New pipelines and access to new markets ... ARE NEEDED NOW! (IMO)
(same goes for the filings updates, otherwise nothing will happen, again IMO)
Price discounts a headache for Alberta government and producers Fiscal pain will be felt by the province and the oil patch
January 25, 2013
Big budget mess for Alberta
I would not want to be in Alberta Premier Alison Redford’s shoes right now.
She told Albertans Thursday night in a TV address that the budget her government will deliver in March will not be a pretty one. Redford says the chief reason for that is the steep discounts western Canadian crude oil is experiencing, which has resulted in the government taking in $6 billion less in oil and gas revenue than it expected.
But I also wouldn’t want to be in the producers shoes right now.
The discounts, of course, hurt their bottom lines and share prices, yet the solution to the problem – new pipelines and access to new markets – is largely out of their hands.
Key projects like Keystone XL and the Northern Gateway pipelines are at the mercy of government regulators, and neither pipeline appears to have a better than a 50-50 chance of being approved.
Rail is one option that producers are using to get their crude oil to tidal water.
But rail is costlier than shipping oil by pipeline and a lot more loading capacity would have to be built to move the kind of volumes that would free up pipeline bottlenecks across North America and narrow the price differential between Western Canada’s crude and pricier blends like West Texas Intermediate and Brent.
It all adds up to continuing discounts – and fiscal pain – for both the Alberta government and Alberta-based oil and gas companies.
Big oil find in the Land of Aus
As if crude oil price discounts weren’t bad enough, word is that Australia’s Linc Energy may have found a huge shale oil deposit in the country’s central region.
While Linc Energy’s chief executive Peter Bond tried to temper the buzz the discovery created, the deposit may contain 233 billion barrels of shale oil.
If that number proves to be correct, it would outnumber the 169 billion barrels of oil sands reserves Alberta has and vault Australia past the province in the global petroleum pecking order.
Australia is one of Canada’s chief competitors in the race to supply liquefied natural gas to Pacific Rim markets. But no one thought the Aussies might also pose a threat to Canada’s plans to sell its bitumen to the likes of China and Japan.
Still, it is a little early for Alberta to press the panic button.
No one knows if the 233 billion barrel estimate is correct, or if anything close to that gargantuan number can be recovered economically.
Big drilling woes in Alaska’s Arctic
As Clifford Krauss and John Broder reported last week in the New York Times, the trainwreck that is Shell’s Arctic drilling program in offshore Alaska is bad news not only for Shell, but for any company keen on exploring in one of the world’s final oil and gas frontiers.
And as Shell fumbles, bumbles and stumbles in Alaska’s offshore, the chance that any company drills a hole in Canada’s Arctic waters gets increasingly slim.
This is not good news for the perennially cash-strapped NWT government, by the way.
Diamond mining has ruled the economic day there since 1998.
But diamond mines are not forever. Eventually, they run out of diamonds, and that day is getting closer for the NWT.
The oil and gas industry has the potential to soften that blow considerably. However, things haven’t gone the territory’s way of late.
The natural gas glut gripping North America seems to have killed the NWT’s greatest economic hope – the Mackenzie Gas Project.
There is some excitement about the Canol shale play in the NWT’s Central Mackenzie Valley region, but again, with North America awash in crude oil from more southerly onshore basins, there seems little reason for the oil patch to produce the stuff from Canada’s hinterlands.
And now the industry might be scared off from exploring in the Arctic offshore thanks to Shell’s failure (so far) in Alaska.
Companies like ExxonMobil, Imperial Oil have spent millions to snap up promising Beaufort Sea leases. But it’s hard to imagine they will be launching offshore drilling programs anytime soon in the Canadian Arctic after Shell’s performance in Alaska has likely soured the public and governments on offshore drilling there.
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