Canada's oilpatch adjusts to 'new normal' after a year of pain

CALGARY -- The stream of traffic between Cold Lake, Alta., and nearby oilfields has slowed to a trickle.

"It's definitely a noticeable slowdown," said Mayor Craig Copeland, who has been hearing from hotels, restaurants and retailers that business is down about 30 per cent year-over-year in the oilpatch's bedroom community.

See Full Article

It's not much of a surprise, with crude prices spending most of the year under US$50 a barrel and sinking below US$40 a barrel this month. Most analysts expect the doldrums to stretch well into 2016.

It's also not getting any easier to build market-opening pipelines and political upsets in Ottawa and Edmonton have put many in the industry on edge.

The Canadian Association of Petroleum Producers has estimated the downturn has slashed 40,000 jobs in the sector, mostly in Alberta, and has urged political leaders to keep competitiveness top of mind as they overhaul energy policy.

Copeland knows there's not much that can be done about larger market forces. What frustrates and worries him most is the "dilly-dallying" on the pipeline front.

If no new pipelines come to fruition, projects already up and running will continue to keep up their current levels of output, but companies will have a hard time justifying multibillion-dollar expansions -- and hiring thousands of people to build them, said Copeland.

"If we can't get a pipeline out of Alberta in the next two years, we might as well start turning the lights off soon in the province."

In November, a seven-year regulatory saga culminated with U.S. President Barack Obama rejecting the Keystone XL pipeline, which would have enabled more oilsands crude to reach Texas refineries. Its backer, TransCanada Corp. (TSX:TRP), is weighing its options.

TransCanada's Energy East project to New Brunswick and Kinder Morgan's Trans Mountain pipeline expansion to the Vancouver area are in the thick of the regulatory process and both face considerable opposition. The new Liberal government has signalled it wants to change how the National Energy Board reviews pipeline proposals, but that processes underway would continue.

Enbridge Inc.'s (TSX:ENB) Northern Gateway pipeline to Kitimat, B.C., remains in limbo, even though it has had a federal permit to proceed since mid-2014, with 209 conditions attached. The Liberal government, which swept to power in October, has formalized a tanker ban on the northern coast of British Columbia. Project critics see that as a deadly blow, but Enbridge has not given up and continues to work on getting B.C. First Nations on side.

European energy giant Royal Dutch Shell PLC cited the pipeline pinch as one reason for abandoning its Carmon Creek project in northwestern Alberta partway through construction. It took a $2-billion charge in the process.

As the oilpatch digests what it will mean to have the Liberals in charge in Ottawa, the change at the provincial level has been staggering since May, when the NDP toppled the Progressive Conservatives after more than four decades in power.

Alberta last month introduced a sweeping new climate change strategy. An unlikely mix of oilsands bosses and environmental campaigners joined Premier Rachel Notley on stage as she announced a plan to cap oilsands emissions at 100 megatonnes -- they're at 70 megatonnes today -- and charge a $30-a-tonne carbon tax by 2018. A panel looking into the royalties the province charges the industry is expected to release its findings in the new year.

The uncertainty isn't confined to Alberta's borders. Indeed, prominent energy economist Peter Tertzakian -- who happens to sit on Alberta's royalty panel -- says the foundation of a 150-year-old energy system is being shaken amid seemingly unrelenting global oil output and a worldwide push to cut carbon emissions.

"Your biggest risk is denying that change is going on," he told business leaders at a conference in Lake Louise, Alta., last month. "If you think that things are going back to business as usual, you're in denial."

In late 2014 as crude prices were beginning their steep descent, Canadian Natural Resources Ltd. (TSX:CNQ) chairman Murray Edwards raised eyebrows when he predicted crude could dip to the US$30 to $40 a barrel range this year. At the time, the price was above US$70 a barrel.

Edwards' prediction proved correct -- except the price has lingered in that range for longer than he'd thought.

A year later, the billionaire oilpatch financier said the industry is adjusting to a "new normal."

"We have a lot of wind blowing in our face right now, a lot of challenge before us, and so it's really going to cause all of us to rethink how we do business if we want to maintain a viable industry in Alberta and Canada."



Advertisements

Latest Economic News

  • Deciphering Trump's curious comments on Keystone XL pipeline

    Economic CBC News
    In his nearly hour-long speech at the Conservative Political Action Conference on Friday morning, U.S. President Trump talked about a lot of things — the media, Obamacare, trade and crime. But he also ventured into pipelines. Source
  • Ontario police looking for 'large quantity' of stolen cheese

    Economic CTV News
    SOUTH WEST OXFORD TOWNSHIP, Ont. - Police in southwestern Ontario are looking for thieves who made off with a lot of cheese. Ontario Provincial Police say the Village Cheese Mill in South West Oxford Township, east of London, Ont. Source
  • Stock prices slide lower despite large profits at big banks

    Economic CBC News
    Canada's benchmark stock index is on track for its worst day of the year as oil prices are lower and financial firms are selling off despite record earnings at some of Canada's biggest banks. The S&P/TSX composite index was off by 260 points to 15,520 in the afternoon. Source
  • TSX tumbles 247 points despite big profits at big banks

    Economic CBC News
    Canada's benchmark stock index is on track for its worst day of the year as oil prices are lower and financial firms are selling off despite record earnings at some of Canada's biggest banks. The S&P/TSX composite index was off by 260 points to 15,520 in the afternoon. Source
  • 'Baycott': Why 'Peeved Beavers' are upset by Ivanka Trump's brand at the Bay

    Economic CTV News
    Armed with distinctive blonde wigs, pursed lips and red power ties, a group of Ontario women are planning to dress up as U.S. President Donald Trump to protest the Hudson’s Bay Co. for carrying Ivanka Trump’s fashion line during two demonstrations in the Toronto area planned for Saturday. Source
  • Nova Scotia tourism sees third consecutive year of growth

    Economic CTV News
    HALIFAX - Nova Scotia says the province's tourism industry continued a steady upswing in fortunes in 2016. It says 2.2 million visitors came to the province -- that's up eight per cent, or about 170,000 more visitors, than in 2015. Source
  • Husky may sell some of its assets in N.L. offshore oil industry: sources

    Economic CBC News
    Canadian oil and gas producer Husky Energy Inc is weighing paring down its stakes in some of its Eastern Canadian offshore assets, in a move that could fetch as much as several billion dollars, people familiar with the talks have told the Reuters news service. Source
  • Cleanup of oil spill in Sask. cost $107M, Husky Energy says

    Economic CTV News
    CALGARY -- Husky Energy says efforts to clean up a major oil pipeline spill last year in Saskatchewan have cost $107 million. About 90,000 litres of heavy crude and diluent leaked into the North Saskatchewan River last July, jeopardizing drinking water supplies for thousands of people downstream. Source
  • Ottawa's deficit hits $14B through first nine months of fiscal year

    Economic CBC News
    The federal government ran a budgetary shortfall of $14 billion over the first nine months of the fiscal year, compared with a $3.2-billion surplus over the same period a year earlier. The Finance Department's monthly fiscal monitor says federal program expenses between April and December rose $16.7 billion, or 8.8 per cent, compared with the same stretch a year ago. Source
  • Uniqlo's new modest line featuring hijabs debuts in Toronto

    Economic CTV News
    A modest-style clothing collection that features hijabs and abayas is making its debut at Canada’s two Uniqlo clothing stores. The clothing collection is by U.K.-born fashion designer Hana Tajima and features 30 items in 81 colours and patterns. Source