Only a congenital optimist would greet Shell's abandonment of its Canadian and Alaskan projects - after sinking a combined $4.6 billion - with anything but dread. When even a supermajor is reporting quarterly losses of $7.4 billion, observers would be in their rights to throw up their hands in frustration and ask when will it end. The problem is indefinite, and WTI remains anchored around $45 per bbl for now, although it may or may not have bottomed out. The supply glut persists. While North [Read more]
Balancing budgets by squeezing blood from stone
Alberta made history yesterday for all the wrong reasons, with an announced budget deficit of $6.1 billion. Trends have been pointing towards this for some time and this latest deficit in part has its roots in the low-tax, high-spending policies of the Stelmach and Redford governments. This view echoes a Fraser Institute report that blames rampant spending growth rather than low oil prices for Alberta's current fiscal woes. That report points out that the province has run seven fiscal deficits [Read more]
The Liberal win and the lure of empty symbolism
A protracted election campaign now over, Prime Minister-designate Trudeau's government is now in its honeymoon phase. Oddly enough, many people who admit that they did not truly support Mr. Trudeau nevertheless feel they are now in a position to demand special concessions. That their stories have any traction whatsoever can probably be blamed on the nature of politics. After all, they make great theater. There is of course the open letter from "an average west coast, middle class mom [Read more]
Industry’s post-election position is ambiguous
It is conventional wisdom that in any election, there will be winners and losers. So where does Canada's oil & gas industry - and the millions of people relying on it - stand in the aftermath of the Liberals' landslide? Win or lose is a matter of perspective. The oil & gas industry needs pipelines. In the person of Prime Minister Harper, the industry had an unequivocal supporter. While every serious contender to some varying extent touted their support for Canada's resource sector, it [Read more]
Industry detractors will not be satisfied with a change in government
It is hardly news by now that export pipelines are crucial as far as the long-term health of Canada's oil & gas sector is concerned. Opposition remains at fever pitch, and multi-billion dollar projects are in limbo, held hostage to political and bureaucratic wrangling. Liberal Leader Justin Trudeau blames Prime Minister Stephen Harper for the impasse, arguing that the government failed to build support in the United States and among concerned stakeholders in Canada. “[F]or all Mr. [Read more]
Liberal intentions one more source of uncertainty for industry
Considering the strained nerves that accompany protracted election seasons, concerned Albertans can be forgiven for looking to the looming October 19th election with resigned complacency. After all, the biggest political threat to the province's well-being appears to have passed. Policy miscalculations in eastern Canada have left the federal NDP lagging a distant third according to the latest Grenier seat projection. Canada will likely not see a repeat of the so-called orange crush that swept [Read more]
Oil & gas industry critics misunderstand GDP breakdowns
With Canada's election cycle heating up, and little more than a week to go, it should not be surprising that some very questionably presented figures have been thrown around by industry detractors. A particularly egregious example of this is a figure that has been making its rounds in the past few months, namely that the oil sands contribute "only 2 per cent [to] the national GDP." As a preliminary matter, it makes very little sense to include only the oil sands' share, unless the goal is to [Read more]
Lower E & P company borrowing capacity alters investor calculus
A recent Wood Mackenzie consultancy report argues that concerns over an impending credit crunch for US operators is exaggerated. This concern was initially raised by Moody's, which predicted that lenders will lower their price decks by 15 - 25%. Price decks are used by lenders to determine the value of company reserves and thus borrowing bases. They are commonly used in relation to reserves-based financing (RBF), which is a form of revolving credit based on the net present value of reserves, [Read more]
Alberta energy efficiency program uncertain in impact
By now it is hardly news that a review of Alberta's climate change policies is underway. In this context, the issue of energy efficiency has been gaining some traction. Energy efficiency as a policy goal is a broad term that refers to measures 1) that alter the ratio of energy outputs to inputs by getting the same with less or getting more with the same on the supply side, 2) that alter how energy is transported or stored on the transmission side, or 3) that alter the way end-users consume [Read more]
Alberta government’s timing of climate change review likely to aggravate effects of downturn
Ever since the left-leaning NDP's surprise win in the May provincial elections this year, the province's mainstay industry has more than just a severe commodities price drop to concern itself with. Much has already been made of the government's plan to go through with royalty review and corporate tax increases. This has tended to obscure the government's equally significant decision to carry out a comprehensive review of the province's climate change policies. Much like the Royalty Review [Read more]