TransCanada hopes to start construction on Keystone XL pipeline by June

TransCanada Corp. is hoping to start construction by June on its decade-old Keystone XL oil pipeline project, even as the U.S. government shutdown threatens to delay a key legal proceeding.

In a court filing on Monday, the Calgary-based pipeline company said its current schedule requires pre-construction activities including setting up pipe yards and work camps to resume by February. That would allow full work to begin by June and be completed in late 2020, with the pipeline entering service in early 2021.

TransCanada reiterated that a yearlong delay would cost the company US$949 million in lost profits and delay the hiring of about 6,600 workers. The company would also face higher construction costs as competition for crews increases in 2020, TransCanada said in a letter filed in U.S. District Court in Montana.

The 1,200-mile (1,900-kilometre) pipeline, which would help carry 830,000 barrels of crude a day from Alberta’s oilsands to U.S. Gulf Coast refiners, has faced legal holdups amid staunch opposition from environmental groups and landowners.

The same court last month sided with environmental groups opposing the project and said TransCanada couldn’t resume field work while it awaited a new environmental review from the U.S. State Department. Prior to that ruling, TransCanada had hoped to start construction as early as mid February.A hearing is scheduled for Jan. 14, though the Justice Department — which is representing the State Department in the proceedings — lacks funding due to the partial government shutdown. TransCanada asked the court to move forward with that hearing without the Justice Department, a move the agency supported in a separate letter.


Ottawa offers $1.6B backstop for energy sector as political tensions with Alberta fester

We didn't ask for the opportunity to go further into debt,' says Alberta premier

Latest Numbers from December's Public Offering Released

The latest numbers are in for December's public offering of crown petroleum and natural gas rights generating $20.1 million for the province.

While most of the attention was placed in the Wilkie and St Walberg area, 5,473.394 hectares of petroleum and Natural gas and 2,800.373 hectares of petroleum natural gas lease were available in the Weyburn-Estevan area totalling $3,083,599.39 of revenue.

“Saskatchewan continues to be an attractive destination for investment by the oil and gas industry,” Energy and Resources Minister Bronwyn Eyre said. “Our competitive policies and incentives, designed in collaboration with industry, encourage sustainable activity, job growth, and good resource management.”

The highest bid for a 5,568.500 hectare parcel of land east of Wilkie purchased by BASM Land & Resources Ltd for $9,126,103.28.

The final offering for the fiscal year will be held on February 5, 2019.

6 things to know about Canada's oil-price gap, from gluts to the differential

Here's what you need to know about the historically low prices

Here's everything you need to know about the low prices being paid right now for Canadian oil. (Jason Lee/Reuters)


The Alberta government has ordered a mandatory cut to crude oil production next year to deal with historically low prices being paid for Canadian oil.

Here are six things to know about Canada's resource:

Light or heavy

Each type of oil around the world has its own price.

New-York-traded West Texas Intermediate (WTI), delivered at Cushing, Okla., is the benchmark price for light crude oil in North America.

Western Canadian Select (WCS) is the reference price for heavy crude oil from the oilsands delivered at Hardisty, Alta.

Price differential

Canada's heavy crude usually trades at a discount because of refining and transportation costs, so a price gap or differential is typical between WTI and WCS.

Record gap

The biggest gap — $52 US per barrel — was recorded in October.

Experts say the extreme discount happened due to a reliance on high-cost transportation — rail and truck — instead of new pipelines.

The glut

Alberta says about 190,000 barrels of raw crude oil and bitumen are being produced each day that can't be shipped out. Roughly 35 million barrels, about twice the normal level, are in storage.

Cutting production

The province has ordered the output of raw crude oil and bitumen to be reduced by 8.7 per cent, or 325,000 barrels per day, starting in January.

As the excess storage clears, the reduction is expected to drop to 95,000 barrels a day until the end of next December.

The move is expected to narrow the differential by at least $4 per barrel.

Winners and losers

Calgary economist Trevor Tombe says $4 per barrel doesn't sound like much, but, over a year, it's worth about $1 billion to the Alberta government's budget. While some companies will also benefit, those with their own refining and upgrading operations may not.


Two key Canada-to-U.S. oil pipelines hit by disruptions

NEW YORK/VANCOUVER (Reuters) - Two major pipelines carrying oil from Canada to the United States were hit by weather-related disruptions on Tuesday, the latest hit to Canada’s oil industry just days after the Alberta government announced forced cuts in crude production.

A number of lines on the Enbridge Inc (ENB.TO) Mainline system, which carries crude and other liquids, were hit by power outages in the Western Canadian province of Saskatchewan due to severe weather, the company said Tuesday.

TransCanada Corp’s (TRP.TO) 590,000 barrel-per-day crude Keystone pipeline was also shut due to the outage, according to a shipper on the line and traders. There was no estimated restart timeline for the line, one source said, citing a notice to shippers. The company did not respond to a request for comment.

The outages, though temporary, are just the latest constraints to hit Western Canadian oil producers already struggling to export crude due to full pipelines as production has surged to a record at more than 4.6 million barrels a day in 2018.

Both systems originate in Alberta, where most of Canada’s oil is produced.

Enbridge, for its part, said it will remain in contact with SaskPower, that province’s primary utility, through the night “to evaluate the possibility of starting the lines earlier.” The Mainline system ships about 1.2 million bpd.

Western Canadian Select (WCS) heavy oil prices weakened on the news, dealers said, closing at $29.25 a barrel below West Texas Intermediate CLc1 benchmark prices. In October, that discount hit a record of $52 below U.S. prices, but had narrowed to a $19 discount on Monday after the production cuts were announced.

Traders said they expect the outages to be brief.

“If the lines are not up tomorrow, I’m sure folks will start to get nervous,” one shipper on the lines said.

Enbridge said its lines 1, 2a, 3, 4, 13 and 67 would be shut through the night, as SaskPower anticipates power will remain down until at least until Wednesday morning.TransCanada’s Keystone line runs to Steele City, Nebraska and from there to other U.S. markets. Decreased power consumption on that line was observed at about 9:30 a.m. EST (1430 GMT), according to market intelligence firm Genscape.

Reporting by Devika Krishna Kumar in New York and Julie Gordon in Vancouver; Editing by Marguerita Choy and Lisa Shumaker


Canadian oil producers trade shares for growth but investors hard to impress

WINNIPEG/TORONTO (Reuters) - Depressed Canadian oil prices are forcing energy companies to use their shares as a currency to fund acquisitions, but investors have been hard to win over to the strategy.

Canadian oil producers face a dwindling amount of capital willing to invest in the sector, leaving many with a stark choice, said Eric Nuttal, senior portfolio manager at Ninepoint Partners, which owns shares in MEG Energy (MEG.TO), Baytex and Athabasca Oil (ATH.TO).

“Do you increase in scale and get your market cap above $1 billion to get on the radar screen? Or do you just throw in the towel?”

Many are scaling up. The result, Nuttall said, will likely be more deals into early 2019, and a shrinking number of small-cap Canadian oil producers in the long term.

The Canadian oil patch has made 29 deals so far in the second half, worth $9.5 billion, the busiest half-year period for deals since the first half of 2017, according to Cormark Securities data.

“When you get into a period of such volatility, I think any kind of M&A is very difficult because revenues are certainly challenged.”

Shareholders are mainly interested in companies that pay dividends or buy back shares, said Cormark analyst Amir Arif.

“It’s almost like you can’t win if you’re a Canadian energy company,” said Janan Paskaran, a partner at Torys LLP who provides M&A advice to energy companies. “It’s hard to invest within Canada, and it’s tough to get investor support when you expand outside.”

“People are saying, ‘let’s not spend any capital.’”

On Tuesday, Trinidad Drilling (TDG.TO) shareholders rejected a friendly stock deal to sell to Precision Drilling Corp (PD.TO), choosing instead the certainty of a cash offer from Ensign Energy Services (ESI.TO). [nL4N1Y24UP]

Swiss-based IPC’s shares have traded more in line with the industry since the steep sell-off last month when it announced its purchase of BlackPearl Resources (PXX.TO), and investors generally support the deal, said CEO Mike Nicholson.

“We’re now well positioned for the recovery over the next two to three years,” Nicholson said in an interview from Geneva. “Should we start to see (Canadian) pipelines and crude-by-rail improve, I think there’s a huge amount of upside now in our share price.”

Reporting by Rod Nickel in Winnipeg, Manitoba and John Tilak in Toronto; Editing by Phil Berlowitz

'I'm afraid for Canada': Energy CEOs losing patience with country's indifference to oilpatch's plight

Executives say Canada doesn't support the industry, and one says Trudeau's government actually has no interest in getting the Trans Mountain pipeline built. 

The Canadian oilpatch is losing patience with the country’s lack of support for the industry.

The plunge in global crude prices is being exacerbated in Canada by a lack of pipeline capacity, sending the country’s oil prices to a near record discount to the U.S. and energy stocks reeling. Gas producers can’t even catch a break: while U.S. gas has surged about 19 per cent in the past week amid an expected cold stretch, Canadian prices have actually dropped 14 per cent.

“Globally, we’ve politicized energy so much,” Darren Gee, chief executive officer of Peyto Exploration & Development Corp., a Calgary-based gas producer, said in an interview at Bloomberg’s Toronto office Wednesday. Environmental and regulatory concerns have added an “entire layer of risk that people just don’t know how to asses.”

Gee joins other executives and investors lamenting the country’s inability to get its energy to global markets. The Keystone XL and Trans Mountain oil pipeline projects are facing fresh environmental scrutiny while gas exports are largely handled by only one pipeline company, TransCanada Corp., said Gee.

An analyst with one of the largest foreign holders of Canadian energy stocks, Capital Group Cos., warned in a letter to Prime Minister Justin Trudeau recently that investors and companies will continue to avoid the Canadian energy sector unless more is done to improve market access.

Separatist Sentiment

Canada’s main energy index is down 11 per cent over the past 12 months compared with a 3.4 per cent drop for U.S. energy stocks.

While the government bought the Trans Mountain project in an effort to get more oil flowing to the Pacific coast, Gee holds out little hope of progress. Trudeau’s government has “absolutely no interest in having that pipeline built or expanding this basin,” Gee said. The government’s seeming indifference to the patch’s plight is likely to foment political friction in Alberta, he said.

Miles of unused pipe for Keystone XL. The plunge in global crude prices is being exacerbated in Canada by a lack of pipeline capacity. ANDREW BURTON/GETTY IMAGES


“I’m quite afraid that we’re going to see a separatist agenda in the west and a lot of separatist movement because of the energy industry. I’m afraid for Canada for that reason,” Gee added.

Advantage Oil & Gas Ltd.’s CEO Andy Mah said the country has to stand up for the industry. “We keep coming back and finding better ways to do things but there gets to be a point where we need people, public and political, to understand this is a big sector in Canada,” he said in an interview at an energy conference in Toronto on Wednesday.

Former Canadian Prime Minister Stephen Harper said Canada could be an energy superpower but he should have made clear that “the rest of the world will fight us tooth and nail for market share like mad, so get ready Canada, we’ve got to put our elbows up and fight back,” Gee said.

“As a Canadian, I’m offended by what’s going on,” Daniel Halyk, CEO of Total Energy Services Inc. said at the GMP FirstEnergy conference. “We’re selling our resources for pennies on the dollar.”


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