The Oil Sands Weekly

The Oil Sands Weekly

In the news this week:
  • Notley expands petrochemical credits
  • Alberta pledges purchase of 170 railcars
  • ATB warns of more layoffs and possible recession
  • Ottawa hands out pre-election goodies ...
  • ... but comes up short for oil producers
  • Husky suffers a spill at White Rose after severe storm
  • Trump thanks the Saudis for cheap(er) gas this Thanksgiving
  • TransCanada cries fowl in Mexico
  • French demonstrators take to the streets to protest gas taxes
  • Largest oil field in the Middle East makes a comeback, after being offline for more than a year.
ALBERTA

Alberta Premier Rachel Notley is under fire again this week for appointing yet another anti-oil sands activist to head up one of three special envoys tasked with narrowing the price gap between Alberta crude and WTI. Brian Topp is the premier's former chief of staff, who once compared oil sands production to the manufacturing of landmines. This is the second questionable pick from Notley, who previously appointed anti-pipeline crusader Tzeporah Berman to an oil sands advisory panel.

The NDP government also announced a doubling of royalty credits for the development of new petrochemical facilities, rising to $2.1 billion. The province says it has received 23 applications for the credits, representing over $60 billion in potential investments. So far, two projects have been sanctioned under the original program, including Inter Pipeline's $3.5 billion Heartland Petrochemical Complex in Strathcona County, and the $4 billion PDH/PP Facility in Sturgeon County, a joint-venture between Pembina Pipeline and Kuwait's Petrochemical Industries Company. The government says it expects to generate over $20 billion in private sector investment from the expanded program. Petrochemical plants process NGLs, which will do nothing to boost the price of Alberta crude.

Speaking in Calgary this week, Premier Notley says the province has short-listed six partial upgrading projects, worth a combined $5 billion. Partial upgrading would reduce diluent requirements, freeing up space on heavy oil export pipelines.

ATB Financial is warning Albertans to brace for more layoffs next year, and possibly another recession. Chief Economist Todd Hirsch says the recent collapse in Canadian crude prices is not yet reflected in government data, but could eventually result in substantial damage to the national economy.

CANADA

The Trudeau Liberals announced plans to spend, spend, spend their way to the 2019 federal election, announcing a number of subsidies and $14 billion in corporate tax allowances. Corporations can now qualify for accelerated depreciation of capital costs, rising from 4% to 12% annually. The manufacturing and clean-tech sectors can write-off all capital expenditures within the first year. A host of new subsidies were also announced for forestry, media, fishing, avalanche prevention, export diversification and non-profit groups. The Liberals have added $75 billion to the national debt during their current term in office, despite claims of a strong labour market and strong GDP growth.

As expected, the federal government had nothing for Alberta's energy patch. However, Reuters is reporting that Ottawa is still considering a request from Alberta to purchase enough rail cars to move 120,000 bbl/day of crude, the amount estimated to be above current pipeline and rail capacity. The 170 railcars come at a cost of about $350 million, and could be delivered as early as next summer. The provincial government says they are willing to foot the entire bill if Ottawa decides not to share costs. According to the National Energy Board, Canada exported a record 270,000 bbl/day of crude to the US in the month of September. That number is projected to rise to as much as 400,000 bbl/day by the end of 2019.

Husky Energy's White Rose platform off the coast of Newfoundland spilled about 1,500 barrels of oil last weekend, forcing the shutdown of the facility. White Rose was shutdown on November 15 due to severe weather, along with Hibernia, Terra Nova and Hebron. Husky discovered a leak in its subsea flowline after the storm, while it was conducting safety checks for restart. The incident resulted in the death of about a dozen seabirds. The spill has since been dispersed into the ocean. According to provincial offshore regulators, this is the largest spill to ever have occurred in the region. White Rose remains offline pending a full investigation.

USA

Minnesota regulators have unanimously denied a request to reconsider its approval of Enbridge's replacement of Line 3. The request was put forward by several environmental groups and Native American Tribes after the state's Public Utilities Commission (PUC) approved the project in June. The PUC called the review of Line 3 "probably the most extensive and thoroughly vetted" project ever seen, calling the approval "the right decision based on the record and applicable law."

More than a dozen US energy companies have pledged US$100 million towards alleviating stresses on health care, education and municipal infrastructure brought on by the shale boom in the Permian Basin. ExxonMobil, Chevron, EOG Resources, and Shell are among 17 companies behind the Permian Strategic Partnership, which promises to address labour shortages, traffic congestion and a housing crunch in West Texas and New Mexico. Production out of the Permian will have risen 400% since 2010, to about 3.7 million bbl/day by the end of this year. The influx of labour has overwhelmed existing infrastructure, and is expected to get worse as production is set to reach 5.4 million bbl/day by 2023.

The US Interior Department continues to work towards expanding oil and gas exploration in Alaska's National Petroleum Reserve, potentially opening up about 12 million acres of land. The government says some areas that were previously off-limits need to be re-evaluated, including the need for additional pipelines and road infrastructure. The US Geological Survey estimates the region to hold about 8.7 billion barrels of oil and 25 trillion cubic feet of natural gas. The government adds it is looking at establishing boundaries for ecologically sensitive areas.

President Trump thanked Saudi Arabia for the recent plunge in oil prices, and urged the kingdom to push prices even lower. Despite the recent declines, retail gasoline prices over this Thanksgiving weekend are the highest since 2014, averaging US$2.61 per gallon (roughly $0.92/L). However, prices at the pump vary greatly across the US due to state taxes. The cheapest gas can be found in the Gulf Coast (US$2.30/gal) and the most expensive on the West Coast (US$3.40/gal). Gasoline prices are closely correlated to the price of Brent, which is seaborne and unaffected by infrastructure bottlenecks.

GLOBAL

TransCanada has halted construction of two natural gas pipelines in central Mexico, accusing the Hidalgo state government of making "irrational requests that border on extortion." The Tuxpan-Tula and Tula-Villa de Reyes pipelines transport gas from South Texas to the Mexico's interior, going through rugged mountain terrain. The projects have been met with opposition from farmers and landowners, as well as uncooperative municipalities who have stalled on the issuance of permits. The company says it faces "significant delays," but will continue to execute both projects while evaluating options for rerouting the lines around problematic areas.

About 300,000 demonstrators took to the streets in France to protest high fuel prices. The government levied additional taxes on diesel at the end of 2017, aimed at levelling the playing field with gasoline and reducing diesel consumption. Coupled with higher wholesale prices, diesel prices at the pump have risen 16% this year, averaging US$1.69/L, now on par with gasoline. Fuel taxes are set to increase again in 2019. President Macron has refused to back down on the tax hike. Macron is expected to lose the next election by a landslide when French voters take to the polls next spring.

After being offline for more than a year, Iraq announced the restart of exports from its Kirkuk oil field last week. Flow resumed at about 50,000 to 60,000 bbl/day. The field was producing closer to 300,000 bbl/day before it was shutdown in the fall of 2017, due to a territorial dispute between the Iraqi government and Kurdistan’s semi-autonomous region. The Trump Administration applauded the move, calling the resumption of exports "another important step" in their efforts to curb Iran's exports. Kirkuk is one of the largest and oldest oilfields in the Middle East, estimated to contain 9 billion barrels of recoverable oil.

NEXT WEEK'S EVENTS

Monday:

  • TMEP Reconsideration hearings continue in Victoria, BC

Tuesday:

  • Finance Minister Bill Morneau speaks at the Calgary Chamber of Commerce
  • API Weekly Statistical Bulletin released @ 4:30pm ET

Wednesday:

  • EIA Weekly Petroleum Status Report released @ 10:30am ET
  • US third quarter GDP data release (second estimate)
  • December contract expiry for Henry Hub natural gas.

Thursday:

  • September weekly payroll data released by StatsCan @ 8:30am ET
  • EIA Weekly Natural Gas Storage Report released @ 10:30am ET
  • Alberta Premier Rachel Notley delivers speech in Toronto
  • US Federal Reserve releases minutes from last FOMC meeting

Friday:

  • September/Q3 GDP released by StatsCan @ 8:30am ET
  • Industrial product and raw materials price indexes released by StatsCan @ 8:30am ET
  • US Working and Net Available Shell Storage Capacity released by the EIA
  • Baker Hughes Rig Count released @ 1:00pm ET
  • G20 Summit begins in Buenos Aires, Argentina
  • December contract expiry for gasoline
  • January contract expiry for Brent.
The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

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