The Oil Sands Weekly

The Oil Sands Weekly

IN THE NEWS THIS WEEK:
  • Tough month ahead for Cenovus employees
  • Just when you thought the WCS discount couldn't get any wider
  • US imports of Canadian crude takes a big tumble
  • Kinder Morgan in no hurry to expand Trans Mountain
  • CP Rail in no hurry to boost crude-by-rail transport
  • TransCanada CEO brushes off Keystone XL's alternative route
  • Husky's SeaRose FSPO cleared for restart
  • First Nations group turns to GoFundMe to overturn BC Tanker Moratorium
  • NEB approves repairs to Norman Wells pipeline ...
  • ... but it likely won't make a difference for Norman Wells
  • More ethane from Ohio headed to Ontario
  • Rising output from US shale not to blame for global oversupply.

ALBERTA

Extracting value from mined tailings streams
Titanium Corporation says it continues to make "excellent progress" on the commercialization of its CVW™️ technology, designed to extract bitumen, solvents and minerals from oil sands tailings streams. The company has partnered with Emissions Reduction Alberta and Canadian Natural Resources (CNRL) to design and construct a pilot plant at CNRL's Horizon Mine. Titanium Corp says FEED is now underway, with contracts expected to be awarded in March. Engineering is expected to start in April and be completed by the end of the year.

Just when you thought the heavy oil discount couldn't get any wider
After narrowing slightly in early January, the heavy discount widened to over US$28 a barrel this week, the widest since January 2014 when WTI was trading closer to US$100. Imports of Canadian crude into the US are estimated to have declined by 580,000 bbl/day last week to just 3.0 million bbl/day, about 300,000 bbl/day below normal rates. Earlier in the week, CP Rail poured cold water on the hopes for a rapid rise in crude-by-rail exports, calling the higher demand "here for a limited period of time." CEO Keith Creel told analysts he wants "a more stable book of business" and refuses to be "commoditized," asking shippers to guarantee volumes before assigning more railcars. New pipeline capacity is not expected until 2020 while Alberta's crude production keeps rising as new facilities and expansion projects come online. Crude-by-rail exports to the US have increased from a low of just 50,000 bbl/day in the summer of 2016 to about 140,000 bbl/day last October. At its peak in 2014, rail exports to the US were as high as 180,000 bbl/day.

A tough month ahead for Cenovus
At this week's CIBC Institutional Investor Conference in Whistler, Cenovus CEO Alex Pourbaix says the company's previous announced job cuts will be completed by mid-February. Last December, Cenovus announced a 15% reduction in its head count, translating to roughly 500-700 staff members. Pourbaix says he remains committed to being transparent with employees.


CANADA

Kinder Morgan in no hurry to expand Trans Mountain
At this week's 2018 Analyst Day in Houston, Kinder Morgan Canada CEO Steve Kean says the company has made good progress on its Trans Mountain Expansion Project, but is in no hurry to ramp up construction. The company says its focus for this year will be to get all its permits and paperwork in place. Opponents in BC's Lower Mainland got a chance to voice their opposition to the project again this week, as the National Energy Board continues its route hearings on the expansion.

TransCanada CEO brushes off Keystone XL's alternative route
TransCanada CEO Russ Girling says Keystone XL's revised routing through the state of Nebraska is no big deal, calling the line's approval "solid." Speaking at this week's CIBC Institutional Investor Conference, Girling confirmed the route change will likely add $100 to $200 million to the total construction costs. The company says it is continuing to acquire land along the pipeline's right of way but has yet to confirm a date for a final investment decision. The State of Nebraska approved the pipeline last November, but a small section of the approved route differed from the company's regulatory application.

NEB finally rules on 2.5 km section of line repair
After a 10-month review process, the National Energy Board (NEB) says it will allow Enbridge to replace a 2.5 km section of its Line 21 (aka the Norman Wells Pipeline), which runs 870 km from Imperial Oil's Norman Wells operation in the Northwest Territories to a terminal in Zama, AB. Enbridge shut the line down in November 2016 due to ground instability on a section of the pipeline crossing near Ft. Simpson, NT. Closure of the pipeline forced the shutdown of the Norman Wells production facility. The Mayor of Norman Wells had hoped for a speedier approval from the NEB, noting this is just a repair of an existing line. The line has a capacity of 50,000 bbl/day but averaged closer to 11,000 bbl/day due to declining output from the field. Imperial has not committed to restarting production at Norman Wells once the line is placed back into service. The company has since put the property up for sale.

SeaRose cleared for restart
Just 10 days after ordering the shutdown of Husky's SeaRose production platform off the coast of Newfoundland, the province's offshore regulator (C-NLOPB) has withdrawn their suspension, allowing production to restart. The C-NLOPB says the case remains open and they will continue to monitor the company's implementation of promised changes to their operating practices. Last March, Husky failed to disconnect their SeaRose FSPO vessel and sail away from an iceberg that came too close to the platform.

Pro-pipeline indigenous groups ask the public for help in legal battle against Federal Liberals
More than 30 First Nations groups backing the $16 billion Eagle Spirit pipeline have launched a GoFundMe campaign to help pay legal fees in their attempt to get Bill C-48 overturned. The Oil Tanker Moratorium Act was passed unilaterally by the Trudeau Liberals last spring, banning the transportation of crude off the northern coast of BC and effectively killing any export pipelines to Prince Rupert or Kitimat. The group says environmental protection needs to be balanced with social welfare and job prospects, calling on "big American environmental NGO’s" to keep their noses out of Canada's business. The organizers would like the public's help in paying legal costs, given that most of their communities have unemployment rates near 90%, serious health concerns and third-world living standards.

New ethane supply into Ontario
Kinder Morgan announced the start of operations of its 270 mile (435 km) Utopia Pipeline, transporting 50,000 bbl/day of ethane between Harrison County, Ohio, and Windsor, Ontario. The ethane is sourced from Ohio's Utica shale basin, to be used as feedstock in the production of plastic. The company says the line can be expanded beyond 75,000 bbl/day if there's sufficient demand.


USA/GLOBAL

Rover struggles to cross the finish line
US regulators have ordered Energy Transfer Partners (ETP) to stop construction of its Rover natural gas pipeline under Ohio's Tuscarawas River after state regulators expressed concerns over the release of drilling fluids. The US Federal Energy Regulatory Commission (FERC) has asked ETP to consider alternatives to the river crossing. ETP says construction is more than 99% complete and the stop-work order will not delay the in-service date, currently forecasted by the end of the first quarter. Rover is designed to carry up to 3.25 bcf/day of natural gas from the shale fields in Pennsylvania, Ohio and West Virginia to the US Midwest and Ontario.

Another looming bankruptcy for PES
East coast refiner Philadelphia Energy Solutions (PES) announced plans to file for Chapter 11 bankruptcy, citing losses from the contentious Renewable Fuels Standard, which forces refiners to blend biofuels or buy credits. PES owns and operates two refineries, with a combined capacity of 335,000 bbl/day. The company says the biofuel credits are one of its biggest expenses, having spent US$800 million on credits since 2012. The refiner almost went under six years ago before being purchased by private equity firm Carlyle Group and Sunoco. PES is the largest refiner on the East Coast and the 10th largest in the US, employing about 1,100 people. The company has secured US$260 million in new financing and says it now plans to restructure its debt.

Don't rain on my parade
US Energy Secretary Rick Perry played down the impacts of the US shale oil boom, saying "I don’t think American shale production will be a spoiler. There is a lot of reforms going on around the world ... those reforms have the potential to really drive the consumption." Perry was addressing a panel of the world's most powerful energy ministers at this week's Economic Forum in Davos, dismissing suggestions that rapid expansion of US crude supply will put downward pressure on oil prices. US shale output is expected to increase by 1 million bbl/day this year, bring total US production well above 10 million bbl/day. Earlier this week, Saudi Arabia's Energy Minister also blasted the International Energy Agency (IEA) for overplaying the impacts of US shale growth, accusing the IEA of taking "it out of context."

GHG emissions at Wheatstone LNG under review
Chevron may face stricter emissions regulations at its US$34 billion Wheatstone LNG facility in Western Australia after the government promised to review environmental conditions tied to the project's regulatory approval. The facility was originally required to offset 2.6 million tonnes a year of CO₂ emissions, but those conditions were waived in 2011 after the country repealed its Clean Energy Act. Australia's EPA says it will investigate GHG conditions placed on the project "to ensure it is in line with contemporary best practice." Chevron has committed A$13 million in environmental offsets, including protection of marine animals near its waters. The company says it is disappointed by the news and wants a national approach to managing emissions.


NEXT WEEK'S EVENTS

Monday:

  • Last trading day for Henry Hub (February contract)

Tuesday:

Wednesday:

Thursday:

Friday:

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

  • Q4/2017 earnings releases: ExxonMobil, Imperial Oil, Chevron, Phillips 66, Valero Energy Partners

The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

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