Thursday, 11 December 2014

Canadian Pipelines in Purgatory

By: Mike Doyle, CAGC

Keystone XL is a proposed 1,897-kilometre pipeline that would carry crude oil from Hardisty, Alberta to Steele City, Nebraska, where it would link up with other pipelines that run to the Gulf Coast and the U.S. Midwest.

The pipeline would carry an average of 830,000 barrels of oil per day to refineries in the Midwest and the Gulf Coast.

TransCanada (TSX:TRP) would develop the US$5.4 billion pipeline. In May 2012, the company filed a new application for a presidential permit — a requirement for any cross-border pipeline —after the U.S. State Department denied its first application.

The Canadian Energy Research Institute estimates that Keystone XL will add $172 billion to the United States’ gross domestic product by 2035.

Earlier this year, the State Department put off its decision again, pending the outcome of a court fight in Nebraska over the proposed route. A decision is not expected before next year. 

However, last week’s midterm elections, which left the Republican party in full control of the U.S. Congress, could force the issue through expected legislation.

But there are potential pitfalls that could prevent progress on the pipeline.

Here are some of them. 

— The Veto: A bill needs two-thirds support in Congress to override a presidential veto — which is 67 votes in the 100-seat Senate. The bill being pushed by Louisiana’s embattled Sen. Mary
Landrieu does not have those votes. 

There’s already huge pressure on Obama from environmental groups to veto it, on the logic that he’d be tarnishing his own legacy on climate change by allowing the pipeline just after striking a historic emissions deal with China. 

One columnist in the Washington Post pointed to another concern: the bill starves Obama of valuable leverage he might prefer using in two months. 

The next Congress, to be sworn in early next year, will be dominated by Republicans. One of their biggest policy priorities — perhaps even their No. 1 issue — is pushing Obama to approve the pipeline. In exchange for that kind of political victory, Obama might have insisted on something in return from the Republicans.

 —The Legal Issues: The pipeline doesn’t even have an approved route, at least not for now. In Nebraska, the courts have thrown out the existing route, declaring that the state’s Republican governor used unconstitutional methods to approve it.

The case is before the state’s Supreme Court. Dave Domina, the lawyer fighting the pipeline on behalf of holdout Nebraska landowners, said he expects a decision by the state Supreme Court
soon, possibly by the holidays.

Domina said lawmakers need to remember not only that there’s a gap in the route in Nebraska but also that the final decision belongs to the president, not Congress. A hasty move in Washington could prompt more lawsuits, he suggested. 

Northern Gateway

Northern Gateway is a proposed 1,177-kilometre twin pipeline that would carry diluted bitumen from Alberta to the town of Kitimat on the British Columbia coast, where it would be shipped overseas by oil tankers. 

One pipeline would carry an average of 525,000 barrels a day of petroleum products west to Kitimat. The other pipeline would carry a daily average of 193,000 barrels of natural-gas condensate — used to dilute oilsands bitumen — east to Bruderheim, Alta., just north of Edmonton. 

Calgary-based Enbridge Inc. would develop the $6.5-billion pipeline. The company submitted an application for the pipeline to the National Energy Board in May 2010. Consultations were then held with opponents and supporters of the project. 

In December 2013, a federal joint review panel recommended approval of the project, subject to 209 conditions. The government approved the project, contingent on those conditions being met, and further consultations with affected aboriginal communities.

The Northern Gateway project is worth an estimated $300 billion in gross domestic product over 30 years. 

Energy East 

The $12-billion, 4,600-kilometre Energy East pipeline would carry 1.1 million barrels of crude oil per day from Alberta and Saskatchewan to refineries in eastern Canada. 

The project would involve converting an existing natural gas pipeline to oil, then building new lines in Alberta, Saskatchewan, Manitoba, eastern Ontario, Quebec and New Brunswick to extend the existing line. It would require construction of two marine facilities, on the Gulf of St. Lawrence near Quebec City and in Saint John, N.B. 

The project would also deliver oil to existing Quebec refineries in Montreal, near Quebec City and in Saint John. New pipeline would be built in Alberta, Saskatchewan, Manitoba, eastern Ontario, Quebec and New Brunswick.

TransCanada filed its regulatory application for Energy East to the National Energy Board two weeks ago. Several environmental groups have vowed to fight the pipeline, raising concerns over the ecological harm that would result from a spill as well the project’s enabling role in oilsands growth.

Trans Mountain Pipeline

Kinder Morgan’s proposed $5.4-billion expansion of its Trans Mountain pipeline would nearly triple its capacity to ship petroleum products to 890,000 barrels a day along a 1,000-kilometre route to Burnaby, BC up from the current daily flow of 300,000 barrels.

The pipeline would enable crude exports to Asia through the Vancouver area, but opponents of the Trans Mountain project have warned of the potential impact of a spill, either from the pipeline itself or from increased tanker traffic. 

The National Energy Board plans to begin oral hearings examining the Trans Mountain expansion in July of next year. A final report is due to federal cabinet in January 2016.

Monday, 1 December 2014

Analyzing the Downturn (of Oil) - Only Market Forces Will Increase Oil Prices and OFS Activity

From MNP, Oilfield Service News, December 1st, 2014

By: David Yager, National Leader, Oilfield Services

There was a time when the Organization of Petroleum Exporting Countries (OPEC) truly did control world oil prices. As producers of the greatest quantities of the world’s cheapest oil, OPEC – particularly Saudi Arabia – possessed what had come to be known as “swing” production. While the rest of the world produced every possible barrel, OPEC could adjust production and therefore prices. Increase production and prices would decline. Decrease production and prices would rise.

Those were the days. No longer.  At 30 million b/d OPEC only produces about a third of the 90 million barrels a day of the oil the world produces and consumes daily. The United States, Russia, Canada and China combined now produce as much oil as OPEC. With the exception of Russia, these other countries are not as dependent upon oil to power their economies as the 12 members of OPEC. The United States and China, the world’s two largest oil importers and consumers, actually benefit greatly from lower oil prices.

At the OPEC meeting on November 27 the decision was made to make no attempt to constrain production. Oil prices tanked immediately. In fact, world oil markets had already anticipated this decision to a great degree. With WTI closing at US$66.15 on November 28, crude traded at the lowest price in over five years, July 29, 2009. Western Canada Select (WCS, Canada’s blend of bitumen, synthetic crude and condensate) closed at Cdn$55.31. Following is a snapshot of crude prices for the last trading day of November, a year ago, and the average price for each commodity so far this year.

Source: First Energy Capital Corp.

All of these commodities are trading about $30 a barrel lower than their average price so far this year even when favorable Canada/U.S. currency exchange rates are taken into consideration. While WTI and Brent prices have improved by about US$2 a barrel in early trading today, they are still well below the levels that have generated the type of spending activity that OFS operators have become accustomed to in the past few years.

What does this mean for the Canadian oilfield services sector? There is no good news. Canada produces about 4.1 million barrels a day of conventional crude, bitumen, synthetic crude and natural gas liquids. If oil prices in 2015 were to stay at these levels, and natural gas stayed the same, the size of the pie as measured by the value of all the oil produced would fall about 29% or $45 billion compared to 2014 from 2014 record levels of about $155 billion. The figures that follow are the value of all hydrocarbons produced in Canada per year dating back to 1998. The red line is how 2015 could compare with previous years.

In reality, it isn’t likely to be this bad. What the $45 billion decline figures do not factor in is how much current oil production is “hedged” or locked in at higher prices on the futures market. At least for a while. Revenue in 2015 will be higher than estimated above for this reason. The other is a recovery in oil prices based on supply and demand fundamentals next year, which will be explained later in this article. 

There have been lots of theories floated about why OPEC (particularly the Saudis and other low cost producers like Kuwait, Qatar and United Arab Emirates) decided not to reduce output and sustain higher prices. One was to punish a potentially nuclear and ambitious Iran. The other was to put pressure on expansionist Russia.

But what it really means is that market forces have ended OPEC’s ability to dial in world oil prices. Likely forever.

The biggest single change in world oil markets in the $100 a barrel world since 2008 has been the application of new technology and extraction methods in North America to previously uneconomic or marginal reservoirs containing oilsands and shale oil. Canada and the United States have increased their combined production by about 5 million b/d in the past six years. This is the biggest change in world oil production patterns in decades. If prices stay at high levels, this will continue to increase. Estimates from CAPP and CERI have indicated that Canada could double oilsands production in the next ten years, triple in the next 30. As has been written many times, the United States appears to be able to continue to increase production in oil shale deposits in places like the North Dakota, South and West Texas.

So what really happened with OPEC last week is global crude oil market realities have been analyzed, acknowledged and accepted. Should OPEC shut in production to sustain higher prices, the result would be a permanent loss in market share because it would keep new supplies of higher cost oil economic to develop. You can pay now or you can pay later. The Saudis in particular have finally concluded that they will indeed pay and have decided to trade short term pain for long-term market share and price stability.

Going in to the OPEC meeting, analysts figured that the market was oversupplied by up to 2 million b/d and only a production cut of 1 million b/d would have a meaningful impact on oil prices. The good news is a 1 million b/d swing in market fundamentals is achievable in 2015.

Low prices will spur demand. A demand increase of 500,000 b/d is less than a 6% increase in world consumption. With prices down by 1/3 (or more if it gets worse), this should be achievable as airline fares decline and it becomes cheaper to travel by automobile everywhere. On a global basis, a US$30 a barrel drop in oil prices will transfer a whopping US$2.7 billion a day or nearly US$1 trillion a year into the pockets of oil consumers. This will be a very positive economic stimulus to the world economy and increase demand for petroleum. 

The other factor is a 500,000 b/d decline in production. While prices are still high enough that nobody is likely to shut in any existing production, the economics of the next tight oil play to be drilled are very different. Many shale oil wells experience production declines of 50% per year. Only steady drilling can sustain or increase production. Access to capital for tight oil developers will be squeezed through reduced credit facilities for existing production (with reserve values re-priced at current prices) and contracted equity markets.

Only the best and most efficient operators in possession of the best tight oil or natural gas liquids assets will be able to sustain their drilling and development programs. It is not a reach to conclude that reduced drilling caused by squeezed economics could easily cause a meaningful decline in North American tight oil and liquids production halfway through 2015. Of the 4 million b/d of increased tight oil production in the U.S., 500,000 b/d is about a 12.5% decline.

As supply and demand start to fall into line, prices will stabilize then improve. Many analysts are forecasting an oil price recovery in the second or third quarter of 2015. This explains why.

What is the outlook for the oilfield services sector? The 1998 – 2015 revenue figures tell the story.

The 11-year run from 1998 to 2008 was fantastic for OFS. The size of the pie increased over 500% during this period and the demand for equipment and services grew with it. After the major correction of 2008, a similar growth cycle occurred where the value of all the oil and gas produced in Canada increased by over 70% from $90 billion in 2009 to over $155 billion in 2014. 

While the type of equipment and services changed dramatically (a switch from many vertical gaswells to fewer but more expensive horizontal oilwells), demand stayed steady. Companies grew. Manpower shortages were endemic. OFS spent billions on new drilling rigs, frac spreads, crude oil transloading terminals, and production infrastructure to handle growing production.

Oilsands development has been delivering steady growth for OFS for almost 15 uninterrupted years. That will end in 2015 and is, in fact, already underway.

Everything has changed in the past 90 days. Forecasts from PSAC and CAODC for over 10,000 wells in 2015 released in the past month were based on US$85 crude. Now prices are only 80% of those levels, possibly rendering these figures optimistic (again, hedged production will increase total cashflow available from exiting production). Oilsands projects that have been postponed, delayed or cancelled will surely stay that way until oil prices stabilize and concrete indications of lower-cost pipeline takeaway capacity materialize.

In these market conditions OFS owners and managers will be asked to share the pain with their E&P company clients through lower prices. While nobody will welcome having to do more for less, it is impossible for OFS to succeed without its clients succeeding. One strategy that can help is consolidation by which OFS operators spread their management and fixed costs over a larger operation and revenue stream, thus creating improved overall margins at lower prices. Another is for companies to exit the business which, unfortunately, always happens when this business contracts this much this quickly.

Increasingly, more crude market analysts and producers are beginning to see a significantly lower price deck as the reality for the next couple of years. This is because many of the tight oil and natural gas liquids plays will still be profitable at $70 or less, and thus development will continue, albeit at lower levels. This will be assisted by lower prices for goods and services and improvements in operating efficiency. And new technologies that reduce costs and enhance production are always winners, regardless of market conditions.

Most oilpatch entrepreneurs purport to be big fans of free markets. What goes up in this business always comes down.

A Moral Case for Fossil Fuels

Recorder Article by: Mike Doyle, President of the CAGC – the Canadian Association of Geophysical
Contractors - representing the business interests of the seismic industry within Canada.
The CAGC website may be found at

It is time to defend ourselves against the anti (Canadian) Oil Interests. The new President/CEO of CAPP, Tim McMillan, says he wants to mobilize the silent majority of energy consumers to speak on its behalf as the industry looks to counter the environmental groups’ campaigns against major pipeline projects.

“I want to convert you from being an energy consumer and endorser to becoming an energy advocate and energy citizen.”

Cody Battershill of Canada Action says it is time to Balance the Conversation on Canadian Oil & Gas - The #oilsands are a major contributor to the prosperity of our country! When you attack our energy you attack us.

Alex Epstein has recently put out a book from which I take the final chapter as below.

From the Book “The Moral Case for Fossil Fuels” by Alex Epstein - Published by Penguin Random House - 2014

In 2007 and 2008, candidate Obama declared his intention to destroy fossil fuel energy in America and around the world, calling for “emissions targets” that would make it illegal to use more than 20 percent of today’s levels. About oil, the most versatile fuel in the world, which powers 93 percent of our transportation system and, through shale-oil booms in North Dakota, Texas, and elsewhere, has been one of our few sources of economic hope, he said:

“At the dawn of the twenty-first century, the country that faced down the tyranny of fascism and communism is now called to challenge the tyranny of oil. . . . For the sake of our security, our economy, our jobs and our planet, the age of oil must end in our time.”

While he was saying this, the oil industry he was comparing to the mass murderers of the twentieth century was perfecting shale-oil (and shale-gas) technology. Thanks to Obama’s lack of oversight in this area, shale energy technology became the leading positive economic force during his administration.

That is, a revolution in fossil fuel technology occurred because our government didn’t know enough about it to demonize and ban it. This is not the kind of thing we want to depend on.

What if Obama had been aware of this revolution in the making ten years out? He would have no doubt regarded it as a dangerous practice to be stopped, given that he viewed oil as a “tyranny” to be ended, not expanded. Technological progress in the United States would have been thwarted—and with it, progress around the world. The United States is the best place in the world to do fossil fuel research and development, because we have the most private property that can be bought and explored, rather than delegated at the whim of the state.

This example to me captures where we are—incredible threats to progress and incredible opportunities for progress. We are still arguably at the beginning of the fossil fuel age. In several decades we may be able to drill efficiently and safely at any depth, efficiently turn coal or gas into oil, and use fossil fuels to help develop new generations of technology (likely nuclear) and help increase the amount of the most valuable resources—food, water, beauty, and most important, human time. All indications are that, as the amount of CO2 in the atmosphere increases from .04 percent to .05 or .06 percent, we will continue to benefit from more plant growth. If new climate dynamics are discovered, we will adapt—always keeping in mind as full context the indispensable value of industrial civilization.

We can have it all.

We just need to be clear on what is right, then take the time and sometimes social risk to try to reach the people who matter most to us. I wrote this book so you could hand it to the people who matter most to you—and so that you could take its ideas and make them your own, telling the people who matter to you how you think and feel.

I wrote this book for anyone who wants to make the world a better place—for human beings—including many, many people who would start this book opposed to or at least suspicious of fossil fuels. Having held that position myself before, I know it can be well motivated. The idea of ruining the world for the less fortunate and, even worse, for our children or grandchildren is horrifying to us. Thus, when someone tells us of a major risk that our behavior is causing, we want to do something about it.

What we are not taught is that the biggest risk is not using fossil fuels, and that using them is incredibly virtuous. We are not taught that we’re building a civilization that serves us and the future, that we’re creating knowledge and resources that can enrich everyone around the world. We’re not taught that the choices we make often reflect an extremely rational calculation that balances benefit and risk. We’re not taught that some people truly believe that human life doesn’t matter, and that their goal is not to help us triumph over nature’s obstacles but to remove us as an obstacle to the rest of nature.

Make no mistake—there are people trying to use you to promote actions that would harm everything you care about. Not because they care about you—they prioritize nature over you—but because they see you as a tool.

The unpopular but moral cause of our time is fossil fuels. Fossil fuels are easy to misunderstand and demonize, but they are absolutely good to use. And they absolutely need to be championed.

There are many specific battles to be fought. The venue and strategy for each is ever changing, which is why the specific actions we take need to be timely and coordinated. That’s why this book has a Web site,, which will let you know about the latest opportunities to fight for energy liberation, whether it’s promoting a series of debates over fossil fuels, writing a public comment on the EPA’s attacks on coal, or sharing inspiring stories about industrial progress around the world.

But no matter what you read, the need for moral clarity will always be timely. Here, in a sentence, is the moral case for fossil fuels, the single thought that can empower us to empower the world: Mankind’s use of fossil fuels is supremely virtuous—because human life is the standard of value, and because using fossil fuels transforms our environment to make it wonderful for human life.

Somewhere in all of this we begin to believe the repeated rhetoric. Fossil Fuels and Energy have brought prosperity and safety to the human species. And now “civilized” factions wish to turn back the hand of time. This is a good thing? A smart thing?

From Brainy Quotes on the Internet:

Sometimes a concept is baffling not because it is profound but because it is wrong.

-          E. O. Wilson

Tuesday, 25 November 2014

Seismic Acquisition Expected To Be Soft In 2014-2015; Mergers May Signal Market Bottoming

By: Carter Haydu, Daily Oil Bulletin

Coming off the tail end of a relatively lacklustre 2013-14, seismic acquisition companies can expect a similarly soft season ahead in Western Canada, say industry representatives.

“There has been one merger completed and another merger that is imminent, but even with the mergers happening there is still minimal work available for crews in Canada,” Forrest Burkholder, general manager at SAExploration Holdings Inc., told the Bulletin.

He added: “2014 was mediocre at best and 2015 is looking like it is going to be similar or slightly worse.”

According to Burkholder, lack of market access for producers is limiting exploration, which means companies are focusing on developing current assets with infrastructure and available markets already in place, which is largely reducing the work available for seismic firms.

“I would certainly think the pipeline issue is impacting all Canadian energy service sectors,” he said, adding that many oil and gas companies are still completing their budget cycles for 2015, and so there is potential for more seismic work. However, based on customer feedback he expects the job pickings to be fairly slim.

“[SAExploration] is international, and so we are fortunate in that we can move people and assets to places that are still active while we keep whatever is necessary here to keep things working as needed by our clients.”

Kelly Zamiski, operations vice-president of Sourcex Geophysical Corp., said that while many seismic companies are transferring equipment and personnel to the United States and even international markets, the company has yet to take such measures, in large part because commodity price woes are hurting energy companies everywhere.

“It certainly is not as busy in those markets either,” he said, adding that better crude prices would improve investments in Canadian seismic acquisition, although commodity prices are just one factor in low seismic activity.

“This is the culmination of a bunch of things that have slowed us down, including instability in the market price, but we are also hearing from our information sources that there is just no pipeline to move it, and they can’t get a lot of their product to market in a timely fashion.”

With current market instability for the oil and gas sector, Zamiski does not think seismic acquisition companies can expect this year to be any busier than last year.

“Certainly, to get through this [companies] are just going to have to stay the course. We are starting to see some companies merge together. I think you are going to see more of that as the year starts to transpire, especially if it looks to be slow next year as well.”

Seismic sector still dealing with challenges from AER implementation

With all the confusion that went with the advent of a single energy regulator last year, the resulting backlog of applications had a dramatic impact on the 2013-14 seismic acquisition season, Mike Doyle, president of the Canadian Association of Geophysical Contractors, told the DOB.

“Really, by the time it was cleared it had impacted certainly at least some of our winter work,” he said, adding that the first quarter of 2014 was the worst seismic acquisition season in Western Canada since the first quarter of 2010, when the market bottomed out due to the 2008 financial crash.

“At some point, [the oil and gas companies] just decided to shelve [seismic work] until next year.”

With the Alberta government changing its whole approach to approvals with its single-window Alberta Energy Regulator, many projects received late approvals, said Burkholder. While the long winter definitely helped get some work done in 2013-14, he noted, the weather was also a hindrance for the industry.

“Obviously we like cold weather and longer winters, which really helps get things done, but last winter we had a fairly significant snowfall in some areas that dramatically hindered operations, and it certainly cost clients more money to complete projects.”

With current market conditions, the oil and gas industry will probably call for reactive rather than proactive seismic work over the upcoming months, Zamiski said. His company intends to deploy at least two crews this season, and possibly a third, into Western Canada.

“We have a bit to do on the Saskatchewan side — not deep southeastern Saskatchewan, but around the Lloydminster area and south of there. We will have a little bit of demand in the oilsands coming up this year, and a little bit in the Peace River area, with possibly a bit of demand in the Fox Creek area as well.”

Duvernay area, oilsands targets for 2014-15 seismic season

Depending on how the big industry players react to the British Columbia’s newly-announced LNG tax regime (DOB, Oct. 21, 2014), there could be a perceptible effect in terms of seismic work, as the prospect for that industry has already resulted in more demand for subsurface mapping in the Horn River and Montney over recent years, Doyle said.

“We have seen companies spend lots of money in those areas, and in the last year or two we have seen bigger players starting to get out and sell to other players — you are seeing that consolidation.”

According to Doyle, seismic acquisition companies continue to do 4D work for SAGD operations, and companies are also expressing interest in seismic work for the Foothills and oil plays such as in the Duvernay. However, if the price of oil continues to soften, he said, companies would likely concentrate on existing plays rather than exploring new frontiers.

While the Duvernay is busy, as is the Fort McMurray area, Burkholder told the DOB that B.C. is actually on the slow side for seismic work this year.

“The biggest challenge in B.C. is the amount of time it takes to get an approval. They are regularly 90 to 100 days once you submit to the [B.C. Oil and Gas Commission] to get your approval,” he said, adding that while the province’s recent LNG income tax announcement would probably help seismic acquisition companies long-term, it is doubtful the positive impact would be felt too much this winter.

In Saskatchewan, Burkholder noted, seismic acquisition firms are not only grappling with less demand from the oil companies, but also from potash companies dealing with their own global activity and economic woes.

For example, Potash Corporation of Saskatchewan Inc.’s capital expenditures for the first nine months of 2014 fell 40 per cent, year-over-year, to $726 million.

Fortunately for those in the seismic acquisition business, Doyle said, even if the sector is currently going through a low point, there really is no other way to attain the subsurface mapping necessary for producers to make their decisions, although there are other technologies that can help.

Eagle Canada parent company part of ongoing seismic sector mergers

Wayne Whitener, president and chief executive officer of TGC Industries Inc., said that while seismic acquisition is currently a bit of a soft market in Canada, subsidiary Eagle Canada Inc. is fortunate to be well established north of the Canada-U.S. border, with a strong reputation and client base.

“We are hoping to run three to four crews [in Canada] in the fourth quarter, and our hope is to run five to six crews in the first quarter of next year,” he told a recent conference call.

“That being said, it is still a little bit early in the season for us to know what the backlog is going to be like in the first quarter but we are very optimistic on the amount of work we will be receiving in Canadian operations.”

Last month, U.S. companies Dawson Geophysical Company and TGC announced a proposed strategic business combination, which if approved would see Dawson and TGC shareholders own about 66 and 34 per cent, respectively, of the combined company, to be called ‘Dawson’ in the U.S. and ‘Eagle Canada’ north of the 49th parallel.

“Obviously the Canadian issue, from our side, will be a growth opportunity for us,” Stephen Jumper, president and CEO at Dawson, said in discussing how the merger would benefit his side of the new company on the Canadian front if approved by shareholders.

Dawson is still building its presence in Canada and this has been difficult due in large part to softer market conditions, Jumper told the merger announcement conference call. “This is an exciting time for our companies as we work together to combine our complementary resources and create a best-of-breed company.”

If recent merger deals are any indication, then the upcoming seismic acquisition season will be rather limited, Doyle told the DOB. “We have seen some proposed mergers … and to some extent that signals the bottom of the market,” he said, adding that mergers reduce the number of players vying for a limited number of seismic contracts.

“Certainly, when the consolidations occur, our type of work tapers off for a while, until those companies figure out what they are going to do.”

Earlier this year, Geokinetics Inc. acquired CGG’s North American land seismic acquisition business, with CGG contributing its North America land contract activities (minus its land multi-client and monitoring business) for a minority equity stake in Geokinetics.

David Crowley, president and chief executive officer at Geokinetics, said in a news release that consolidation elevates Geokinetics to the top position in marketed crews for North America, including a leading position in Canada.

“The combination of our industry-leading seismic acquisition teams will better position our company in the North American marketplace, as we integrate our experience, knowledge and deployable technology,” he said.

As part of the transaction, CGG will provide its patented technology in support of seismic crews. Geokinetics will also benefit from a preferred relationship with the CGG North American land multi-client group.

Diverse portfolio, multi-client model helps Arcis through soft market periods

TGS, through its wholly-owned subsidiary, Arcis Seismic Solutions, completed several projects in the Western Canadian Sedimentary Basin last winter, primarily focused around the Duvernay and Cardium plays in the Pembina core area. The company currently is acquiring more than 700 square kilometres of new data near Fox Creek in the Kaybob-Bigstone-Simonette area.

“Basically, we are targeting a variety of formations. The program is designed to assist in the evaluation and development of multiple zones from the Cretaceous to Devonian, including emerging plays such as the Duvernay and Montney, along with established producing zones including Swan Hills, Gething, Notikewin and Dunvegan,” Katja Akentieva, managing director of Arcis and North America Arctic, told the DOB.

“We are very pleased to be expanding our data coverage in the heart of the Duvernay fairway where we see high customer interest. We are hoping to deliver additional value to our customers by including reservoir characterizations deliverables, as well as S-wave component data.”

According to Akentieva, there is enough available work for the “several crews” Arcis has contracted in Western Canada. The soft seismic acquisition market in the region presents an opportunity for multi-client data companies such as Arcis-TGS to secure competitive rates for projects, she said.

The Arcis multi-client model is advantageous to operators when budgets are constrained as it provides an attractive solution that allows operators to “stretch their seismic dollars further” by licensing multi-client data, said Akentieva.

“In the soft market conditions, where work is often limited, in order to remain successful you have to leverage your competitive advantage and offer differentiators to the market place, to your customers. Providing high-quality data and utilizing an integrated approach to solving imaging problems will enhance the understanding of the reservoir.

“If an unconventional play is delivering inconsistent results, seismic may be a mechanism to reduce this uncertainty and high-grade exploration opportunities.”

Arcis, through its parent company TGS, has a diverse portfolio including offshore seismic data library. For example, Akentieva said, her company is active offshore East Coast, which has seen increased activity since the Canada-Newfoundland and Labrador Offshore Petroleum Board announced a new scheduled land tenure system to improve transparency, predictability and input (DOB, Dec. 20, 2013).

“We are seeing an increased level of customer interest and support of our seismic activities. We continue growing our footprint in this exciting frontier area. In partnership with [Petroleum Geo-Services] we have two vessels operating there this season, acquiring over 33,000 kilometres of 2D data.

“We are also seeing some interesting features on our data which could soon become new exploration targets. It has been a very exciting part of our business.”

Monday, 24 November 2014

Quebec and Ontario want to discuss Alberta emissions to approve Energy East?

By: David Yager, National Leader, Oilfield Services

MNP Oilfield Services News

We should all think our luck stars our industry got a few interprovincial oil and gas pipelines built before they became the political issue of the day. There was a time – decades ago regrettably - when people were happy to have the jobs and economic activity associated with pipeline construction. No longer.  With lots written about Keystone XL, Northern Gateway and increasingly Kinder Morgan TransMountain, it is now time to put the public and media focus on Energy East. OFS New predicts getting this pipeline approved will also not be easy. 

Energy East is the all-Canadian plan to get Alberta crude to Ontario, Quebec, New Brunswick and the Atlantic Ocean. It involves switching the flow of one of TransCanada’s underutilized legacy natural gas pipelines from gas to oil. If completed, one day the $12 billion project (today’s estimate) could carry 1.1 million barrels of day of oil to new markets. Its economic benefits to the country are huge and need not be repeated here. 

In of an NEB hearing expected to take 15 months, on November 20 Quebec and Ontario weighed in and publicly announced their list of conditions by which they would permit rampant prosperity, investment and job creation to take place within their borders. The concept of a province outlining the terms under which pipelines will be allowed to pass through their jurisdictions began in B.C. in 2012 and the Northern Gateway pipeline.

In a Calgary Herald Story on November 21, Ontario Premier Kathleen Wynn and Quebec Premier Philippe Couillard announced their “principles” for energy developing surrounding Energy East which included building, “a stronger and more competitive low-carbon economy” and that new oil pipelines must “take into account the contribution to greenhouse gas emissions”. 

The construction and operation of a pipeline has only negligible incremental GHG emissions. Therefore, this position was obviously a reference to the contents of the pipeline, meaning that Ontario and Quebec would in fact be dictating the acceptable type of industrial activity to take place in Alberta. One cannot imagine Alberta dispensing advice on how Canada’s two largest provinces should operate their economies, tempting as it might be.

What is more interesting is the comments of new NEB chair and CEO Peter Watson who clearly stated that the concerns of Ontario and Quebec about emissions are not within the NEB’s mandate. “Our job is to assess the need for new cross-border energy infrastructure and to make sure it can be constructed and operated safety in the public interest. Our job is not to conduct a referendum on society’s use of fossil fuels every time a proponent proposes to build a section of pipe”. Watson says issues like total emissions are the purview of the federal government and the province in which the emission are created.

TransCanada Corp. filed its 30,000 page application with the NEB in October. Groups like green lobbyist Environmental Defense are already are already on the record as demanding Ontario and Quebec reject the project.

Meanwhile, in B.C. another NEB approved project – Kinder Morgan’s TransMountain pipeline – is encountering continued civil disobedience as the company attempts to survey a route to the ocean through the municipality of Burnaby. Kinder Morgan recently received a court order allowing work to continue. Several protesters have been arrested. This opposition is likely to continue.

Thursday, 6 November 2014

What happened in the U.S. Midterms: A breakdown, and its effect on Canada, Keystone XL pipeline

By: The Canadian Press, from EnergyNow

WASHINGTON - It didn't take the Canadian government long to note the far-reaching policy implications of the Republican wave in Tuesday's midterm U.S. elections. It swept the party to power in both chambers of Congress. And it carried into state races, where Republicans were flirting with an 82-year-old party record for most governorships. And it left President Barack Obama wobbling with the unwanted distinction of most seats lost throughout a presidency since the Second World War. But, as Jason Kenney noted, it also held potential implications for the Canadian economy — having, just maybe, created the winning conditions for a certain long-delayed oil pipeline. "Good news for Canadian jobs & economy," the employment minister tweeted. "It looks like the new US Senate will have the 60+ votes needed to ensure that Keystone XL is approved." He could be right. The impact on Keystone XL is just one of countless results after Americans voted in thousands of races — for one-third of the 100-seat federal Senate; for all 435 House members; 36 state governors; 6,000 state legislators; in 147 referendums; and in municipal contests across the country. Here are some of those implications: —Before the vote: Republicans controlled one chamber in Congress, Democrats the other. Bills got stuck, because one chamber would block the other, and the U.S. Congress experienced its least productive period in generations as even routine items became swamped in partisan spite. —And now: Republicans control both chambers for the first time in eight years. They have enough votes to pass bills — as long as Obama approves. They didn't get the two-thirds congressional majority they'd need to override a presidential veto. —What the Senate does: It does more than pass laws, like the House of Representatives. It also holds great power to approve or reject the judges, cabinet members, political staff, and diplomats that the White House appoints. —How will Republicans use this new power? That's the big question. The party is torn. Its more conservative faction will want to beat up on the president, attack his cherished health-care bill, gut the Environmental Protection Agency, and launch congressional investigations into every scandal of the last six years. If so, these may be ugly and unproductive times. —What about Obama? He also sets the tone. He's expected to make public remarks Wednesday, and has apparently invited the new Senate leaders for a meeting Friday. Obama will need Republican support to make political appointments — let alone to pass legislation. The president can still issue executive orders to federal agencies. Anonymous White House officials have been quoted in news reports sounding defiant, suggesting they plan to fight the new Congress. —Could things get done? Absolutely. And Canadian interests, ironically, are linked to the most often-cited areas of potential compromise between the Republicans and the president for his remaining time in office: the oil pipeline, a free-trade deal, tax reform, and perhaps even an immigration package. —What's this about Canada? Keystone XL: Republicans have signalled, loudly, that a top priority will be pushing Obama to approve the pipeline. Free trade: They'll probably even give him fast-track authority to negotiate a Trans-Pacific Partnership trade deal with 12 countries, including Canada — something the Democrats did not do, divided as they were on free trade; Canada has been waiting, reluctant to conclude trade negotiations until Obama gets fast-track from Congress. Tax reform, inspired in part by Timmies': Calls for reform spread like wildfire this summer after news of Burger King moving to Canada in a merger with Tim Hortons, and there's support for it within both parties. Immigration: There's a provision in an omnibus bill that passed the Senate that would have extended the maximum annual U.S. stay for snowbirds. If Republican leaders are willing to withstand the backlash from their base — and that, in itself, may be the biggest "If" in American politics these next two years — that bill could potentially clear both chambers. —The big battle, bubbling below the surface: A struggle could erupt at any moment over the Supreme Court. Half its judges are older than 75. Their successors could settle some of the biggest issues in American democratic life, with liberals and conservatives eager to revisit lost fights over abortion, gun control, corporate political financing and voter ID laws. If any vacancies open up these next two years, look out. There's already speculation Obama might rather leave a seat empty until the 2016 election, in hope that a president Hillary Clinton gets to present her nominee to a Democratic-controlled Senate. —History: Presidents almost always lose seats in midterm elections. But Obama has lost more congressional seats in midterms than any since the Second World War. Here's how bad things got: A Republican from New York who faces 20 criminal charges, and was heard on camera threatening to throw a guy off a balcony, and was shunned by his own party during the campaign, won his House seat. —Why such a big wave? Partly, because this year's electoral map stunk for Democrats. Obama's approval levels are mediocre nationally, at just over 40 per cent; but they're especially low in the swing states that were up for re-election in the 2014 cycle, in more rural states like Kentucky, Arkansas and North Dakota. To complete the perfect storm for Democrats, those seats were up for grabs in a non-presidential election year — when the electorate is older, whiter, and more conservative. The roles could be reversed in 2016 — when Republicans will be defending seats in more liberal states, and the presidential-year election demographics will likely be younger, more multicultural and more Democratic. —Referendums: Liberal ideas actually made some gains. Oregon and Washington, D.C., voted to follow Colorado and Washington State with marijuana-legalization measures. Ballot measures to increase the minimum wage passed in different states. Background checks for gun purchases passed easily in Washington State. Anti-abortion measures failed in two of three states, although voters in Tennessee gave their state legislature approval to pass measures stifling abortion access. —Notable names: For the first time, an openly gay Republican was on the verge of being elected to Congress — Carl DeMaio held a slim lead as ballots were being counted early Wednesday in California. And a half-century after Lyndon Johnson predicted that civil rights would cost Democrats the south, the region they'd long dominated, the last white Democrat in the Deep South, Georgia's John Barrow, lost his House seat. Also in Georgia, ex-president Jimmy Carter's grandson, Jason, lost the gubernatorial race. On the other hand, George H. W. Bush's grandson, George P. Bush, won the race for Texas land commissioner.

Monday, 27 October 2014

Nova Scotia, Fracking and Transfer Payments

By: Frank Atkins, Business in Calgary Magazine

Before he became a senator, Mike Duffy was the host of a news television show on the CTV network. I was a guest on that show, and Mr. Duffy asked me a question about equalization. I responded that the system of transfers that we generally refer to as equalization is not consistent with the efficient running of the economy. When Mr. Duffy, asked me why, I responded that equalization was like having your 25-year-old son living in your basement rent-free. There was no incentive to get a job and no incentive to move out and become a productive member of society. Mr. Duffy's reaction was somewhat akin to wondering how someone with so much education could have such weird ideas.

I was reminded of this recently, when the government of Nova Scotia officially banned hydraulic fracturing, commonly known as fracking. A lot of people think of fracking in the same manner that they think of the oilsands, as dangerous, dirty and generally destroying the environment. Fracking has the added problem that it is alleged to contaminate drinking water. The problem is that there is no proof of these claims. Fracking has been around for many, many years and I am not aware of any credible claim that it has harmed drinking water. Given the number of years that fracking has been used, I find it curious that it is only recently that the environment movement has decided fracking is bad.

This sort of rhetoric is typical of the manner in which organizations such as Greenpeace and the World Wildlife Fund view the oil and gas industry. Generally speaking, the environmental movement never lets the facts get in the way of a good argument. Just so that we understand who the players are here, it is worth noting that the Nova Scotia government that banned fracking is a Liberal administration. Next door to Nova Scotia in New Brunswick, there is an election where the Conservatives are running against the Liberals on a pro-fracking platform. Finally, Liberal leader Justin Trudeau's principal adviser is Gerald Butts. Before joining Mr. Trudeau, Mr. Butts wasthe president and CEO of the World Wildlife Fund Canada. We should pay attention to this in the next federal election.

The fact that there is no scientific basis for the claims against fracking is just one of the problems with the Nova Scotia decision. The major issue here is the hypocrisy that is involved in this decision. Nova Scotia is a recipient of a large amount of transfer payments. Nova Scotia has the opportunity to develop industries, and to create jobs and wealth through using fracking and selling natural gas. This would lead to Nova Scotia ending its dependence on transfer payments. Instead, it has chosen to continue to survive by receiving transfer payments. Here is the hypocrisy. These transfer payments generally come from the western provinces, who make money from using fracking techniques. Apparently, it is all right to receive money from other provinces that use fracking, as long as Nova Scotia does not use fracking itself.

It seems to me that Nova Scotia is the 25-year-old son living in the basement. Because of transfer payments, there is no incentive to get out of the basement and become productive members of the Canadian economy.

Frank Atkins is an Associate Professor of Economics at the University of Calgary, a senior fellow at the Frontier Centre for Public Policy, and a member of the Advisory Board of the Institute for Public Sector Accountability. 

Thursday, 23 October 2014

Rest In Peace

By banning high-volume fracking, Nova Scotia has bowed to ENGO pressure and hobbled the province's economic future

By: Jim Bentein, from Oilweek Magazine

Nova Scotia's Liberal government allowed "well-funded anit-fossil fuel groups" to dominate its decision making in choosing to ban high-volume fracking, says the head of an organization that represents conventional and renewable energy producers in the province.

The ban, says Barbara Pike, chief executive officer of the Halifax-based Maritimes Energy Association, has cost the province in an anti-business light, a perception that will be almost impossible to overcome.

The government has "created the impression that the province isn't open for business," says Pike, whose organization represents some 320 energy producers, from tidal to wind to oil and gas. "If you're developing wind for generating hydro or other forms of energy, you're looking at investing in a place that is business friendly, and Nova Scotia  may not be where they will put their money."

She was commenting on Energy Minister Andrew Younger's announcement in early September that Nova Scotia would ban high-volume hydraulic fracturing as part of onshore oil and gas development in the province.

His decision came days after and independent panel, headed by Cape Breton University president David Wheeler, released a 387-page report calling for more research into hydraulic fracturing but not recommending an outright ban.

"Nova Scotians have overwhelmingly expressed concern about allowing high-volume hydraulic fracturing to be part of onshore shale development in this province at this time," Younger said in a written statement. "Our petroleum resources belong to Nova Scotians and we must honour the trust people have put in us to understand their concerns. We will, therefore, introduce legislation to prohibit using this technique to stimulate onshore shale projects."

Pike says the ban is a grave mistake and will halt virtually all onshore oil and gas development in a province that will, according to all estimates, need to import substantial volumes of gas in the future, as offshore resources dwindle and rising costs impact future offshore exploration initiatives.

The government, which relies on federal transfer payments for more than 40 per cent of its revenue, has also lost an opportunity to create economic activity and jobs, Pike notes.

She points out that 1,000 people showed up at a recent job fair put on by Alberta oilsands producers in neighbouring New Brunswick, where onshore fracking has been allowed. There was a suggestion, however, that it might be banned if the pro-fracking Conservative government was defeated in a late September election.

"[Job fair attendees] said they were going out west because there are no jobs," Pike says, adding that the employment prospects in Nova Scotia and Prince Edward Island are as bleak as they are in New Brunswick.

Pike says that recent opinion polls in the province show about half of Nova Scotias favour fracking, but that didn't stop the government from "listening to the same groups that are fighting pipelines in British Columbia" by announcing the ban.

"This is perceived by some of those groups as a real victory," she says, arguing that anti-fracking groups stacked the attendance at public meetings that were held as part of the Wheeler panel's process.

Karen White, a spokeswoman in Younger's department, says that Pike and other critics of the government are wrong when they portray it as viewing the fossil fuel sector negatively.

She says the government continues to support offshore oil and gas development as well as waterless fracs using propane, CO2, or nitrogen. It also continues to support coalbed methane (CBM) development, White says, noting the recent approval of a project being developed by Toronto-based East Coast Energy Inc.

"The concern was around the use of high amounts of fresh water," White says, adding that the legislation will outline whether the use of recycled water would be allowed.

Julie Cohen, president and chief executive officer of privately owned East Coast Energy, which proposes to develop a CBM project in the Pictou County area of the province, says her experience with the Department of Energy in Nova Scotia "has been very positive," with permits being granted without extensive delays.

"In fact, I had the minister of energy come to the site," she says.

The company was granted permits to drill two test wells last November and December along the Foord coal seam, located near Stellarton, at a depth of 540 metres.

CBM development is not new in Nova Scotia, where it dates back to the 1800's and where more than 30 wells have been drilled since 1979.

The Foord coal seam is known for its high levels of methane gas.

Cohen says her company has since drilled the first successful horizontal well in a CBM seam and will be carrying out further analysis this fall. She hints that development will proceed.

"It's very exciting," she says. "For me, it couldn't be any better."

East Coast Energy has the rights to develop 22,000 acres, with 20 coal seams.

She says a Sproule Associates Limited resource estimate showed there is 426 billion cubic feet of gas in place there.

Gas utility Heritage Gas Limited is extending a pipeline to the Stellarton area, which means the project would have ready access to local and out-of-province markets.

Cohen says she "sort of feels bad" for the energy minister, since he is being portrayed as anti-industry.

But she also says the fracking decision came in a province "where people don't understand what fracking is about."

The energy department also doesn't appear to understand what it is, according to Paul Barnes, manager, Atlantic Canada, for the Canadian Association of Petroleum Producers.

"What do they mean by high-volume fracking?" he says. "Is it fresh water they're talking about? Can you use salt water or waste water?"

He points out that the province should have no worries about freshwater shortages or access to salt water, given its ample rainfall and coastal location.

"The concern for us is the way [Younger's announcement] came out," he says. "We were hoping to have more discussions with the government [before any decision was made]."

He says he wouldn't go as far as Pike in portraying the government as anti-business, pointing out that it does have an active offshore oil and gas industry.

"But if you don't want to see onshore oil and gas development, why promote offshore development?" he asks.

And while CBM development doesn't involve high-volume fracking, he points out that it does require the use of water. "It's a mixed and confused message."

Offshore gas development is slowing as the Sable Offshore Energy Project winds down, despite the recent addition of the much less prolific Deep Panuke project, which was finally commissioned by Encana Corporation last fall. In April, Nova Scotia Finance and Treasury Board Minister Diana Whalen said that the province faces significant economic and fiscal challenges as royalties from offshore development decline.

Offshore royalties are estimated to climb to $31.78 million in 2014-2015 from just $22.36 million in 2013-2014, as the Deep Panuke offshore gas project goes into production. However, those revenues pale in comparison to the past. It took in $172.68 million in offshore royalties in 2010-2011, for instance, when gas prices were much higher and the Sable project was producing significant gas volumes.

Edwin Macdonald, vice-president and chief geologist with St. Brendan's Explorations Ltd., which has licenses to explore three blocks in the Cumberland Basin in the province totalling 833,000 acres, says he will await the final regulations before reaching a decision on his company's plans or commenting on the government's decision. However, he says his company plans to drill primarily for conventional natural gas on its properties.

Nevertheless, even those plans are on hold until the final regulations are announced, he says.

Macdonald won't criticize the fracking ban, but he wonders how development will proceed without the industry being able to explore for shale gas.

"There is a long history of oil and gas exploration in Nova Scotia, stretching back to the 1860's,' he says. "In all of that time there have been 130 conventional wells drilled and there have been no commercial discoveries."

Macdonald, who was born and educated in the province and has worked worldwide, including in western Canada, in the South China Sea for Husky Energy Inc. and offshore Atlantic Canada, says it is unlikely there will be onshore gas development any time soon, given the massive capital investment involved.

Another veteran local geologist, Bob MacDonald, who owns consulting firm Jammin Rock Resources Inc. and has 40 years of experience in the oil and gas industry, says the decision is more about politics than geology.

"There is a silent majority [in Nova Scotia and New Brunswick] that wants shale gas development," he says.

He recently conducted a survey for a client in New Brunswick who wanted to gauge the public mood  about development. "We knocked on 4,500 doors and 75 per cent of the people were in favour of development."

And he's convinced the same percentage of Nova Scotians would support fracking. "We're kind of tired of being on welfare."

He says there is more seismic available, and there has been more active drilling in New Brunswick, where Halifax based Corridor Resources Inc. has been producing small volumes of conventional gas from its McCully Field since 2007. Corridor has launched a shale gas exploration program and has so far drilled three wells and fracked them with waterless frac technology developed by Calgary based GASFRAC Energy Services Inc.

Future plans, however, were thrown into doubt with the late September election of a majority Liberal government under Brian Gallant.

During the campaign, Gallant set out the conditions his government would require before allowing fracking for shale gas to move forward in New Brunswick. The conditions include extensive public consultation to determine if a social consensus to allow fracking exists; the existence of methods to avoid unacceptable risks to the environment, water and health; the government's ability to maximize benefits to the province through a royalty regime; and the development of a country-leading regulatory regime. Lastly, the economic and long-term employment benefits would have to outweigh and residual risk, the Liberal's platform says.

Estimates suggest New Brunswick's onshore has the potential to deliver 80 trillion cubic feet of reserves through fracking, and while not much is known about Nova Scotia and Prince Edward Island, there's bound to be significant potential in both provinces - potential that might go unrealized if the fracking fear that has paralyzed Nova Scotia spreads to other jurisdictions.

"We're missing a golden opportunity here," Bob MacDonald says.

Brad Hayes, president of Calgary based Petrel Robertson Consulting Ltd., was one of the 11 members of the Wheeler panel, and he shares Bob MacDonald's view that the decision was about politics rather than geology or economics.

"Some of the people working with me on the panel said there was a lot of political interference around the decision," he says, even though the panel, appointed after a moratorium on fracking was declared by a previous New Democrat government in 2012, was supposed to provide and independent review.

He wonders if the energy minister even read the Wheeler report.

"He got the report on August 27-28 and the ban was issued the week after," he says, questioning how a thorough analysis could have been made of such a detailed report.

In June, Hayes and Ray Ritcey, the former president of Heritage Gas and also a member of the Wheeler panel, produced a report that suggested there was likely commerical potential for onshore gas development but that the industry first needed the assurance that it could use suitable technologies, including fracking.

"Exploration companies are attracted but are hesitant to move quickly in light of the high levels of risk and uncertainty," Hayes and Ritcey suggest in their report.

"As knowledge of the subsurface, including sedimentary rocks and hydrocarbons, is extremely limited, it is very difficult to quantify the potential or even rank the various basins in terms of overall prospectivity," say the authors. "More exploration, and particularly more deep wells targeted to investigate unconventional reservoirs, would be required to add to our knowledge."

They conclude that the province is unlikely to see increased exploration activity until the moratorium on fracturing is lifted, additional seismic well data is acquired and the complexities of developing frontier basins are addressed.

Nevertheless, they did suggest, using information acquired to date, that gas volumes in the prospective Windsor-Kennetcook Basin are between 17 trillion and 69 trillion cubic feet, while CBM resources stand between 280 billion and 1.8 trillion cubic feet.

Hayes says he is as mystified as others about the government's reference to high-volume fracking.

He says Younger "is trying to create the impression there is a definition and that high-volume fracking would be dangerous, but that is not correct."

In fact, there is no one-size-fits-all approach producers can use. Some formations, such as the Cardium in Alberta, need as little as 2,000 cubic metres of water for each frac, while others, such as the Horn River in British Columbia, routinely see fracs that use 50,000 - 75,000 cubic metres of water.

"The companies will put in as little fluid as they can because it makes sense" - the less water they use, the less a frac costs.

But he says they won't know that until they can test approaches on different reservoirs, which the ban will prevent them from doing.

As for waterless propane-only fracs, he says "not many plays use propane," and he doesn't see that changing.

And CO2 and nitrogen are mostly used in addition to water "to energize a frac" but are rarely used on their own.

Hayes fails to see why water use should be such an issue in the province, pointing to its use in the Marcellus shale in Pennsylvania, where water access is similar to what it is in Nova Scotia.

"You're not talking about high-volumes when you compare water use in fracking to agriculture," he says, which uses far more than the energy industry ever would.

In any case, he says the provincial government hasn't reached out to other Canadian jurisdictions like Alberta and British Columbia, which have strict regulations regarding water use by the energy industry.

"Those provinces have dealt with this issue, and there are very good regulations in place," he says.

Kevin Heffernan, president of the Calgary-based Canadian Society for Unconventional Resources (CSUR), which represents most companies involved in fracking, says the Nova Scotia government never contacted his organization, even though it is recognized as one of the most knowledgeable groups regarding the technology.

"We're certainly prepared to meet with the Nova Scotia government about a path forward," he says.

In contrast, the former left-leaning Parti Quebecois government in Quebec talked to CSUR and to companies involved in fracking to gain a good understanding of the technology, he says. After implementing a moratorium on fracking a few years ago, the Parti Quebecois subsequently agreed to allow some fracking in the province and even invested in a company involved in areas where it will be deployed.

"Maybe the [Nova Scotia government needs] to understand how it is regulated safely in other jurisdictions," he says.

Monday, 20 October 2014

Oil, LNG, Elections, and Keystone

CAGC Recorder Article by: Mike Doyle

Mike Doyle is the President of the CAGC – the Canadian Association of Geophysical
Contractors - representing the business interests of the seismic industry within Canada.

The CAGC website may be found at

Another soft year for crew numbers. Perhaps the recent and upcoming mergers (of seismic companies) signal the bottom of the market for our industry - as in the floor. Canada’s oil exports to the USA continue to grow whereas natural gas needs to find a new market given the saturation of shale gas in the USA. Petronas is pushing the BC Government to announce LNG taxes prior to the end of October 2014 or potentially face ten years of further delay. It is hard to say who will blink first but a positive investment decision would help our market tremendously.

As well the USA midterm elections are coming in early November. As usual it is too close to call however a Republican majority in the Senate could force Obama into a more difficult corner as it relates to delaying a decision on Keystone. Some excerpts from a couple of interesting columns for Energy Now follows on these matters:

A brave view in an uncertain world: Why Canada’s energy boom remains on course despite sliding prices by Claudia Cattaneo   FP  | October 16, 2014 | Energy Now –

With oil prices skidding near four-year lows and Canadian energy shares feeling the pain, it’s hard to stay optimistic. But a new report by HSBC Global Research argues Canada’s oil and gas boom remains on course.

The 20-page report, authored by HSBC Bank Canada chief economist David Watt, says the unprecedented boom in capital spending in Canada’s natural resources sector is here to stay, with major projects currently under way or planned in the next decade worth $675-billion.

“Natural resources investment has been quite firm in the post-financial crisis, a trend we expect to continue, despite recent commodity price volatility,” Mr. Watt writes in the Oct. 15 report.

It’s a brave view in an uncertain oil world.

Global oil price and market gyrations lately added to many Canadian worries — whether proposed pipelines are moving ahead; whether First Nations could stand in the way; whether fiscal terms, environmental legislation, political agendas could weaken the economic case. Oil bounced back sharply from a four-year low Thursday, closing at US$82.70, reversing the steep selling of the past two weeks.

We expect U.S. imports of oil from Canada to continue to rise.

Still, the volatility doesn’t alter Canada’s unique attributes as a major energy producer: giant oil and gas deposits, the expertise to extract them, sound regulation, a legal system that protects property rights, and a social conscience and supportive governments. Investors who believe that a growing, more affluent world population needs more energy are better off investing in Canada than in the few remaining energy producing jurisdictions that still accept their money.

To be sure, the oil price downturn could curtail spending in the short term as producers adapt. The silver lining is that they will also temper rising costs.

Mr. Watt argues that natural resource investment in Canada will remain a key driver of overall business investment. With the vast majority — more than 75% — of the major projects planned or under way in the energy sector, most of it will flow to Alberta and British Columbia.

“Alberta (current population: 4.1 million), thanks largely to the oil sands, has surged past Ontario (current population: 13.6 million) to become the leading investment destination in Canada. The 10-year outlook for natural resources investment … will even more firmly entrench the westward shift.”

The report argues that oil will continue to be exported to the United States in the next few years — a prediction that conflicts with efforts by Canada to diversify its oil markets in Asia and Europe.

“With Canadian oil production expected to continue to increase and the U.S. still the destination for over 98% of Canadian oil exports, we expect U.S. imports of oil from Canada to continue to rise,” the report says. “In coming years, as oil exports double from 2.2 million barrels a day to 4.5 million barrels a day in 2025, and exports increase from 67.1% to almost 76% of oil production, we look for Canada to eventually account for over 40% of U.S. oil imports.”

But natural gas will find its way elsewhere because the U.S. market is saturated. While in competition with other suppliers of liquefied natural gas, the report argues Western Canadian gas still has a major advantage — proximity. “Proposed Western Canadian LNG export facilities would be between 3,500 and 4,000 nautical miles from Asian ports, while U.S. Gulf Coast projects are between 9,000 and 9,500 nautical miles from Asian markets."

U.S. midterms: Stage may finally be set for Keystone XL vote by Canadian Free Press | October 13, 2014 | Energy Now –

A certain Canadian pipeline appears poised to spring back to the top of the American political agenda, with the upcoming congressional elections setting the stage for a vote on the long-delayed Keystone XL project. Republicans have all but declared that they would try to use their new dominance in Congress to push through a Keystone bill, should they win the Senate in three weeks as many predict. The pipeline issue had been a little more dormant in Washington since the spring, as foreign crises came to dominate the political agenda while the Keystone process was mired in a regulatory delay. That period of relative calm appears poised to end. "It's very, very likely that there will be a Keystone bill fairly early on in 2015," Ben Lieberman, a counsel on the Republican-controlled House energy committee, told a gathering last week at the Wilson Center think-tank. Of course, lawmakers have attempted to ram Keystone legislation onto the president's desk before. Such efforts stalled in the Senate, where the Democratic leadership prevented a vote. What would be different now, Lieberman said, is that the Senate calendar would no longer be controlled by Democrat leader Harry Reid — who was determined not to allow a Keystone vote onto the floor lest it cause divisions in his caucus, alienate his party base and donors, and create a painful dilemma for the president. Even if Keystone backers fall short of a filibuster-proof 60 per cent of Senate votes, Lieberman said, the legislative game will have changed. He said there would be all sorts of new strategic possibilities. One would be to stick a Keystone provision into a must-pass spending bill, something President Barack Obama be loath to veto, and force him and his congressional allies into one of two options: Approve Keystone, or scrap the whole thing. "That raises the question," Lieberman said, "What would President Obama do if a Keystone bill reaches him?" That very quandary lies at the heart of a piece published by Karl Rove, the prominent Republican strategist and fundraiser. As he described a possible agenda for a Republican-controlled Senate in an Oct. 9 op-ed in the Wall Street Journal, Keystone was one of the very first things he mentioned. "Will (Obama) spend two more years polarizing Washington, attacking Republicans' motives, complaining about GOP obstructionism, and circumventing Congress in lawless, even unconstitutional, ways?" Rove wrote. "Or will Mr. Obama try to salvage his presidency by doing what other presidents — Ronald Reagan, Bill Clinton and the two Bushes — did after electoral setbacks, which was working with the opposition party?... "Right out of the box, Republicans should move quickly on proposals where they and the administration agree, such as giving the president (fast-track) authority to negotiate trade deals that receive an up-or-down congressional vote, or on issues that have significant support from Democrats, like the Keystone XL pipeline." Virtually every published election-prediction model predicts the Republicans winning the Senate. The likelihood of a GOP takeover ranges from 58 per cent according to statistician Nate Silver, to 94 per cent according to the political scientists at the Washington Post's Monkey Cage blog. A Keystone bill could be just an early example of the new dynamic that would bedevil the president in his final two years in office, with bills getting to his desk that he might rather veto than pass. Canada's ambassador to the U.S. doesn't want to pick sides. In an interview, Gary Doer went out of his way to avoid describing the pipeline dynamic as Republican-versus-Democrat. He points to West Virginia as one example where the Senate candidates for both parties have expressed support for Keystone. One of them will replace the soon-to-retire Jay Rockefeller, who sided against the pipeline. "West Virginia's interesting," Doer said, "because it goes from a No vote to a Yes vote no matter who wins." In a similarly non-partisan vein, Doer points out that a task force of people with varying political affiliations, led by former CIA boss David Petraeus and ex-World Bank boss Robert Zoellick, strongly endorsed the pipeline in a just-released report for the Council on Foreign Relations. But pipeline opponents say all these names, and all these bills, are just hot air. "When it comes right down to it, the only person who matters (here) is Barack Obama," said Jason Kowalski, the U.S. policy director at the group "President Obama will decide whether this thing is built or not.... Surely the election will change the political dynamic in the U.S., and it's definitely a big factor, but at the end of the day it's still the president's decision." The president pushed back, aggressively, when congressional Republicans tried to force a decision on Keystone before the 2012 election. Arguing that it couldn't comply in time, the White House essentially rebooted the regulatory process. Since then it has repeatedly pointed out that, legally speaking, this issue belongs to the executive branch, which must conduct a review of public and inter-agency comments through the U.S. State Department. Another delay this year came when the State Department said it couldn't pass judgment, as the route was under dispute in the Nebraska court system. None of that has changed. A verdict from a Nebraska court appeal might still be months away.

From Brainy Quotes on the Internet:

Never give up, for that is just the place and time that the tide will turn.

-          Harriet Beecher Stowe