Memorial Day weekend, known not only as a time for hitting the road but also the kickoff to the summer road trip season, has always been regarded as a key moment for gas prices. This year, the national average for a gallon of regular is almost exactly the same as it was for Memorial Day 2012. And yet, for the past two years, the periods leading up to Memorial Day couldn’t be more different. In 2012 and 2013, the first two months of the year were both marked by increases in prices at the pump, including curiously sharp spikes in February, despite relatively low demand in the marketplace. That’s when the similarities in 2012 and 2013 gas prices end. In March 2013, trends shifted gears compared to the year before. Gas prices almost never drop during the month of March, and sure enough, they rose swiftly in March 2012. Fast-forward a year later, however, and prices at the pump dipped significantly in March 2013. By early April 2013, the national average was around $3.64, 30¢ cheaper than the year before. Prices continued dropping throughout the month, reaching roughly the $3.50 mark. (MORE: Peak Traffic Ticket Season Is Here: Police Pushed to Give More Seat Belt Citations) More recently, gas prices have been on the rise around the country—and especially in the Midwest and California. Thanks to refinery outages, the statewide average in Minnesota hit $4.27 per gallon this week, an all-time high for the state and the highest average in the Lower 48, according to the Minneapolis Star-Tribune. GasBuddy noted that drivers in North Dakota were also paying all-time highs for gasoline, and much of the Midwest was nearing record high gas prices just in time for Memorial Day. The latest Energy Information Administration report states that the national average jumped roughly 14¢ over the past two weeks, thanks in particular to prices spikes in the Midwest and California, where a gallon of regular jumped 18¢ in two weeks. Around this time last year, by contrast, gas prices were decreasing
Albertans hurt by deep budget cuts due to shrinking provincial revenue from discounted bitumen prices may question the province’s bold buildup of its international presence.
To the extent that the new strategy, announced Friday in Calgary, helps Alberta deal with concerns about whether it’s a responsible oil producer, it is a necessity.
Without new export pipelines and new oil customers, the future of Alberta’s economy, and as a consequence the government’s ability to support its programs, is grim. Already, the energy sector has dialed down growth plans while waiting for pipeline decisions to be made.
As oil sands critics continue to aggressively campaign in the United States, Europe, across Canada and elsewhere against the use of Alberta’s oil, Alberta Premier Alison Redford is deploying more Albertans abroad to ensure those making important decisions get a full view of the province’s major industry.
“More than ever Alberta understands the importance of building bridges around the world, and connecting to the world outside of our borders,” Premier Redford said in unveiling the province’s new international strategy at the University of Calgary.
“Alberta has an export economy. We have plentiful natural resources. But the truth is that we have to be bold in opening new markets for our products, our ideas and our expertise around the world, and our government is ready to do that, because we know that the steps that we take now will determine Alberta’s future success.”
Over the next two years, Alberta is doubling resources in its trade and investment office in Beijing, is co-locating its Shanghai office with the federal government, and is establishing a new office in Southern China. It will establish two new offices in the United States — in Chicago, Ill., and in California, a hotbed of anti-oil sands sentiment. It will also open new offices in Singapore, India and Brazil.
The move follows the recent establishment of an Alberta office in Ottawa, increased advocacy efforts in the U.S. from Washington, D.C., and across Europe from London. The increased presence will add $1.3-million to the province’s $10.5 million budget for its international office network.
Being on the ground has worked.
It’s shown in the positive momentum acquired by the proposed Keystone XL project after Alberta and federal politicians started defending it and Canada’s environmental record in the U.S. It’s shown in the pause taken by the EU before deciding whether to discriminate against Canada’s oil sands in its new fuel quality directive.
Perhaps it has rubbed off on British Columbians, who this week returned to power Christy Clark’s Liberals against all expectations, while rejected the anti-energy development, anti-Alberta message of the NDP.
To be sure, the new offices will not focus exclusively on oil. Other Alberta industries, from agriculture to tourism, will also get the spotlight. But it’s oil that is Alberta’s mainstay, and it is it’s historical brand as a secure, environmentally responsible, market driven source that needs the most help.
The truth is that we have to be bold in opening new markets for our products, our ideas and our expertise around the world
The province’s international expansion piggybacks on the already extensive international presence of the federal government. But Ms. Redford said that isn’t enough and opening new markets for Alberta’s products and services is her government’s top priority.
“There is no one who knows Alberta better than Albertans,” she said.
“We think there are very particular initiatives, and perspective and information that is very important. And it would be a mistake for us, particularly since we are Canada’s economic engine, to rely exclusively on representation, by people who don’t know Alberta as well as we do.”
With new pipeline permits stalled by oil sands critics, prices for Canadian oil have decoupled from world oil prices, slashing government revenues and forcing budget cuts.
Plans to build oil pipelines to the West Coast, which are essential to Alberta’s oil market diversification, are on shaky ground because of B.C. worries about oil spills and insufficient upside from the projects.
Rocked by scandal and a poor connection with Albertans, Premier Redford has shown great strength as Alberta’s top saleswoman. Her international approach deserves full credit for effort and initiative.
WASHINGTON — The Obama administration opened the door to a new era of U.S. energy exports on Friday, approving the first natural gas project since the start of a heated debate over how best to benefit from the shale energy boom.
The Energy Department’s approval of natural gas exports to all countries from Freeport LNG’s Quintana Island, Texas, terminal ends nearly a two-year pause in its review of export applications as the administration addressed concerns that sending unlimited amounts of U.S. gas abroad could harm U.S. manufacturers.
“It is an historic moment for the United States,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “From a price standpoint this is definitely going to put some upward pressure on prices, further out in 2015 to 2018.”
Natural gas for June delivery rose 12.2 cents, or 3.1%, to $4.054 per million British thermal units on the news on the New York Mercantile Exchange. Futures trading volume at that time was 2.7% below the 100-day average. The futures have increased 21% this year.
Despite Freeport’s greenlight, the pace of future decisions by the administration still remains murky with the department facing intense political pressure from certain sectors to keep exports in check.
Since the department signed off on exports from Cheniere’s Sabine Pass terminal in 2011, a fierce debate over the future of America’s natural gas bounty has swept through Washington and elsewhere.
Rapid growth in shale gas output has placed the United States in a position to be a major gas exporter, upending years of expectations that the nation would have to rely increasingly on imports of gas.
More than a dozen projects have been proposed to export natural gas, but a vocal contingent led by Dow Chemical have argued that allowing unlimited exports could raise prices and hinder a resurgence in U.S. manufacturing.
The administration held off on making decisions on export applications after Cheniere’s approval while waiting on the outcome of two studies on the economic impact of sending gas to foreign markets.
Analysts warned that the department’s deliberate approach to weighing applications could continue, which could put the pending U.S. projects at a disadvantage as they compete with terminals being developed abroad.
“The window of opportunity is closing quickly so the longer the process takes in getting DOE approval the likelihood that the US will face steeper competition is increasing,” said Teri Viswanath, an analyst at BNP Paribas.
Natural gas prices for 2015 and beyond were little moved by the news, with President Obama having widely signaled his likely approval for at least some projects.
In addition to comments from Obama about the United States becoming an energy exporter, the department-commissioned study by NERA Economic Consulting released late last year found that the more gas exports allowed, the greater the economic benefits.
Benchmark prices for 2016 on the New York Mercantile Exchange inched up about 2 cents to trade around $4.30-$4.60 per million British thermal units (mmBtu), scarcely higher than current prices as traders expect the rapid rise in shale gas production to outstrip demand, including the rise that is likely to come from LNG exports.
FAVORING FRONT OF THE LINE
The department stressed that going forward, applications would be reviewed on a case by case basis, with decisions being made in order of the queue the government has set forth.
That queue is based on the order in which applications were received and the timing of companies filing with the Federal Energy Regulatory Commission, which must issue a license for construction of LNG terminals.
With critics calling for allowing only a limited amount of exports, supporters of the gas projects have raised concerns that the terminals at the front of the line will have an unfair advantage. Freeport was at the top of the queue.
“Everything we’ve seen to date points to a subset of the pending applications being conditionally approved, a small first tranche,” said Kevin Book, energy analyst with ClearView Energy Partners.
Book pointed out that the department’s approvals are conditional pending FERC’s decision on a construction license, a separate process that could take months.
MORE DEBATE NEEDED?
The timing of the approval came as a bit of a surprise, with Ernest Moniz just confirmed on Thursday to head the Energy Department. Many observers had expected the administration would wait until Moniz had settled into his new role before moving ahead on export applications.
Congressman Edward Markey, a prominent critic of gas exports, called the decision to allow exports from Freeport premature.
“The Department of Energy still doesn’t even know what the impact of natural gas exports will be on domestic businesses and consumers, but they are approving more exports anyways,” Markey said in a statement.
Energy Department authorization is required for gas exports to all but a handful of countries with free-trade agreements. Without approval to export to major gas consumers without such agreements, including Japan and India, multi-billion dollar LNG export facilities would likely not be economically feasible.
The department’s approval of the Freeport terminal will allow the company to export up to 1.4 billion cubic feet of natural gas a day for 20 years.
© Thomson Reuters 2013/ Bloomberg News
Petroleos de Venezuela SA will allow joint ventures with China National Petroleum Corp. and Chevron Corp. to manage US$6-billion in loans designed to revert oil output declines, said a PDVSA official.
The state-owned producer reached agreements on terms of a US$2-billion credit from Chevron for the Petroboscan venture and a US$4-billion loan from China Development Bank for Sinovensa, said the official who was briefed on the negotiations. The transactions probably will be signed by the end of June, said the person, who isn’t authorized to speak publicly.
PDVSA is allowing the joint ventures to handle the funds directly for oil infrastructure rather than being channeled through the state company or the government, said the official. PDVSA is also working on arrangements with oil service providers to pay as much as US$2-billion in overdue payments and for new cash flow mechanisms.
Chevron spokesmen Kurt Glaubitz and James Craig didn’t respond to e-mails and telephone messages left Friday. An e-mail sent to CNPC after business hours wasn’t immediately answered.
Venezuela, which channels oil earnings into social programs and regional fuel subsidies, is depending on the ventures with foreign partners to tap more of the world’s largest oil reserves. Progress on the funding had been delayed by two presidential elections and the death of former President Hugo Chavez. Oil Minister Rafael Ramirez said May 15 that he would travel to China soon to sign the Sinovensa credit.
PDVSA is in talks for similar funding with companies including Repsol SA and Royal Dutch Shell Plc as it targets output capacity of 3.5 million barrels a day by the end of 2014 from about 3 million at the end of 2013, the official said. PDVSA reported daily oil and natural gas liquids production of 3.03 million barrels last year from 3.13 million in 2011.
Repsol spokesman Kristian Rix didn’t respond to e-mails and phone messages left Friday seeking comment. Shell’s press department didn’t respond to phone messages and e-mails. A PDVSA press official, who isn’t an authorized spokesperson, said the company had no comment on the loans beyond those made by Ramirez on May 15.
The Venezuelan company has no plans to sell dollar debt this year, although the government may do so, said the official. The company is studying ways to refinance debt maturing in 2014-2017, the official said.
© Bloomberg News
JAKARTA — State energy firm Pertamina is planning to tap into the expertise of Canada’s Talisman Energy Inc as it embarks on Indonesia’s first shale gas extraction project, a company official said on Friday.
Pertamina said this week it would spend $28 million over the next three years on exploration and drilling in the Sumbagut shale gas block in North Sumatra province, and was looking for help from Talisman Energy, a long-time upstream investor in Indonesia that is also involved in the Eagle Ford and Marcellus shale plays in the United States.
“We have sent people to work with Talisman in Calgary,” said Wahidin, the corporate secretary for Pertamina’s upstream subsidiary Pertamina Hulu Energi.
The company had no immediate plans to seek partners in the exploration block, which may cost $8 billion to develop over 30 years, but Wahidin said Pertamina was open to the idea.
“There is a possibility that will happen in future, but it hasn’t happened yet. We are just studying there now,” he added.
Calls to Talisman Energy’s Jakarta office were not answered and the company did not immediately respond to emails.
Indonesia hopes shale gas output can help compensate for declining energy production from mature oil and gas fields. Southeast Asia’s largest economy is struggling to meet rising domestic demand and contracted export volumes.
Oil output has fallen to about 830,000 barrels a day, nearly half of levels seen in the 1990s. Gas output has also declined to 8.2 billion cubic feet a day last year, down about 12 percent from 2010 levels.
Boosting gas reserves and output is also politically sensitive because much of the current supply is committed to foreign customers as liquefied natural gas shipments at a significant discount to current market prices.
Pertamina Hulu Energi has said it is planning on a six-to-seven year exploration and development programme that could lead to production of up to 100 million cubic feet of gas per day by 2020.
Pertamina is Indonesia’s second-largest oil producer behind U.S. major Chevron. Pertamina’s 121,000 barrels per day (bpd) of oil is about 15 percent of the country’s total.
© Thomson Reuters 2013
OTTAWA — Prime Minister Stephen Harper will be in New York today, pitching Canadian energy prospects to a leading U.S. think-tank.
At the same time, critics of Canada’s green record are taking to the Internet to warn that the Alberta oil sands are an environmental threat.
Speaking to the Council on Foreign Relations, Harper is expected to stress that Canada is halfway towards meeting its greenhouse gas emissions target. Many people in both countries, however, are wondering about the other half.
As the Obama administration ponders the TransCanada Corp. proposal to build the Keystone XL pipeline to link the oil sands to Gulf Coast refineries, Harper’s government is trumpeting the steps it has taken to ensure pipeline safety, cut emissions and monitor oil sands pollution.
This week, in advance of the prime minister’s Q-and-A with the council, the federal government took out ads in major U.S. publications and fired up a new website to promote its sector-by-sector regulatory approach to reducing emissions.
“With these and other means, Canada is honouring its United Nations commitment under the Copenhagen Accord to a 17-per-cent reduction in emissions from 2005 levels by 2020,” the website says.
“We estimate that as a result of our collective actions taken to date, Canada is already halfway toward closing the gap between what our emissions had originally been projected to be in 2020, and where we need to be to meet our Copenhagen target.”
But critics, including Environmental Defence Canada, Equiterre, Forest Ethics Advocacy, Greenpeace Canada and the U.S. Natural Resources Defence Council, have set up their own Internet soapbox.
They say OilSandsRealityCheck.com “presents peer-reviewed, easy to understand facts about the devastating impacts of the oil sands on climate, economy, human rights, land and species, air and water.”
The trouble with Harper’s “halfway” claim is that it lumps together all the measures both provincial and federal governments have taken and the cumulative effect they will have on emissions by 2020.
Numerous analyses suggest that closing the rest of the gap will take a near miracle, or some kind of national carbon pricing program.
The federal Conservatives reject carbon pricing, although many provinces have already headed in that direction, either on their own or to comply with federal regulations.
Something will have to give.
Oil and gas are the largest source of emissions growth. Federal, provincial and industry officials have been negotiating for months to produce a plan that would curb emissions at a cost that does not disadvantage the industry.
But none of the scenarios will take Canada anywhere near meeting its 2020 target, analysts say.
Environment Minister Peter Kent, meanwhile, is looking at the handful of sectors not yet regulated. Commercial and residential buildings are key, he said in a recent interview, adding that he’s also hoping for international action in the aviation sector.
Canada, he also noted, is now getting credit for reforestation efforts.
But none of those this will give Canada more than a few megatonnes of carbon reductions each by 2020, well short of the needed 100 megatonnes.
Canada could buy emissions credits from cash-short developing countries, but the government isn’t keen on that option.
The Conservatives have also rejected suggestions that they limit emissions by freezing oil sands development and pipeline construction.
This week, the International Energy Association said it expects oil sands production to increase by 1.3 million barrels a day by 2018, to a total of about 5 million a day.
CALGARY — TransCanada Corp. is selling a 45% stake in two natural gas pipelines to its U.S. subsidiary for $1.05-billion.
The deal with TC Pipelines LP, one-third owned by TransCanada, involves the Bison and GTN pipelines.
The sale is expected to close in July.
The Bison pipeline connects gas from the U.S. Rocky Mountain region to TransCanada’s Northern Border system in North Dakota.
GTN moves Western Canadian and Rocky Mountain gas to the Western United States.
TransCanada CEO Russ Girling says the proceeds from the sale will help fund TransCanada’s capital program, which includes $26-billion in commercially secured projects.
“The transaction demonstrates one of the many funding options available to TransCanada to finance our current capital commitments,” he said.
The sale will allow the partnership to grow its earnings, cash flow and payout to investors, Girling added.
“The possibility of selling further interests in our mature U.S. natural gas pipeline assets, through a series of dropdowns, provides us with a significant amount of financial flexibility,” he said.
The Canadian Press
MONTREAL – Quebec’s minority Parti Québécois government has introduced legislation to ban shale gas hydraulic fracturing in the farming region of the St. Lawrence Lowlands for up to five years. But it signalled it is open to resource development in other regions under the right conditions.
The bill, if passed with support of one of the two opposition parties, would put a moratorium on all exploration and drilling activity in the area widely known as Quebec’s Utica formation until an environmental review on fracking is complete and the government introduces a new legislative framework governing hydrocarbons. All current permits would be suspended and no new permits issued.
The government would offer no compensation to permit holders, exposing Quebec to potential legal action on behalf of resource companies. One company, Calgary-based Lone Pine Resources Inc., last year launched a lawsuit under North American Free Trade Agreement rules against Ottawa over the former Liberal provincial government’s decision to revoke oil and gas exploration permits for deposits under the St. Lawrence River.
“It’s my region, my riding and I can see the issues very clearly,” Quebec environment minister Yves-François Blanchet told reporters in Quebec City Wednesday. “I see the concern that citizens have, the level that has reached. And it’s really a genuine issue of social acceptability.”
The moratorium is limited to the St. Lawrence Lowlands region and does not apply to other areas of Quebec. The PQ minister suggested his government would consider the development of each resource region separately.
“There are differences in the geology between regions and, particularly, differences in population,” Mr. Blanchet said. “It will require different approaches on a case-by-case basis.”
Asked in particular about the government’s position on Anticosti Island, where Junex Inc., Pétrolia Inc. and Corridor Resources Inc. have done preliminary oil exploration work, Mr. Blanchet said the PQ would make an announcement soon on the framework for resources development there. He did not elaborate.
Unlike the St. Lawrence Lowlands, an agricultural area with a sizable population, Anticosti is thinly populated, with an estimated 280 residents. Thousands of deer roam the island without natural predators.
Junex alone estimates that its Anticosti land permits may hold a potential of 12.2 billion barrels of oil on the island’s Macasty shale oil play, which would require fracture stimulation to access.
“The next phase is to go out there and drill some vertical wells,” Junex chief operating officer Peter Dorrins said in an interview. “We’ve identified some deeper targets in what we call conventional type reservoirs that really we find quite exciting.”
Quebec’s natural resources minister, Martine Ouellet, caused an uproar last September after she suggested, less than 24 hours after getting elected, that she had difficulty seeing a day when technology would allow the safe extraction of shale natural gas. The PQ government has since softened and nuanced that statement, stating that the risk posed by fracking need to be more carefully considered in populated areas like the Lowlands.
Mr. Blanchet on Wednesday declined to comment on the possible dangers of fracking, saying his personal opinions are unimportant in this case. The government’s environmental review agency, the Bureau d’audiences publiques sur l’environnement, is conducting a review of fracking, and he urged everyone to wait for its conclusions.