Saskatchewan Population Continues to Grow, Hitting an All-Time High
Released on September 28, 2016
Saskatchewan’s population hit one more milestone today, reaching an all-time high according to figures issued by Statistics Canada today.
Saskatchewan’s population grew by 5,314 people in the second quarter of 2016, bringing the total population to 1,150,632 as of July 1st. This is the largest quarterly increase since the second quarter of 2013, and the third largest percentage increase among the provinces over the past quarter.
“There are many opportunities in our province and it’s great we continue to attract more people that will call Saskatchewan home,” Economy Minister Jeremy Harrison said. “The relative strength and diversity of our economy continues to show people this is a great place to live and to invest.”
For over 10 years, Saskatchewan’s economy has grown every quarter, making it one of the best decades for population increases in this province’s history.
“Saskatchewan continues to prove that this is a land of opportunity, and in spite of challenges in the resource sector of our economy, we continue to experience record population growth,” Harrison said.
Wed Sep 28, 2016 | 5:45pm EDT
OPEC agrees modest oil output curbs in first deal since 2008
By Rania El Gamal, Alex Lawler and Vladimir Soldatkin | ALGIERS
OPEC agreed on Wednesday modest oil output cuts in the first such deal since 2008, with the group’s leader Saudi Arabia softening its stance on arch-rival Iran amid mounting pressure from low oil prices.
“OPEC made an exceptional decision today … After two and a half years, OPEC reached consensus to manage the market,” said Iranian Oil Minister Bijan Zanganeh, who had repeatedly clashed with Saudi Arabia during previous meetings.
He and other ministers said the Organization of the Petroleum Exporting Countries would reduce output to a range of 32.5-33.0 million barrels per day. OPEC estimates its current output at 33.24 million bpd.
“We have decided to decrease the production around 700,000 bpd,” Zanganeh said.
The move would effectively re-establish OPEC production ceilings abandoned a year ago.
However, how much each country will produce is to be decided at the next formal OPEC meeting in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia.
Oil prices LCOc1 jumped more than 5 percent to trade above $48 per barrel as of 2015 GMT. Many traders said they were impressed OPEC had managed to reach a compromise after years of wrangling but others said they wanted to see the details.
“This is the first OPEC deal in eight years! The cartel proved that it still matters even in the age of shale! This is the end of the ‘production war’ and OPEC claims victory,” said Phil Flynn, senior energy analyst at Price Futures Group.
Jeff Quigley, director of energy markets at Houston-based Stratas Advisors, said the market had yet to discover who would produce what: “I want to hear from the mouth of the Iranian oil minister that he’s not going to go back to pre-sanction levels. For the Saudis, it just goes against the conventional wisdom of what they’ve been saying.”.
Saudi Energy Minister Khalid al-Falih said on Tuesday that Iran, Nigeria and Libya would be allowed to produce “at maximum levels that make sense” as part of any output limits.
That represents a strategy shift for Riyadh, which had said it would reduce output to ease a global glut only if every other OPEC and non-OPEC producer followed suit. Iran has argued it should be exempt from such limits as its production recovers after the lifting of EU sanctions earlier this year.
The Saudi and Iranian economies depend heavily on oil but in a post-sanctions environment, Iran is suffering less pressure from the halving in crude prices since 2014 and its economy could expand by almost 4 percent this year, according to the International Monetary Fund.
Riyadh, on the other hand, faces a second year of budget deficits after a record gap of $98 billion last year, a stagnating economy and is being forced to cut the salaries of government employees.
OIL PRICE PRESSURES
Saudi Arabia is by far the largest OPEC producer with output of more than 10.7 million bpd, on par with Russia and the United States. Together, the three largest global producers extract a third of the world’s oil.
Iran’s production has been stagnant at 3.6 million bpd in the past three months, close to pre-sanctions levels although Tehran says it wants to ramp up output to more than 4 million bpd when foreign investments in its fields kick in.
Saudi oil revenue has halved over the past two years, forcing Riyadh to liquidate billions of dollars of overseas assets every month to pay bills and cut domestic fuel and utility subsidies last year.
“The Iranians have lived with a very tough macro backdrop for many years…” said Raza Agha, chief Middle East economist at investment bank VTB Capital. “So a sustained drop in oil prices has a more difficult social impact on Saudi.”
However, with unemployment in double digits, Tehran is also facing calls to maximize oil revenues and President Hassan Rouhani is under pressure from conservative opponents to deliver a faster economic recovery.
Oil prices are well below the budget requirements of most OPEC nations. But attempts to reach an output deal have also been complicated by political rivalry between Iran and Saudi Arabia, which are fighting several proxy-wars in the Middle East, including in Syria and Yemen.
OPEC sources have said Saudi Arabia offered to reduce its output from summer peaks of 10.7 million bpd to around 10.2 million if Iran agreed to freeze production at around current levels of 3.6-3.7 million bpd.
Riyadh has raised production in recent years to compete for market share while Iran’s output was limited by sanctions. Minister Zanganeh has said Iran wanted an output cap of close to 4 million bpd. Saudi output drops in winter when it needs less fuel than during summer, when cooling requirements spike.
(Additional reporting by Patrick Markey and Lamine Chikhi in Algiers, Andrew Torchia in Dubai; Writing by Dmitry Zhdannikov; Editing by Dale Hudson)
- 28 Sep 2016
- Calgary Herald
- DEBORAH YEDLIN
ENERGY SECTOR VITAL TO ECONOMY, SAYS RBC
Oil and gas sector helps fund services and keeps corporate tax rates low
Canada’s largest bank has added its voice in asserting the energy sector’s importance to the country’s economy. Finally, some might say. Royal Bank of Canada CEO Dave McKay, in a speech to the Edmonton Chamber of Commerce on Monday, made the case that development of our energy resources today underpins the path to Canada being a leader in the energy world of tomorrow.
The bank’s backing comes almost 18 months after Scotiabank chief executive Brian Porter spoke out for the energy sector during his company’s annual meeting in Ottawa.
As they say, better late than never.
While there is no question the energy sector dropped the ball on communicating with Canadians — if it ever really possessed it — it’s equally important that leaders in other sectors of the economy are audibly and visibly part of that conversation.
That’s why McKay’s speech Monday was so important.
It comes as the clock is ticking for Ottawa to make a decision on Kinder Morgan’s Trans Mountain expansion and Petronas’s Pacific Northwest liquefied natural gas project. When Canada’s largest bank stands up and speaks of the economic linkages of the oilpatch to the overall economy, an important message is sent.
As McKay said in an interview Monday, without the revenues and tax base derived from the energy sector, the federal government faces other less-palatable choices.
“If you don’t have the tax base from the strength of the industry, you are either going to have to cut back services and/or redistribute and tax at a higher rate,” he said. “We can’t afford higher taxes in this country.
“Corporate taxes are a competitive advantage. Others want to match us. There is no room for increase.”
It’s difficult to refute that logic, but changing sentiment is a much more difficult exercise.
McKay makes an impressive case that’s of relevance to governments, businesses and non-governmental organizations.
“We have to leverage what we have to get to where we need to go,” he said.
That means using revenues generated by the development of energy resources and reinvesting in new technologies and processes.
An example of that very concept was evident Tuesday when Evok Innovations — the venture capital vehicle formed by Suncor, Cenovus and the B.C. Cleantech CEO Alliance — announced its first round of investments in companies aimed at moving the yardsticks on reducing emissions and increasing the efficiency and productivity of the energy sector.
Evok funded five companies — four from Canada and one from California — identified as being involved in the 20 “challenge areas” of the oilpatch, ranging from the treatment of oilsands process water to carbon capture and conversion.
The key ingredient to all this — as was pointed out in a recent C.D. Howe Institute paper and reiterated by McKay — is that the long-term success of a clean tech industry in Canada is to think globally about the customer base.
“We have to take our ideas globally much faster. We are just large enough that it takes us too long to think about that,” McKay said, suggesting we need to reconsider how we assess risk and become more ambitious.
As he said, Canadians aspire to work for Google and Americans aspire to build the next Google.
It’s also about an ecosystem where capital is available to companies beyond the venture stage.
“Too many companies in Stage 2 sell because they don’t have a customer to sustain their cash flow … the role the banks have to play is helping to finance Stage 2,” said McKay.
The banks can also be active in the green bond market, as RBC has. It’s acted as the lead or joint lead manager on green bond issues worth almost $6 billion for a variety of international issuers in various currencies in the past three years.
That sounds like a big number, but for the sake of context, the broader global green bond market is estimated to be worth US$118 billion. No such issues have been made to date by Alberta-based entities.
Leveraging our resources for the future includes being realistic about pipeline infrastructure versus other options, McKay said.
“If you look at the 50 per cent increase in production that is coming online, and if you didn’t have the pipeline to transport it, then you are going to have to get it to market with more rail,” he said. “And there is a carbon footprint with rail, there is an environmental concern with rail and therefore it’s not a sustainable end-to-end model.”
That means certainty for investments, especially those with a long time horizon.
Companies can’t invest with confidence if they don’t understand the rules of the game, said McKay.
“It’s hard for us to deploy our capital into our customers’ franchises with that uncertainty. Businesses need stability of their operating environments and the rules set,” he said.
That includes having a floor price on carbon — which McKay supports — and not whining about the fact Canada is responsible for only 1.6 per cent of global emissions and should therefore let someone else deal with the problem.
“We punch above our weight and we want to continue to do that. It’s about doing what’s right,” said McKay.
“We have to start with the recognition this planet is warming and there will be significant consequences of a warming planet that we don’t even understand yet. We can’t stand back and let the other guys fix it.”
Viewed together, McKay’s speech and the theme of his interview responses link back to advertisements Royal Bank aired during the recent Rio Olympics that were about Canadians and their “someday.”
McKay is talking about Canada’s “someday” and its future as a leader in clean tech and the energy space of today and tomorrow.
“Our someday includes helping manage the climate change the planet is going through and carbon emissions. And our someday includes being a clean tech leader and investing in that sector,” McKay said.
“And the path to that someday is leveraging the resources we have in the ground today … we think Canadians realize that we want our politicians to act.”
It all makes for a convincing argument. It’s too bad it took this long to surface.
David Suzuki on energy is like Canada’s Donald Trump
By Bill Whitelaw
Sept. 28, 2016, 7:05 a.m.
Dear, oh dear…what to do with David Suzuki?
He’s the lead in the same style surreal drama south of the border that is currently fascinating Canadians.
Suzuki on stage plays Canada’s mainstream media like a cheap fiddle. He’s the master square dance caller when he wants them to do-si-do around his views of the country’s petroleum sector.
He lays out for media consumption outlandish and provocative declarations, like his most recent assertion that Saskatchewan is in a carbon crisis and that its premier is a carbon denier.
It brings to mind last fall’s feat of fancy: comparing the oilsands sector to 19th-century southern slavers based on the flimsiest of links. That tenuous tie: both slavers and oilsands supporters put economic arguments in front of moral imperatives in defending their industries.
What? Oilsands operators are just like southern slavers? Who knew?
Why, you can hear the whips crack north of Fort Mac all the way to Calgary.
What headlines! What soundbites!
Even social media can’t make this stuff up.
The media laps it up like free soup at a service club luncheon.
Now he’s stirring things up in Saskatchewan.
Here’s the problem: when you have a go-to source like a Suzuki, each time he’s interviewed, the “outlandish threshold” is set higher because, after all, who wants to hear the same old, same old.
In many respects, Suzuki talking these days is somewhat akin to Donald Trump debating himself: rich in metaphor, poor in fact.
Indeed, Suzuki is so secure in the delusion he has ordinary Canadians in his camp, he can just say what he says and no one steps up to say, “Hey…wait a minute…”
It is actually kind of sad.
Suzuki was once a commentator worthy of the gravitas he was legitimately accorded. He heightened consciousness at critical junctures and gave the environmental movement a much-needed credibility.
He was once iconic. No longer.
At a time when the nation needs builders around the critical debates Canadians need to have about energy, the environment and the economy, Suzuki is a destructive, not productive, force.
Suzuki’s utility as even an imagined check on the petroleum sector’s imagined evils, has a tainted, detrimental quality to it.
He’s turned into a querulous old armchair critic, a relic of environmental discourses of days gone by. Young Canadians seeking role models to define how they will approach climate and carbon should look for alternatives.
Media, which is still itself sorting out where it wants to land on the environment, exacerbates the problem by treating him with the “respect” accorded old curmudgeons who are still capable of pounding the floor with their walking sticks to get attention.
Of course, the interviewers ask him the “tough” questions but like Donald Trump, Suzuki dances and deflects and Teflons his way through the discussion because, he is, after all, David Suzuki.
What the media should understand, if its various forms want to build their own credibility with Canadians, and play a productive and responsible mediating role, is that some people just don’t deserve time in front of a microphone.
It’s not censorship. It’s good judgment to know when someone is adding value to critical discourses — or when they’re eroding them.
It’s astonishing then to see Canadians show such consternation at presidential events south of the border when we have our own lamentable laugh-fest north of the 49th.
Except it’s hardly funny.
NEWS RELEASE September 26, 2016
Stock Symbol: SGF: TSX Saskatoon, Saskatchewan
STAR-ORION SOUTH DIAMOND PROJECT TEST WORK PROGRESS TOWARDS UPDATED FEASIBILITY STUDY
George H. Read, P. Geo., Senior Vice President Exploration and Development of Shore Gold Inc. (“Shore” or the “Company”) is pleased to announce that Shore has successfully completed significant aspects of test work towards the Updated Feasibility Study on the Star-Orion South Diamond Project. The work completed in recent months includes: Autogenous (“AG”) mill test work on Star pyroclastic kimberlite; X-ray Transmissivity (“XRT”) recovery of diamonds from Star pyroclastic kimberlite; Geotechnical investigations of the mechanical properties of the Lower Colorado Shale using an in-situ pressure meter; Mine planning scenarios to investigate the economics of higher grade starter pits; Investigation and optimization of in-pit continuous mining systems for both the removal of overburden and ore recovery. These programs investigate the use of new technology for the efficient excavation of the open pit and improvements to the flow-sheet of the diamond processing plant, while simultaneously reducing pre-production capital costs and the time to initial diamond production.
AG Mill Test Work
A 38 tonne sample of Star Early Joli Fou (“EJF”) pyroclastic kimberlite was processed by SGS Canada Inc. at their milling facilities in Lakefield, Ontario. Prior to the 2011 Feasibility Study (“FS”) AG milling tested had only been conducted on Orion South EJF kimberlite breccia and the FS had recommended that the AG milling test be expanded to include the significantly harder EJF pyroclastic kimberlite. The AG mill test work produced 31 tonnes of milled product recovered between -32+1 millimetres. All -1.0 millimetre material reported to waste. This test work and scale up analysis has indicated that AG milling is the appropriate method of ore treatment for diamond liberation under large throughput conditions of some 45,000 tonnes per day.
XRT Diamond Recovery Test Work
Some 2.8 tonnes of AG milled product was shipped to the test facilities of Steinert in Cologne, Germany for diamond recovery test work using XRT sorting machines. XRT sorters are able to discriminate individual particles in the feed through sorter, based on their degree of x-ray absorption. The AG milled product was screened into the following size fractions: -32+16 millimetre, -16+8 millimetre and -8+4 millimetre, which were each spiked with specific numbers of natural diamonds and polyoxymethylene tracers and processed through the XRT sorter. All diamonds and tracers were recovered down to 8 millimetres. The results of the test showed that XRT is viable as a replacement, for +8 millimetre fractions, for dense media separation in the re-design of the process plant, potentially reducing capital costs of the plant, and simplifying the overall flow sheet, leading to reduced operating costs and a smaller environmental footprint.
The Lower Colorado Shale, present across the Star deposit, and partially across Orion South, is the primary constraint on the slope angles of the pit designs. Due to the depth of burial and the nature of the shale, proper geotechnical assessments have always worked with less than optimal samples, leading to conservatism in the slope design. Steepening of the slopes would lead to lower stripping costs and reduced capital expenditure. The 2016 drill program included a geotechnical investigation of the Lower Colorado Shale, utilizing an in-situ pressure meter. The results of this test work provided more robust details of the shale strength parameters, which will result in more accurate analysis of long term slope stability, with the potential to lower capital and operating costs.
Mine Planning Scenarios
Mine planning scenarios are under way, to ascertain if a smaller high grade starter pit can achieve a shorter capital payback period, while also allowing later stages of the pits to be developed in a cost effective manner. Initial designs on Orion South show a higher grade Phase 1 pit that avoids the Lower Colorado Shale, lowering the strip ratio as the majority of increased resources came from inferred material within the feasibility study pits, previously counted as waste.
Investigation of In-pit Continuous Mining Systems
Following the recommendations from the FS, Shore is investigating the use of continuous mining systems for overburden removal, including Dozer push and Dozer traps for the upper sands and clays, and bucket wheels and / or bucket chains coupled with large capacity, high speed, shiftable conveyors delivering the material to out-of-pit spreaders and stackers. Design considerations for the efficient use of these systems include incorporating straight mining faces with lengths up to 1.6 km in the sand, clay and till to maximize the production of these types of equipment. Current production rates for large scale dozer traps are some 700 bank cubic metres per hour, while bucket wheel excavators can provide in excess of 20,000 tonnes per hour, over operating conditions very similar to the Fort a la Corne in central Saskatchewan. Large capacity, in-pit, shiftable conveyors are currently in operation in Germany, Brazil, Australia, India, China and Russia. Shore visited active coal mines in Germany during August 2016 for an on-site inspection as well as discussions with mine operators and equipment manufacturers/suppliers of these continuous mining systems. The continuous mining systems used in these German coal mines have been active, in some cases, for over 40 years, in overburden stripping of a similar magnitude to the Star and Orion South Kimberlites.
Senior Vice President Exploration and Development, George Read, states: “Work has been completed and is active on a number of fronts towards the Updated Feasibility Study. This Updated Feasibility Study will be based on the 55.4 million carat Revised Resource Estimate completed in 2015. Capital and operating cost savings are possible through the application of proven technology to the overburden removal and a redesign of the diamond processing plant, principally using XRT technology for recovery of diamonds from the +8 millimetre size fractions.” The Star-Orion South Diamond Project is located in central Saskatchewan some 60 kilometres east of the city of Prince Albert. The Project is in close proximity to established infrastructure, including paved highways and the electrical power grid, which provide significant advantages for future mine development. The Technical Report on the Revised Resource Estimate for the Star-Orion South Diamond Project dated November 9, 2015 provided an updated Mineral Resource Estimate for the Star and Orion South kimberlite deposits: Indicated Mineral Resource of 393 million tonnes containing 55.4 million carats of diamonds at a weighted average price of US$210 per carat. In addition to the Indicated Mineral Resource Estimate, the Star and Orion South Kimberlites include Inferred Resources containing 11.5 million carats.
All technical information in this press release has been prepared under the supervision of George Read, Senior Vice-President of Exploration and Development, Professional Geoscientist in the Provinces of Saskatchewan and British Columbia, and Mark Shimell, Project Manager, Professional Geoscientist in the Province of Saskatchewan, who are the Company’s “Qualified Persons” under the definition of NI 43-101.
Shore is a Canadian based corporation engaged in the acquisition, exploration and development of mineral properties. Shares of the Company trade on the TSX Exchange under the trading symbol “SGF”.
Caution Regarding Forward-Looking Statements
This news release contains forward-looking statements as defined by certain securities laws, including the “safe harbour” provisions of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995. Forward-looking information is often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “forecast”, “target”, “project”, “guidance”, “may”, “will”, “should”, “could”, “estimate”, “predict” or similar words suggesting future outcomes or language suggesting an outlook. In particular, statements regarding Shore’s future operations, future exploration and development activities or other development plans constitute forward-looking statements. By their nature, statements referring to mineral reserves, mineral resources or TFFE constitute forward-looking statements.
Forward-looking statements in this press release include, but are not limited to statements with respect to Shore’s objectives for the ensuing year including, the optimization of the feasibility study, anticipated capital and operating cost savings and the anticipated positive change in the economic model for the Project; the aim of Shore to undertake additional studies and the potential updating of the Feasibility Study.
These forward-looking statements are based on Shore’s current beliefs as well as assumptions made by and information currently available to it and involve inherent risks and uncertainties, both general and specific. Risks exist that forward-looking statements will not be achieved due to a number of factors including, but not limited to, developments in world diamond markets, changes in diamond prices, risks relating to fluctuations in the Canadian dollar and other currencies relative to the US dollar, changes in exploration, development or mining plans due to exploration results and changing budget priorities of Shore or its joint venture partners, the effects of competition in the markets in which Shore operates, the impact of changes in the laws and regulations regulating mining exploration, development, closure, judicial or regulatory judgments and legal proceedings, operational and infrastructure risks and the additional risks described in Shore’s most recently filed Annual Information Form, annual and interim MD&A. Shore’s anticipation of and success in managing the foregoing risks could cause actual results to differ materially from what
is anticipated in such forward-looking statements. Although management considers the assumptions contained in forward-looking statements to be reasonable based on information currently available to it, those assumptions may prove to be incorrect. When making decisions with respect to Shore, investors and others should not place undue reliance on these statements and should carefully consider the foregoing factors and other uncertainties and potential events. Unless required by applicable securities law, Shore does not undertake to update any forward-looking statement that is made herein.
For further information:
firstname.lastname@example.org or (306) 664-2202
– END –
- 24 Sep 2016
- Calgary Herald
- DAN HEALING
- The Canadian Press
Stalled review of Energy East has cost $685,000: NEB
The National Energy Board says its review of the Energy East Pipeline cost at least $685,000 before members of the panel presiding over hearings into the development resigned, putting the exercise into limbo.
Ninety per cent of the federal regulator’s budget comes from the pipeline and energy companies it regulates, with the rest coming from public coffers.
The figure includes costs from meetings with communities before the hearings began last month, the gathering of oral evidence from aboriginal interveners last year and some expenses from the hearings in Saint John, N.B., and Montreal, NEB spokeswoman Sarah Kiley said.
“Some of the costs from New Brunswick and Montreal may not be included if we have not yet received invoices for certain services,” Kiley said, adding that the figure does not include staff salaries.
Kiley said it cost the NEB a total of about $1.83 million to review the Trans Mountain Pipeline expansion project, a process that concluded in May with a conditional recommendation that the line from Edmonton to Burnaby, B.C., be approved.
She didn’t have a budget estimate for the NEB’s review of Energy East but said it was expected to cost more because the pipeline is longer and crosses through more provinces than Trans Mountain.
The NEB’s review of Energy East broke down earlier this month after hearings in Montreal were disrupted by protests. The three panellists later recused themselves after complaints that two of them met last year with former Quebec premier Jean Charest, a consultant at the time for Energy East proponent TransCanada, to discuss the pipeline.
Natural Resources Minister Jim Carr has said new panellists will be appointed as soon as possible but the review period could be delayed, as could the NEB’s goal of having a decision on Energy East by March 18, 2018.
The new panel is to decide how the review will proceed and whether evidence will need to be heard again.
In a letter filed with the NEB on Thursday, a lawyer for Ecojustice said all of the work done on the pipeline project is tarnished and, therefore, the review should start from scratch. “Any future proceeding must begin again from the proponents submitting the project applications afresh,” says the letter from Dyna Tuytel.
The proposed 4,500-kilometre pipeline is designed to carry 1.1 million barrels of oil per day from Alberta to New Brunswick. About two-thirds is already in place as a natural gas pipeline.
Yager: Even if oil prices rise, Canadian oilfield services must drill deeper for margins
By David Yager
Sept. 23, 2016, 1:46 p.m.
When it comes to oilfield services (OFS), it’s not unreasonable to say Dave Lesar, the chief executive officer of the world’s second-largest operator, speaks for everyone.
While there are obvious advantages to being huge, Halliburton can’t charge higher prices than its competitors regardless of where it operates.
In an August 18 Bloomberg News article, Lesar says, “Some of the efficiency gains we have made with customers are in fact sustainable and will continue, but others, including deep uneconomic pricing cuts, are unsustainable and will have to be reversed.”
Unsustainable describes the Canadian OFS industry as it enters the fourth quarter of 2016. Certainly, there’s a bit more business out there, but at 150 active rigs on August 18, it’s the worst market for this month anyone can remember. The last time it was this bad was so long ago it’s irrelevant.
There have been several responses. Some companies are gone, either voluntarily or with the help of their banker. Some are going, technically underwater because of too much debt but still answering the phone because they have persuaded lenders they are worth more alive than dead.
The rest have figured out how to sort of match revenue with cash costs and hold their own with whatever business comes in the door. Few are excited about going to work.
In the challenged, but ultimately symbiotic, relationship between OFS and its exploration and production (E&P) clients, how does the future look? Without a significant increase spike in commodity prices, how are E&P companies going to replace reserves to stay in business while paying OFS more so it can remain solvent for the next year? And the year after that?
The Bloomberg article quoted several E&P companies that, of course, claim much of the credit for reduced costs. BP, for example, brags about a deep drilling project in the Gulf of Mexico originally budgeted for US$20 billion that came it at US$9 billion. While obviously reduced input costs helped, BP took credit for simplifying the project’s scope. As they released second-quarter financials, Bloomberg reported U.S. shale drillers claim half their cost reductions are permanent improvements in efficiency. Apache’s chief financial officer, Stephen Riney, said, “A lot of the actions that we’ve taken are what we call self-help type of things, changing the way we work. These are things that are not dependent upon the pricing from third parties.”
Finally. It’s always refreshing to learn more E&P companies are understanding how much their own operating practices escalate their total costs. But financial challenges for OFS remain. It is impossible for service and supply to be profitable when its clients are not. Low prices have capped development costs. OFS claims it has cut prices to the bone and perhaps even deeper. But E&Ps that keep producing must replace reserves or the company will disappear. When E&P goes broke so does OFS. Then what?
Out of necessity, OFS has slashed every possible imaginable expense except structural corporate sales, general and administrative costs. The extended, and nearly uninterrupted, growth cycle from 2000 to 2014 allowed the formation of hundreds of new and smaller players. As larger companies continually consolidated OFS through buying competitors to make it more efficient, many of the former owners were back in the game the day their non-competes expired, adding more capacity and players.
But OFS must also remember the marketplace is elastic. Cut costs and E&Ps will drill more wells. Getting a better margin for ongoing work while expanding the market under fixed commodity prices remains a monumental challenge.
While many of the smaller OFS players may quite rightly brag about offering better service, most cannot touch the big dogs when it comes to financial management and investment discipline. They employ systems and people to count the pennies on every job while ensuring each new capital asset will yield a double-digit after-tax rate of return. But tragically, even some of the fast-growing larger outfits of the post-2009 recession era weren’t good at this either.
Nobody ever published a Harvard Business School case study highlighting the remarkable financial efficiency of the oil service industry or its E&P customers. Too fat for too long. OFS has proven it can cut costs but can it reinvent itself? However awful, OFS must manufacture a positive operating margin with whatever business is available. This will require consolidation, financial management and finally understanding their client’s objectives and become a partner, not just a vendor. There’s no other way.
Anti-pipeline accord could deepen divide in indigenous communities
KELLY CRYDERMAN AND SHAWN MCCARTHY
CALGARY and OTTAWA — The Globe and Mail
Published Friday, Sep. 23, 2016 4:39PM EDT
Last updated Friday, Sep. 23, 2016 5:03PM EDT
As a coalition of First Nations ramps up its opposition to new pipeline and tanker projects, some aboriginal leaders are cautioning against the group’s blanket condemnation of the oil sands issued this week, saying the industry is funding important programs in their communities.
Opposition from some First Nations to individual pipeline projects is long-standing. But on Thursday, 50 indigenous communities in Canada, plus some U.S. tribes, unveiled an accord that commits them to stand together against the building of any new pipelines and rail projects, or increased tanker traffic, that would facilitate the expansion of oil sands production. They say they are concerned about the risk of spills and climate change.
As of Friday, the coalition’s ranks had grown to 85 First Nation signatories.
The move may amplify a growing divide in Canada’s indigenous communities. Not every First Nation leader is against new pipeline projects – especially in Alberta, Saskatchewan and northeastern British Colombia, where many aboriginal leaders have a stake in the oil and gas industry.
Next month in Calgary, an advocacy group for those First Nation communities will host a Pipeline Gridlock Conference to discuss aboriginal issues around pipelines, and ways to build new projects with indigenous interests front and centre.
Stephen Buffalo, president and chief executive officer of the Indian Resource Council, said the coalition voices legitimate concerns, but every industry has an environmental cost and it’s unfair to target oil alone. He said many energy-dependent aboriginal communities have already taken a hit because of two years of low crude prices
“From a First Nations standpoint, we’re really trying to not be poor,” said Mr. Buffalo, who hails from the Samson Cree Nation in Maskwacis, Alta.
“Oil and gas, and energy, is one way to advance, and build our communities, and build houses and rec centres and hockey rinks.”
Chief Wallace Fox said his oil-rich Onion Lake Cree Nation – which straddles the Alberta-Saskatchewan boundary north of Lloydminster – shares all First Nations’ concerns about the land and water. But he said the community’s heavy oil resource has led to jobs and revenues for housing and education programs, such as a Cree language immersion program.
“If we didn’t have that, we would be in the same situation – for example – as those who face a big housing crisis across Canada. We use our own money, our own source funding, to try to meet the needs of First Nations,” Mr. Fox said.
“The reality is we still need this product to get from point A to point B,” he said of pipelines.
The federal government will decide before Christmas whether to approve Kinder Morgan Inc.’s proposed expansion of the Trans Mountain pipeline to Vancouver. The project has attracted the ire of Lower Mainland municipal leaders. The most vocal First Nations opposition to that project has come from the Tsleil-Waututh Nation – a key member of the coalition – which is based on Burrard Inlet near the export terminal.
At the same time, Trans Mountain said it now has more than 40 letters of support from aboriginal communities and associations in Alberta and British Columbia. As of mid-September, the company had signed 18 benefits agreements with 22 aboriginal communities along 95 per cent of the pipeline corridor, a company spokesman said in an e-mailed statement.
In a letter submitted to the National Energy Board last December, Chief Clifford Calliou of the Kelly Lake Cree Nation said some of the project would occur within its traditional territory in northeastern B.C., and that it is “satisfied with the mitigation measures” promised by Trans Mountain.
“The Kelly Lake Cree Nation is of the view that there will be positive effects as a result of the project,” Mr. Calliou said in the letter.
Enbridge Inc.-led Northern Gateway ran into a wall of First Nations opposition on the British Columbia coast, but the company claimed it had significant support among aboriginal communities in Alberta and along the pipeline route. It says there are 31 aboriginal communities that are part of its ownership groups, though some that initially expressed support have revisited that decision amid internal battles.
In Edmonton, the NDP government is in a battle to show that its ambitious climate-change plan and other measures will help the province build the cross-country goodwill to build at least one new pipeline to allow for growth in crude exports and to carry Alberta oil to new, international markets. The government, elected in 2015, argues that Alberta is now on the forefront in the battle to reduce Canada’s greenhouse gases – but previous years of inaction are sticking to the province’s reputation.
“I get why they’re in a position where they need to say no – no matter what,” said Alberta Deputy Premier Sarah Hoffman, speaking about the First Nations coalition against pipelines.
“It’s them having an opportunity to express their frustration with what’s happened in the past,” Ms. Hoffman said.
“I want to honour what they’re saying, but also acknowledge that there are other First Nations who know how important it is to safely get our product to tidewater.
- 23 Sep 2016
- The StarPhoenix
- DAN HEALING
- The Canadian Press
Saskatchewan set to increase deposit fees for oil well cleanup
Companies buying energy assets in Saskatchewan are facing higher deposit costs for environmental remediation after a precedent-setting court case in Alberta that dealt with abandoned oil and gas wells.
In a letter sent last month to operators of wells, pipelines and other energy assets in Saskatchewan, the provincial Ministry of Economy (ECON) warns that all applications to transfer government licences for wells as part of sales transactions will be treated as “non-routine” from now on.
“All licence transfer applications will be reviewed in detail and ECON will consider all relevant factors in calculating transfer deposit requirements,” it says. “In addition to increased deposit requirements, ECON may incorporate additional conditions with licence transfer approvals which may impact the decision to proceed with certain transactions.
“In particular, licence transfers involving a high percentage of potentially uneconomic infrastructure will be very closely reviewed and deposit requirements set accordingly.”
Regulators in Western Canada are watching closely after a ruling from the Alberta Court of Queen’s Bench in May granted the receiver for bankrupt producer Redwater Energy the right to sell the private company’s best assets and disclaim or abandon inactive assets for which estimated environmental cleanup costs were higher than resale value. An appeal of the decision is to be heard in October.
No end to uranium price plunge
September 23, 2016
While thermal coal has embarked on an astounding surge, natural gas has recovered and oil has rallied more than 70% from 13-year low struck in January, uranium is languishing at decade lows.
U3O8 is down nearly 30% in 2016 with the UxC broker average price sliding to $24.40 a pound on Thursday. Current levels are the cheapest spot uranium has been since April 2005. The long term price, where most uranium business is conducted, has fallen to unprecedented levels below $40 a pound.
Uranium’s weakness persists despite strong fundamentals with only reactors already being built – mostly in China – expected to increase the global need for uranium by a fifth from today’s levels.
Last week’s go-ahead for a $24 billion nuclear power station at Hinkley Point – Europe’s biggest energy project and the UK’s first nuclear project in a generation – should also go a long way in restoring confidence in the market.
But in the short term there seems no relief in sight for the battered industry.
“We expected Japan to move more quickly with restarting their reactors but it didn’t happen. Material that would have been delivered to Japan is now coming onto the market and keeping the price down”
Jonathan Hinze, executive vice president at UxC, quoted by Bloomberg paints a picture of the spot price environment where there is simply too much material available to utilities and little prospect of demand improvement, at least in the short term:
“Some producers and other sellers need to move material for cash flow purposes, and thus, we have seen some pretty aggressive selling in the past few weeks. These market conditions are unlikely to change in the near future.”
In an interview with MINEX Asia in June, Tim Gitzel, President and CEO of Cameco, the world’s number one listed uranium producer representing nearly a fifth of global production summed upped the depressing environment for uranium this way:
“We haven’t seen prices this low for many years. There’s not very much activity on the market, small amounts of material, often changing hands among traders. There is a sense among utilities that there is a lot of uranium around and so there is no urgency to be buying. Utilities are well covered for the next few years so the prices are staying low for now. We expected Japan to move more quickly with restarting their reactors but it didn’t happen. Material that would have been delivered to Japan is now coming onto the market and keeping the price down.”