The Oil Sands Weekly

The Oil Sands Weekly

In the news this week:
  • Notley pledges purchase of new rail cars ...
    ... but they won't be delivered until 2020
  • Bill Morneau faces hostile audience in Calgary
  • WCS discount to WTI narrows considerably ...
    ... without help from either government
  • Shell divests Calgary technology centre
  • TransCanada remains optimistic on Keystone XL
  • US oil and gas reserves reach new record high
  • BP praises Trump for business-friendly energy policies
  • Iran blasts Trump for pulling out of 2015 nuclear deal.
ALBERTA

The discount on Western Canadian Select fell to just US$28.50/bbl on Friday, down from as much as US$47 in late October. According to the US Energy Information Administration (EIA), Midwest refineries are now running at almost 96% of capacity, up from a low of just 70% in mid-October. The region is by far the largest buyer of Canadian crude, accounting for about two-thirds of all exports. US imports of Canadian crude also improved to 3.5 million bbl/day last week.

Also giving a boost to Canadian oil prices is news that the Alberta government is close to finalizing an agreement to purchase enough cars to ship 120,000 bbl/day by rail. The deal is expected to cost Alberta taxpayers about $350 million, but the government says costs will be fully recuperated through additional royalties. The first few cars will be delivered at the end of next year, with the remainder received by the summer of 2020. The government estimates the move will narrow the discount by US$4 per barrel.

Following in the footsteps of Prime Minister Trudeau last week, Federal Finance Minister Bill Morneau faced a hostile crowd of Albertans in Calgary this week, still irked by the recent cancellation of the Trans Mountain expansion project, the crude tanker ban in northern BC and more changes coming to Canada's regulatory process. Morneau delivered a speech at the Calgary Chamber of Commerce, reiterating his support for Alberta's energy patch. The finance minister says the federal Liberals remain committed to getting the expansion project constructed, eventually.

Royal Dutch Shell announced the sale of its Shell Technology Centre to the University of Calgary. The centre will be renamed the U of C Life Sciences Innovation Hub. Shell divested a big chunk of its Alberta assets last year, retaining only the Scotford Refinery, a 10% stake in the Athabasca Oil Sands Project and a handful of small tight oil and natural gas properties. Financial terms of the deal were not disclosed. 

CANADA

The province of BC says it will intervene in defence of the federal government over its plans to implement a minimum price on carbon. Representatives for the province argue that both federal and provincial levels of governments share a role in addressing climate change. Saskatchewan and Ontario are headed to court in the new year to challenge Ottawa's authority to force provinces to levy carbon taxes on its residents.

New Brunswick’s newly elected PC government is poised to vote on a partial lifting of the province's natural gas fracking moratorium. Gas is currently produced in the Sussex region, where support for fracking is the highest. A number of companies have already indicated a willingness to relocate or expand production in the region if the ban is lifted.

Meanwhile in Ontario, its newly elected PC government says it will spend $400 million over four years on the Ontario Carbon Trust, vowing to partner with the private sector on the development of clean technologies. The government says the funds will help Ontario meet its climate change goals under the Paris Accord, where GHG emissions are targeted to be reduced by 30% below 2005 levels by 2030.

USA

A Montana judge has ruled that TransCanada can continue some pre-construction activities on its Keystone XL pipeline, including engineering and right-of-way discussions with land owners. Earlier this month, a US district court halted construction of the pipeline, ruling that the project's existing environmental assessment was inadequate. TransCanada says the ruling didn't specify whether that applied to pre-construction activities, such as finalizing contracts and purchase agreements. The company had hoped to start in February and warns 6,600 US jobs are at stake if construction is delayed.

The 800-mile Trans Alaska Pipeline System was shutdown on Friday after a magnitude 7.0 earthquake struck near Anchorage, Alaska. The pipeline transports about 500,000 bbl/day of crude from Alaska's North Slope to the Valdez terminal. The company says there was no damage to the system, but the line needs to be inspected before restarting. North Slope crude is primarily sold to refineries in California and Washington State. The pipeline has been in operation since 1977 and is co-owned by BP, ExxonMobil, Chevron, ConocoPhillips and Koch Industries.

According to the EIA, the country's oil and gas reserves hit a new record high in 2017, thanks to higher prices and new discoveries. Proved reserves of crude oil rose almost 20% from the previous year, reaching 39.2 billion barrels in 2017, and surpassing the previous high of 39.0 billion barrels in 1970. Texas saw the largest upward revision, adding 3.1 billion barrels of crude, followed by New Mexico, where reserves increased by 1 billion barrels. Proved reserves of natural gas increased 36% to reach 464 Tcf, also topping the 2014 high of 389 Tcf. Pennsylvania was the largest gainer in natural gas reserves, adding 28.1 Tcf.

Speaking in Edinburgh this week, BP CEO Bob Dudley praised President Trump for providing "vital" support to US oil and gas producers. Dudley says Trump scaled back the "avalanche of regulations" that previously existed, speeding up regulatory approvals and allowing for infrastructure to be built more quickly.

GLOBAL

Germany says it is still committed to the NordStream 2 pipeline, which will allow Russia to bypass Ukraine in transporting gas to Europe, despite heavy criticism from the Americans. Opponents argue the pipeline will make Germany and the rest of Europe too dependent on Russian gas, thereby reducing the effectiveness of current sanctions. Russia seized three Ukrainian ships near Crimea last weekend, prompting the US to push the EU for additional sanctions.

Iran’s nuclear chief warns his county could resume its uranium enrichment program, now that the US has pulled out of the 2015 nuclear deal. Under terms of the agreement, Iran agreed to stop producing 20% enriched uranium and give up most of its stockpiles in exchange for the lifting of economic sanctions. President Trump pulled the US out of the accord last spring, despite opposition from EU members, who view the nuclear deal as an important element of international security. Iran says it has the technical capacity to enrich uranium to 20%. Nuclear power plants require only 5% enriched uranium, but nuclear bombs need a purity in excess of 80%. Iran's crude exports have declined by 1 million bbl/day since last spring.

Oil workers in Libya are demanding better working conditions, now that the country's crude export have returned to 5-year highs. The workers say they haven't received a pay raise since 2013 and live in substandard accommodations. Although Libya was once one of Africa’s richest countries, living standards have deteriorated considerably due to a sharp decline in the local currency. Libyan output has recovered to 1.3 million bbl/day, just shy of the 1.6 million bbl/day produced before Muammar Gaddafi was toppled in 2011.

NEXT WEEK'S EVENTS

Monday:

  • TMEP Reconsideration hearings continue in Nanaimo, BC
  • COP24 (UN Climate Change Conference) begins in Katowice, Poland

Tuesday:

  • Canadian international merchandise trade data released by StatsCan
  • API Weekly Statistical Bulletin released @ 4:30pm ET
  • Marathon Petroleum 2018 Investor Day

Wednesday:

  • NYSE and Nasdaq closed in honour of President George H.W. Bush
  • Interest Rate Decision from the Bank of Canada @ 10:00am ET
  • EIA Weekly Petroleum Status Report released @ 10:30am ET
  • 17th Annual Wells Fargo Midstream and Utility Symposium begins in NYC, NY
  • Capital One Securities 13th Annual Energy Conference begins in New Orleans, LA

Thursday:

  • 175th (Ordinary) OPEC Meeting in Vienna, Austria
  • EIA Weekly Natural Gas Storage Report released @ 10:30am ET

Friday:

  • November Labour Force Survey released by StatsCan
  • BlackPearl Resources Special Shareholder Meeting in Calgary, AB
  • Baker Hughes Rig Count released @ 1:00pm ET
  • First Ministers' Meeting kicks-off in Montreal, QC
The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

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