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

  • Judge hears stay request for ex-Amaya CEO, others

    Economic CBC News
    Even before the first witnesses could be heard at a rare insider trading case that involves former Amaya CEO David Baazov and others, lawyers representing the accused attempted Monday to have the charges stayed. Baazov, 37, has pleaded not guilty to securities-related charges following an investigation by the Autorité des marchés financiers, Quebec's stock market regulator, into the allegations of insider trading. Source
  • Uber charges Toronto customer more than $18,000 for short downtown ride

    Economic CTV News
    TORONTO - Uber is apologizing to customer who was charged more than $18,000 for a short ride in downtown Toronto. Photos posted on social media over the weekend showed that an Uber rider was billed $18,518.50 for a 21-minute Uber ride. Source
  • Conservatives ask OPP to investigate ineligible expenses by power generators

    Economic CTV News
    TORONTO -- The Progressive Conservatives have asked the Ontario Provincial Police to investigate millions in ineligible expenses -- including scuba gear and raccoon traps -- filed by nine power generators in the province. Auditor general Bonnie Lysyk reported last week that the generators claimed up to $260 million in ineligible costs between 2006 and 2015, under a program designed to pay power generators for fuel, maintenance and operating costs when the system operator puts them on standby to…
  • Onex Corp. to buy venue manager SMG Holdings for undisclosed price

    Economic CTV News
    TORONTO -- Onex Corp. (TSX:OCX) says it has agreed to acquire a U.S. company that manages hundreds of sports, entertainment and business venues including Soldier Field, home to the NFL's Chicago Bears. The Toronto-based private equity company didn't disclose how much it will pay for privately held SMG Holdings Inc. Source
  • Apple buys music identifying app Shazam

    Economic CBC News
    Shazam has been valued at roughly $1 billion US. (Simon Dawson/Bloomberg) Apple is buying Shazam, a popular app that identifies music for users by listening to a short snippet of it. Technology website Techcrunch first reported on the possibility of the merger last week before Apple made it official in a statement Monday. Source
  • Securities-related trial underway in Montreal for ex-Amaya CEO David Baazov

    Economic CTV News
    MONTREAL -- The securities-related trial of former Amaya CEO David Baazov and others accused of insider trading is underway at the Montreal courthouse. It is opening with a request by the defence to have the case tossed due to unreasonable delays in getting evidence. Source
  • Stay request at insider trading trial for ex-Amaya CEO David Baazov, others

    Economic CTV News
    MONTREAL -- Even before the first witnesses could be heard at a rare insider trading case that involves former Amaya CEO David Baazov and others, lawyers representing the accused attemped Monday to have the charges stayed. Source
  • Calgary-based water pipeline company accepts $509M offer from New York partner

    Economic CTV News
    CALGARY -- A Calgary-based water pipeline technology and inspection company says it has agreed to be sold for more than half a billion dollars to New York-based Xylem Inc. Pure Technologies Ltd. says the offering price of $9 per share or $509 million in cash is more than double its closing share price last Friday. Source
  • Of government and golf courses: Mulroney's East Coast experiment, 30 years later

    Economic CTV News
    HALIFAX -- Ben Cowan-Dewar was a bright-eyed 25-year-old entrepreneur when he visited Inverness, N.S., and saw a jaw-dropping landscape fit for a luxury golf course. Past the abandoned mines and hardscrabble edges of the Cape Breton village, he envisioned a boutique 18-hole course and upscale resort perched atop craggy cliffs. Source
  • Bitcoin futures contract flirts with $19K US, even as current price hovers near $16K

    Economic CBC News
    After jumping out of the gate, the first bitcoin futures contracts to trade on a mainstream exchange stabilized on Monday at around $18,000 US. The Chicago Board of Options Exchange started trading a bitcoin derivative contract on Sunday evening. Source