assets next year ...
  • ... while still making amends in Michigan
  • Exxon restructures refining division
  • Pakistan plots major LNG expansion
  • OPEC and friends extend production caps the end of 2018, maybe.

ALBERTA

TransCanada provides update on Keystone XL
TransCanada says it is "very encouraged" by discussions with potential shippers and expects to secure enough binding commitments to sanction the Keystone XL pipeline. Construction is expected to take about two years after a positive Final Investment Decision is made. The last cost estimate for the 830,000 bbl/day project was about US$8 billion. Last week, Nebraska's Public Service Commission (PSC) approved an alternative route through its state, raising questions on the validity of the approval and leaving the project more vulnerable to lawsuits. TransCanada has asked the PSC to clarify its decision and continues to crunch the numbers on the new route, which is about 8 km longer than its preferred route. The company has yet to provide a timeline on when it expects to make a decision on the project.

Enbridge looks forward to the next three years
In this week's three-year financial outlook, Enbridge says it put $12 billion in new projects into service this year and plans to spend $22 billion through 2020 on growing its oil and gas pipeline and storage business. Enbridge says it has identified $10 billion in non-core assets, at least $3 billion of which it plans to divest next year in its "unregulated gas midstream and onshore renewables businesses." Through its acquisition of Spectra Energy earlier this year, Enbridge is now the largest energy infrastructure company in North America with over $160 billion in assets.

MEG's plan to grow output in 2018
MEG Energy says it plans to produce more oil next year, about 6% more to be exact. The company expects its bitumen production to average about 81,000 bbl/day this year, rising to an average of 85,000 to 88,000 bbl/day next year. The MEG has set a 2018 capital budget of $510 million, about one-quarter dedicated to the completion of its Phase 2B eMSAGP growth project. Another $100 million is dedicated to developing the company's proprietary eMVAPEX technology, which includes injection of a light hydrocarbon to reduce steam loads. Operating costs at its Christina Lake operations are expected to average about $5/bbl next year, ex-energy. MEG says it hopes to exit 2018 close to the 100,000 bbl/day mark and hopefully expand production by another 10% in 2019.

Keyera expands Alberta gas plant
Keyera Corp announced a 10-year gas handling agreement this week with Athabasca Oil Corporation and Murphy Oil to process natural gas production from their Montney and Duvernay operations west of Fox Creek, Alberta. The company says it plans to expand capacity at its Simonette gas plant operations, expected to cost between $85 million and $100 million. Keyera expects the expansion to be put into service in the first half of 2019, if all regulatory approvals are received in time. The company boosted their 2018 capital spending plan to a range of $800 million to $900 million.

Camp operators consolidate despite sluggish demand
Houston-based Civeo announced plans to acquire Noralta Lodge, owner and operator of about a dozen work-camps in northern Alberta, including the Fort McMurray Village and Firebag Lodge, for $367 million. Civeo says it expects to save $10 million in 2019 through "operational and corporate efficiencies." Civeo already owns and operates several lodges in the oil sands region, some of which have been closed due to lack of demand.

Alberta doing better than expected ...
Alberta Finance Minister Joe Ceci delivered an optimistic second quarter fiscal update this week, promising to "responsibly and carefully" balance the budget eventually without "extreme and risky cuts." The government has revised their 2017 GDP growth forecast from 3.1% to 4.0%, leading all Canadian provinces on economic growth. The positive figures come after two consecutive years of contractions. Despite lower revenues, the 2017/18 deficit forecast has been reduced by $183 million to $10.3 billion. Among the economy's green-shoots, Ceci points to the addition of 70,000 full-time jobs since mid-2016 and a doubling of rig counts in the energy patch. The government is banking on an oil price of US$49 WTI.

... but not everyone is impressed
Ratings agency DBRS was less-than-impressed with the government's revised forecast, noting that the province is still running large operating deficits and rapidly accumulating debt. DBRS downgraded Alberta from AA (high) to AA and maintained its Negative trend, pointing to the government's unwillingness to address Alberta's high level of per capita spending while insisting on maintaining some of the lowest tax rates in the country. DBRS says Alberta's fiscal outlook remains the weakest among all provinces, noting that it sees no path to balance unless oil prices stage a spectacular recovery.


CANADA

NEB begins constitutional hearings into TMEP
The National Energy Board (NEB) commenced constitutional hearings into the Trans Mountain Expansion Project (TMEP), initiated at the request of Kinder Morgan Canada after it accused the city of Burnaby of deliberately stalling on the issuance of municipal permits. The company maintains that some of Burnaby’s bylaws do not apply to construction at its Burnaby and Westridge Marine Terminal. Kinder Morgan has also asked the NEB to set up a process for the timely resolution of anticipated conflicts with both provincial and municipal levels of government going forward. The NEB will also hear arguments from the City of Burnaby and representatives from the provinces of Alberta, BC and Saskatchewan before making a final decision. Federal Natural Resources Minister Jim Carr submitted a letter of support for both the NEB and Kinder Morgan's desire for speedy conflict resolution. Proceedings wrap-up in Calgary on Monday December 4, 2017.

Pembina's plans for 2018
Pembina Pipeline's Board of Directors has approved $400 million in new capital projects, as well as a capital spending program of about $1.3 billion for next year. The Board has approved the company's Prince Rupert LPG Export Terminal on Watson Island, BC. The 25,000 bbl/day export facility has a revised price tag of $270 million, now expected to be put into service by the middle of 2020. The company is also moving forward on its jointly-owned North Central Liquids Hub in the Montney region, at an estimated capital cost of $320 million. The new hub has an in-service date of 2018.

Hebron gets off the ground in Newfoundland
After 5 years and 40 million hours of construction, ExxonMobil Canada announced first oil from the Hebron field in the Jeanne d’Arc Basin, located 350 km off the coast of St. John's, NL. At peak rates, the Hebron platform has a nameplate capacity of 150,000 bbl/day and a storage capacity of 1.2 million barrels. The Jeanne d’Arc Basin holds an estimated 700 million barrels of recoverable reserves. Exxon operates the platform, owned jointly with partners Suncor Energy, Chevron, Statoil and Nalcor Energy.

Ontario set to double ethanol blending mandate
The Ontario government has doubled its mandate for ethanol blending in gasoline from 5% to 10% by 2020, as part of its plan to lower GHG emissions. The province's corn producers applauded the change. Ethanol combustion has less than half the GHG emissions than gasoline. However, emissions from ethanol production is highly variable, depending primarily on the type of power used. The Ontario government is requiring the ethanol used in the new fuel blend to be at least 35% lower in GHGs than gasoline on a lifecycle basis. Ethanol is also suspected of contributing to increased levels of smog.


USA

TransCanada provides update on Keystone
TransCanada has restarted the Keystone pipeline after being taken offline for almost two weeks due to a spill that occurred in South Dakota. A preliminary report from the US Pipeline and Hazardous Materials Safety Administration (PHMSA) suggests the leak occurred at a section of pipe that may have been damaged during construction in 2008, when a weight was installed on the pipe to prevent buoyancy issues in waterlogged zones. PHMSA has since issued a Corrective Action Order, mandating the line operate 20% below its normal rated pressure. TransCanada did not provide a timeline for Keystone's return to normal but says it is monitoring the system as it ramps up to full capacity. The company is conducting its own investigation into the exact cause of the pipeline failure.

Enbridge has a path forward in Michigan State
Enbridge says it has reached an understanding with the State of Michigan over the future of Line 5, a 64-year old pipeline that carries 540,000 bbl/day of light crude and NGLs from Superior, WI into Sarnia, ON. At issue is a pair of 20-inch pipelines that cross under the Straits of Mackinac, a narrow waterway that connects Lake Michigan and Lake Huron. The state has flagged concerns over the pipeline, questioning whether the line is still fit for service after six-decades of use. Enbridge says it has completed numerous technical studies, both internally and externally, confirming that the line is in good shape. However, the company acknowledges it still has work to do to restore public confidence after its Line 6B spilled diluted bitumen into the Kalamazoo River in the summer of 2010. Enbridge has agreed to seven new conditions, which include evaluating options to replace the pipe, adding more underwater technologies to monitor the pipe, temporarily shutting the line down during adverse weather conditions and increase information sharing with the state.

Crude terminal suffers another set back in Washington State
The Vancouver Energy terminal suffered another set back in Washington State this week after a state panel unanimously recommended that the governor should reject a permit for the project. The terminal would see 360,000 bbl/day of light Bakken crude railed into a marine loading terminal in Vancouver, WA for shipment to refineries in Washington State and California. A spokesman for the company accuses the council of setting “an impossible standard for new energy facilities," sending "a clear anti-development message that will have a chilling effect on business in the state of Washington." Vancouver Energy is a joint-venture between Andeavor (formerly Tesoro) and Savage. Washington Governor Inslee now has 60 days to render a final decision.

ExxonMobil's plan to shake-up refining operations
ExxonMobil CEO Darren Woods announced plans to restructure the company’s refining and marketing divisions, combining the two business units into a new entity called Exxon Fuels and Lubricants. A spokesperson for the company says the changes will "improve decision making and enhance performance in the market." The changes take effect in the first quarter of 2018 and are intended to simplify operations and boost profits. Exxon operates 22 refineries in 14 countries. It is unclear whether the restructuring will include asset divestitures or job cuts.


US PRODUCTION & INVENTORY DATA

The US Energy Information Administration (EIA) announced another increase in crude production last week, rising 24,000 bbl/day to a new record high of 9.68 million bbl/day. US natural gas production hit a record high of 76.7 Bcf/day last week, as output from the Permian, Marcellus, Utica and Bakken plays hit record highs.

Outage of TransCanada's Keystone pipeline last week dented inventories at Cushing, falling 2.9 million barrels. Imports from Canada also declined sharply, falling almost 12% to 2.9 million bbl/day.

Baker Hughes reported another rise in North American oil rig counts this week, rising by two in the US and four in Canada, bringing the total to 749 and 111, respectively.The number of natural gas rigs in service also increased by 7 this week, bringing the North American total to 291.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

NOV 29, 2017

KEYSTONE OUTAGE TAKES A BIG BITE OUT OF CUSHING STOCKPILES

 

AROUND THE WORLD

Total retreats from the North Sea
French energy giant Total has agreed to sell its stake in two Norwegian oil fields to Statoil for US$1.45 billion. The deal includes its 51% stake in the Martin Linge field, which is currently under development and a 40% stake in the Garantiana discovery on the Norwegian Continental Shelf. Statoil has agreed to take over operatorship of the two facilities. Total retains interests in various non-operated oil fields in the region, including Ekofisk, Snohvit and Johan Sverdrup. The French oil company joins several other oil majors such as ExxonMobil, Royal Dutch Shell, BP and Hess to scale back operations in the Norwegian North Sea. 

Exxon mulls investment in Mauritania
The government of Mauritania is reporting that ExxonMobil is close to signing a deal to explore for oil and gas in three offshore blocks. Interest in the West African country has increased considerably since neighbour Senegal discovered sizeable reserves offshore. BP and Total already have exploration licences in the largely undeveloped region, with BP potentially building a LNG facility in the region. Exxon declined to comment on the deal.

Expanding LNG from Pakistan
The government of Pakistan is in talks with France, Italy and Spain on securing more LNG contracts. Pakistan opened its second LNG import terminal in Karachi last week and is working on building five more export terminals. The country is one of the fastest-growing LNG markets in the world but suffers from chronic energy shortages.

OPEC and friends reach agreement
OPEC and Russia have agreed to extend their 1.8 million bbl/day production cut from next March to the end of 2018. Russia is pushing for more clarity on when to exit the deal, expressing concerns the agreement may lead to big increases in US shale output. Nigeria and Libya have since joined the pact, promising to limit their combined production to 2.8 million bbl/day. OPEC has agreed to review output next June but signalled they may exit early if oil markets "overheat."


NEXT WEEK'S EVENTS

Sunday:

Tuesday:

Wednesday:

Thursday:

Friday:

  • Baker Hughes Rig Count released @ 1:00pm ET
The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

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