The Oil Sands Weekly
- Notley hands OPEC an early Christmas gift
- Canadian oil majors warn of unintended consequences
- Energy patch capex spending remains soft
- Suncor plans random drug & alcohol testing in 2019
- Keystone and Mainline hit by power outage in SK
- Northeastern BC hit by small earthquakes
- US crude exports surge to record highs ...
... sending USGC stockpiles sharply lower
- Guyana poised to surpass Venezuela and Mexico
- France defers increases in fuel taxes
- Qatar plans divorce from OPEC after 57 years ...
... as cartel agrees to more production cuts in the new year.
After initially dismissing the idea as being "too complicated" to implement, Alberta's NDP government has ordered the province's oil producers to reduce output by 325,000 bbl/day, or roughly 8.7%, starting in the new year. The cuts will be administered by the Alberta Energy Regulator, affecting both oil sands and crude oil producers, with the first 10,000 bbl/day to be exempted. The move is expected to add $1.1 billion in additional royalties for the 2019-2020 fiscal year. According to Genscape, some 35 million barrels of crude currently sit in the province's storage tanks.
The news was welcomed by non-integrated producers, such as Cenovus, CNRL, Nexen and MEG Energy, who credit Premier Notley with saving jobs in the energy patch. Producers in Saskatchewan and North Dakota are also happy for the extra breathing space in export pipelines. Smaller producers have already cut about 150,000 bbl/day of crude due to low oil prices, which will count towards the province’s total reductions.
Reaction was not so positive from the country's Big Three integrated names, who largely benefit from low oil prices through their downstream operations. Imperial Oil CEO Rich Kruger says the cuts send yet another negative message to investors, accusing the province of failing to recognize "the investment decisions companies have made to access higher value markets." Kruger warned of "unintended consequences" to competitiveness, trade and future capital spending. Suncor Energy also disagreed with the province's decision to meddle with oil markets, calling free-market capitalism "the most effective means to balance supply and demand and normalize differentials." Husky Energy also warned that government intervention will have "serious negative investment, economic and trade consequences." Imperial, Suncor and Husky already have customers for their heavy crude and are not directly exposed to daily spot prices.
Canadian Natural Resources cut their 2019 capital budget to about $3.7 billion, 20% lower than the current year. About $3.1 billion is reserved for maintenance capital. The reduction was blamed on lack of market access and a "dysfunctional" pipeline nomination process. CNRL says it expects to produce between 1.03 and 1.12 million boe/day in 2019, little changed from the current year. Higher output from the oil sands will be offset by a small decline in conventional crude and natural gas production.
Gibson Energy says it expects to spend between $200 and $250 million on capital projects in 2019, down over 10% from this year's expenditures. More than half of those funds will be allocated towards adding more storage tanks at the Hardisty terminal. CEO Steve Spaulding says he expects to sanction two to four new tanks per year.
Suncor Energy says it will begin random drug and alcohol testing of its employees in the new year. The move comes after its union has given up its court case on the issue, which has been ongoing since 2012. The company says testing would be primarily for "safety-sensitive" positions, which include tradespeople, heavy equipment operators and office workers.
According to Statistics Canada and ATB Financial, total capital spending in Canada's energy patch was $9.3 billion in the third quarter of this year, the second lowest reading in the last five years and the third consecutive quarterly decline. Oil and gas expenditures remain about 60% below the all-time highs of late-2014. The completion of several mega-projects is mostly to blame, while a wide differential on Canadian light and heavy crude, as well as low AECO gas prices, is also not helping.
TransCanada's Keystone pipeline and Enbridge's Mainline network were temporarily shut-in earlier in the week, after a severe storm in Saskatchewan knocked out power to the two pipelines. Keystone brings 590,0000 bbl/day of crude from Alberta and Saskatchewan into the Gulf Coast, while the much larger Mainline network runs to refineries in the Midwest and southern Ontario. Both pipelines resumed normal operation by the middle of the week.
A series of small quakes in northeastern BC has reignited concerns over the hydraulic fracturing of natural gas. A 4.5 magnitude quake shook Thursday morning, followed by a 4.0 quake about 45 minutes later. BC's oil and gas commissioner ordered an immediate shutdown of operations near Fort St. John and Dawson Creek, as a precautionary measure.
According to the US Energy Information Administration (EIA), crude stockpiles declined sharply last week, mainly due to a 9 million barrel drawdown in the Gulf Coast. This is the first overall decline since mid-September. The EIA also reported a record volume of crude exports, surging to over 3 million bbl/day for the first time in US history. US imports of Canadian crude are holding steady at about 3.5 million bbl/day.
According to the New York Times, the Environmental Protection Agency is poised to eliminate President Obama's restrictions on new coal-fired power plants, which required the addition of costly carbon capture and storage technology. About 40% of US coal plants have shutdown since 2010, mostly due to cheap and abundant natural gas. The move is not expected to spur new investments in coal power.
Marathon Petroleum now says it expects to realize US$1.4 billion in synergies, after its recent merger with Andeavor (formerly Tesoro), revised higher from a previous estimate of US$1 billion. Total crude runs through its 16 refineries are expected to rise to 2.8 million bbl/day in the fourth quarter, up from 1.8 million pre-merger. Marathon Petroleum is now the largest US refiner by capacity.
French President Emmanuel Macron has back-peddled on plans to raise fuel taxes again in the new year, delaying implementation until after the next French elections. The "yellow vest" revolt began in mid-November over the government's latest economic reforms, which are being blamed for raising the cost of living. The riots have now spread to Paris, the worst the city has seen in 50 years.
Toronto-based Frontera Energy was forced to shut-in production at Peru's largest oilfield this week after a state-owned pipeline was severed by protesters, spilling more than 8,000 barrels of crude. Protestors are also preventing maintenance workers from accessing the damaged line. The PetroPeru pipeline has been sabotaged 19 times in the past two years. No word yet from the company on when production will resume.
Both Chevron and ExxonMobil are planning to sell their stakes in the Azeri-Chirag-Gunashli field, Azerbaijan's largest oilfield located in the Caspian Sea. Chevron holds a 9.6% stake, while Exxon owns 6.8%, worth a combined US$5 billion. The field produced about 600,000 bbl/day this year. Chevron is also looking to sell its 8.9% interest in the 1,100 mile Baku-Tbilisi-Ceyhan pipeline, which exports 1.2 million bbl/day of crude from Azerbaijan, through Georgia and into Turkey. The line is operated by BP, who owns a 30% stake.
ExxonMobil announced its 10th discovery in the Stabroek Block off the coast of Guyana, increasing its estimates of recoverable reserves to more than 5 billion barrels of oil equivalent, up 25% from its previous forecast. According to WoodMac, the region could soon overtake Venezuela and Mexico to become the second largest producer in South America, after Brazil.
OPEC and friends have agreed to remove 1.2 million bbl/day of crude from oil markets in the new year, as measured from October’s output. The cuts will be spilt 800,000 bbl/day for OPEC members and 400,000 bbl/day for non-OPEC producers, with Russia accounting for more than half of those volumes. Individual quotas for each country were not disclosed. This latest round of cuts will be in effect for six months.
After being a member for 57 years, Qatar announced its exit from OPEC for "non-political" reasons. The country produces only 600,000 bbl/day, but is the world's largest LNG exporter. Saudi Arabia and the United Arab Emirate have had sanctions in place against Qatar for the past 18 months, accusing the country of being overly-friendly with Iran.
- Final arguments for Frontier Oil Sands Mine Project in Calgary, AB
- Enbridge annual investor conference in New York City, NY
- EIA Short Term Energy Outlook (December 2018)
- Uk Parliament votes on Brexit
- API Weekly Statistical Bulletin released @ 4:30pm ET
- Q3/2018 industrial capacity utilization rates released by StatsCan
- OPEC Monthly Oil Market Report (December 2018)
- AltaGas 2019 outlook and operational update (conference call)
- EIA Weekly Petroleum Status Report released @ 10:30am ET
- IEA Oil Market Report (December 2018)
- EIA Weekly Natural Gas Storage Report released @ 10:30am ET
- Baker Hughes Rig Count released @ 1:00pm ET