Come Together
Developers of four of Canada’s largest LNG projects announced an alliance in late May to jointly pursue shared objectives. The alliance currently includes Prince Rupert LNG, Pacific NorthWest LNG, LNG Canada and Kitimat LNG, but additional partners might still be brought on board. The announcement, made in Vancouver on the eve of the International LNG in B.C. Conference, comes amid growing concerns over cost inflation at LNG projects around the world. The Browse project in Australia, for example, saw costs swell after regulatory denial of an onshore liquefaction plant led developers to reconceptualize it as a floating LNG project.
A spokesperson for the B.C. LNG Developers Alliance said the group was formed due to a perceived need among members to share information, and even infrastructure, and proactively seek out community approval to avoid repeating mistakes made overseas.
No Contest
In early May, Encana Corp. pleaded no contest and agreed to pay US$5 million in a settlement over collusion allegations dating back to 2010. The settlement was announced in a Michigan court following the U.S. Department of Justice’s investigation into a claim that Encana and Chesapeake Energy Corp. had entered into unlawful agreements prior to a series of land auctions in the Collingwood region of the state. The two rival companies were accused of keeping bidding prices artificially low by making joint decisions in advance regarding which land blocks each would attempt to acquire.
The company told reporters months earlier that an internal investigation found then-CEO Randy Eresman had no knowledge of the incident. Encana has since restructured its management team under CEO Doug Suttles and divested various natural gas assets, including the aforementioned Michigan assets.
Between a Rock and Hard Place
On May 20, the National Energy Board released a market assessment of Canadian natural gas deliverability for the 2014-2016 period.. The report authors believe dry natural gas output will decline, but this should be more than compensated for by a concurrent rise in natural gas liquids production from 14 to 14.6 billion cubic feet per day. Overall gas production is therefore expected to increase slightly and gradually over the time period.
Greater draws on storage inventory as a result of below- average winter temperatures across North America have lifted stubbornly low natural gas prices. In its high natural gas price scenario, the report projects gas prices to reach $6 per MMBtu in 2016, whereas the low price scenario sees gas prices declining to $4. The high price scenario would boost drilling activity and raise gas daily deliverability to 15.7 bcf; in the low price scenario, however, that number drops to 13.6 bcf.
Bucking the Trend
Citigroup Inc. plans to begin trading physical Canadian crude oil, including WCS heavy and sweeter grades. The New York-based financial services corporation is going against the prevailing trend among Wall Street banks of exiting the commodity trading space in the face of tightening government regulations. JP Morgan Chase & Co., for instance, is preparing to sell its North American physical commodity business that includes leases on six million barrels of storage capacity in Hardisty, Alberta.
The move will help Citicorp strengthen its commodities trading operations after U.S. government bailouts during the economic crisis led the corporation to downsize its exposure to metals, energy and agricultural markets. Led by buoyant oil sands production growth, Canadian crude production is expected to exceed 6.5 million barrels per day by 2030, representing a highly attractive revenue source for both physical and non-physical crude oil traders.
Mediums and Messages
The Canadian government ran a $207,000 full-page oil sands advertisement in the May issue of the New Yorker with the headline “America and Canada have the same greenhouse gas reduction targets.” The advertisement in the upmarket magazine features a photo of a picturesque valley and sky-blue waterway, bereft of any sign of industrial development. Eminent business Globe and Mail journalist Eric Reguly described the advertisement as “propaganda” and “unconscionable because you, the Canadian taxpayer, paid for it.”
The message of the New Yorker ad is clearly the government’s attempt, however effective, to counteract the view of American anti-oil sands activists that bitumen production always involves open pit mines and their intensive environmental footprint. The proportion of overall oil sands operations that are mined is decreasing with the sharp rise in the number of drilling operations. The area currently disturbed by oil sands mining activities is 715 square kilometers, less than the area of Calgary.
Seasons out, Dutton in at Devon
There’s a new boss at Devon Canada. Chris Seasons has been president of the Canadian subsidiary of the Oklahoma-based company for 10 years but announced his departure from the company effective the end of June. Rob Dutton, Devon Canada’s vice-president of capital projects, is taking over.
Denhoff spells Prentice on Enbridge’s First Nations negotiations
With Jim Prentice running for the leadership of Alberta’s Progressive Conservative party, and de facto province premier, he’s no longer available to lead Enbridge Inc.’s negotiations with B.C.’s First Nations on the Northern Gateway project. Eric Denhoff, president of the Canadian Hydrogen Fuel Cell Association, has now taken the job – on a part-time basis.
Petronas advises B.C. on LNG taxation
The chief executive of Malaysia’s state-owned energy producer, Petronas, Tan Sri Dato’ Shamsul Azhar Abbas warned B.C. not to “slaughter the goose before it has the chance to hatch the golden egg” by overtaxing LNG development. Abbas stated the company would come to a final investment decision on the Pacific Northwest LNG project by year’s end.
Phaneuf promoted to CFO
Ivanhoe Energy Inc. announced its senior vice-president of business development and corporate strategy Greg Phaneuf would be promoted to chief financial officer.
Balloch appoints ex-Canadian ambassador to China
Sinopec Canada announced in May that Howard Balloch, who founded investment firm the Balloch Group in 2001, had joined its board of directors. Balloch served as Canada’s ambassador to China between 1996 and 2001.
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