Engaging Articles of the Week
Interesting and a bit sad data points: For a given quality, a barrel of oil is a barrel of oil. Regardless of where it pops out of the ground, it originates from way down below, in pools accumulated millions of years ago, in reservoirs that tend to be disinterested in national borders. And yet, as the mighty BOE Report reported recently, barrels of oil that are still in their underground home in Texas are worth, on the open market more than twice as much as barrels sitting in the ground in Canada. Recent Permian transactions averaged a selling metric of about $66,000 US per flowing boe/d, whereas Canadian Montney reserves are transacting at $31,000 per flowing boe/d, in CAD. It gets worse if you convert currencies, the recent Diamondback acquisition of Double Eagle was valued at $104,000 US per flowing boe/d, and the highest Montney valued transaction in their list was at $34,000 US per flowing boe/d. And that, folks, sums up Canada’s booth at the great global Come Invest Here Conference. We’re in the back corner between the toilets and the fire exit. Our product is the same, but the booth is staffed by obviously disease-riddled animals. Don’t ever wonder why our standard of living is hurting. Article here.
On Tuesday this past week, natural gas market watchers seemed a bit surprised to see an upwards price spasm develop during the day. First thing in the morning, like at 5 am (one develops a pathetic addiction to these types of things when too deeply involved), the US HH market was down about 5 cents. Normally, the market moves in the morning depending on revisions in the weather forecast, so the implication was that there was no notable change in the weather. But by noon, gas prices had climbed as high as 40 cents, quite a huge move these days. Market watchers pegged the reason as a sudden drop in nominations of Canadian gas flowing into the US. Was it weather related, or an impact of tariffs (which had come into force just after midnight)? As it is wont to do, the market freaked out just in case. A big drop in Canadian exports is not on the radar, and it would be a very big deal. S&P Global ran an article the other week entitled “US gas E&Ps see supply mismatch coming as LNG production climbs”. The gas market is always on a knife edge, but so far producers have chosen a different path thus far rather than blowing their toes off like they have for the better part of a decade. US production is not climbing enough to meet growing US LNG exports, and so…we’re now on a hair trigger to the upside. Hopefully that upwards pressure drags things up here in Canada as well. Article here.
On the topic of natural gas, it’s fascinating to watch the Okanagan Valley in BC deal with the dying gasps of anti-natural gas sentiment (what with most of the world scrambling to access natural gas and all). Back in 2023, The BC Utilities Commission rejected FortisBC’s application to build a 30 kilometre natural gas pipeline in the Okanagan from Penticton to Chute Lake. FortisBC, being in the business, said that the project was needed to meet demand in the southern Interior over the next few decades. The BC Utilities Commission, chaired by a guy that has done time with the IPCC, declared FortisBC’s demand growth forecasts to be “highly unlikely”. Well, there ya go. Unsurprisingly as well, the utility actually knew better than the lawyers and academics making these decisions, and so now news emerges that FortisBC is adding mobile LNG tanks in Kelowna to buffer demand. Six tanks will be installed initially with a total capacity of 1,140 cubic metres, or about not very much at all, and the gas will be “brought in from Delta.” Still, FortisBC is doing what they have to do until sanity returns to Canada. There are some green shoots for sure with respect to energy, such as everyone’s lovely infatuation with pipelines all of a sudden, however corners of the country are going to be dealing with such dangerous foolishness for years to come. Articles here and here.
But all is not lost in BC, some wonderful news out the other day: The Prophet River First Nation outside of Fort St. John announced a partnership to develop a major data centre in the Fort St. John area. Or a letter of intent anyway, but still. The site location is in proximity to the legendary Site C Dam and other energy sources. Great to see such First Nations seizing the initiative to move important projects forward. News release here.
Interesting data/chart from the Statista site. We know the US and China are kind of neck and neck in the race to be the world’s economic superpower, with the US still holding a not inconsiderable lead. However, a significant portion of the US economy is financial related – in 2023, fully 21 percent of the US economy was related to the broader finance industry (finance, insurance, real estate, rentals, leasing) and another 13 percent to Professional and Business services. And this explains overall energy consumption patterns. Despite having a smaller economy, China consumes a whopping 80 percent more energy (171 exajoules vs. the US’ 94). We can see why that is from another stat: Only 10 percent of US GDP in 2023 is from manufacturing. In China, the ‘financial intermediary’ segment accounts for only 8 percent of GDP, whereas manufacturing accounts for nearly 30 percent. President Trump is on the warpath to reverse those trends, which means: get ready for a LOT of new US energy demand. Statistics via Statista.
Well, it was a good try, now back to reality. The energy transition is far more challenging than most realized, as outlined in The End of Fossil Fuel Insanity – the energy story for those that don’t live it, and want to find out. And laugh. Available at Amazon.ca, Indigo.ca, or Amazon.com.
Read more insightful analysis from Terry Etam here, or email Terry here.