Like all industries, oil & gas is a slave to the laws of supply and demand. It dictates the boom-bust cycles that govern the fortunes of this most cyclical of industries. That we are in the midst of a historic supply glut is a given. This will remain so, given that OPEC has failed to set a production quota and given the obstacles to such quotas more generally. As it stands, producers are simply on the wrong side of supply and demand. This has been the pattern since the industry's earliest … [Read more...]
What demands for recall legislation say about the state of Alberta
For many months now, job cuts have been mounting; now we have an entire oil & gas company joining the roster of victims. Spyglass Resources, long ailing, has gone into receivership. The world is meeting in Paris for the 2015 UN Climate Change Conference where no doubt Alberta will be cast as a convenient villain. The province has finally unveiled its climate change plan, which is a mix of the expected - carbon taxation - and the less expected - a hard cap on oil sands … [Read more...]
OPEC’s grumbling likely to fall on deaf ears
Growing discontent within OPEC has some members calling for a stabilization of prices and an easing of the present supply glut. Indeed, the current situation within OPEC basically resembles Saudi Arabia - and maybe a combination of the Gulf Arab states - versus everyone else. But given that Saudi Arabia accounts for roughly one-third of OPEC production and given the divisions among members, it is doubtful that the cartel can compel the Kingdom to back down from its current policy. For a … [Read more...]
Canada’s potential international oil and gas royalty obligations
Canada is likely to be on the hook for untold millions of dollars in payments to the UN under its treaty obligations, according to a recent research paper by Mr. Wylie Spicer, Q.C. There is little reason to dispute this finding; the real question is who will ultimately bear the burden. Canada became signatory to the United Nations Convention on the Law of the Sea (UNCLOS) in 1982 and ratified it in 2003. In scope and application, UNCLOS is broad and comprehensive. Given the structure of … [Read more...]
Even ‘insular’ midstream companies feeling effects of downturn
It had long been conventional wisdom that midstreamers were the most insulated from the current downturn. That view is sadly in the stage of being undone, with Enbridge and TransCanada announcing cuts. Thus, industry layoffs now affect the full panoply of the Albertan oil & gas industry, from oil field services to E&P to midstream. And regrettably, where there is breadth there will soon be depth, because cuts beget more cuts. Yes, not all midstreamers are alike. They vary … [Read more...]
Industry proponents’ “told you so” a heavy burden to bear
"Told you so." Remember these words. Yes, they sound smug, but they are intended as a lament. WTI is now around $40 per bbl. The heavier grade of Alberta crude sells at a huge discount to that. Add to this, company decisions have confirmed our warnings that Alberta is heading in the wrong direction. Projects are being scaled down, with obvious implications for future employment. A cross-section of players - and their methods - attests to this: Encana Corporation - delayed completion of … [Read more...]
Politics, not facts, buried Keystone XL
Counterproductive is the first word that comes to mind when trying to make sense of the environmental movement's irrational hatred of pipelines. Sure, Keystone XL has been rejected. But its loss is the railways' gain. By this point, few would dispute that pipelines are a safer means of transporting crude oil than rail. Derailments and the associated spills are substantially more common. Just this past weekend, two separate oil trains derailed in Wisconsin, although thankfully, no one was hurt. … [Read more...]
Pipeline approval, ‘dirty oil,’ and political doublespeak
There really was little doubt that Keystone XL would not get presidential approval. But this predictable decision, having been made, still manages to disappoint. Yet, disappointments and reversals have housekeeping functions, serving as impetus for taking stock of the situation. Moreover, disappointments tellingly reveal the intent of reacting parties. Broadly speaking, Premier Notley is disappointed. Not in the final decision, because she never believed in Keystone XL. Rather, Premier Notley … [Read more...]
Actually, the industry is not asking for a magic wand
The numbers are in and things have never been quite this bad in Alberta, at least not in recent decades. StatsCan reports that 52,800 fewer people are working in Alberta this year compared to the same time last year. Athabasca Oil became one of the more recent companies to announce dramatic layoffs. It joins names like Cenovus, MEG, Enerplus, and Devon. Capital is already beginning its exodus, recently exemplified by Shell abandoning its multi-billion dollar Carmon Creek project. Things are only … [Read more...]
The case for doing away with the Alberta Heritage Fund
The Alberta oil & gas industry is down, the province's unique tax advantage obliterated, and the detractors point to Norway and say "this could have been us!" Both Norway and Alberta are oil producers with sovereign wealth funds. Norway's sovereign wealth fund is $1.1 trillion; Alberta's is $17.3 billion at 2014 year end. The assumption is that Norway has responsibly invested its windfall, whereas Alberta has not. This comparison is wholly unfair. As Professor Stephen Gordon argues, the … [Read more...]
