Energy

Canada’s Conservative Party promises energy independence by 2030

Leader of Canada’s Conservative Party and Official Opposition Andrew Scheer announced that if he is elected in the October national election he will rein in spending, get oil pipelines built, and put the country on a path to energy independence by 2030. In the second of his five policy speeches leading up to the election kickoff, Mr. Scheer criticized Liberal Prime Minister Justin Trudeau, who he says has “blown it all.

Mr. Scheer said more must be done to support the struggling oil and gas industry, which needs more pipeline export capacity to get domestic crude to market, if Canada is to boost its economy and energy security. He promised to overturn PM Trudeau’s proposed environmental assessment rules and pledged to build “a dedicated, coast-to-coast right-of-way specifically set aside for energy infrastructure projects”.

In his 14-page speech in Toronto, Mr. Scheer said, “Rather than have industry submit complicated route proposals for every new transmission line and pipeline project, we could have a single corridor – planned up front and in full consultation with the provinces and with indigenous Canadians who would share in the prosperity it would provide.” He also vowed to ensure Canada would no longer depend on foreign oil by 2030, because, “The fact is Canada has more than enough oil… to put an end to all foreign oil imports once and for all.

Ahead of this October’s federal election, the Conservatives lead the Liberals by more than 5 percentage points in a Nanos Research poll this week.

Alberta’s Premier to axe the provincial carbon tax May 30

Alberta Premier Jason Kenney announced that the Carbon Tax Repeal Act will be introduced during next week’s legislature sitting to end the carbon tax at the end of the month, saying, “By May 30th there will no longer be an Alberta carbon tax,” at a news conference where he outlined key legislation coming from his new United Conservative government.

The carbon tax was introduced by the former NDP government, which was voted out in April and replaced by a UCP majority government, which campaigned on repealing it. Taxpayers are estimated to save CAD $1.4 billion a year for heating their homes and putting gasoline in their vehicles with its repeal.

The end of the tax would mean the federal government would then impose its own carbon tax on the province, which it has done with four other provinces that wouldn’t bring in their own carbon pricing: Ontario, New Brunswick, Manitoba, and Saskatchewan. Prime Minister Justin Trudeau would not say if his government would immediately charge the federal tax if Alberta ditched its own, but stressed that no province will be exempt.

During the election, Premier Kenney promised to file an immediate court challenge on the constitutionality of the federal carbon tax if he won the election, by April 30, however, his Cabinet was not sworn in until that day. In the two weeks since, no challenge has been filed. On Monday, Premier Kenney said the lawsuit has been delayed and may not be filed at all because his government wants to review court decisions in Saskatchewan and Ontario before it decides if it will challenge the federal tax in court. The Saskatchewan Court of Appeal recently ruled in a split decision that the federal tax imposed on provinces without a carbon price of their own is constitutional. The Ontario government is waiting for a decision on its court challenge.

Canada’s first LNG export terminal on course for 2023

Woodfibre LNG says its proposed CAD $1.4-$1.8 billion liquefied natural gas (LNG) export terminal in British Columbia will move forward with construction later this year and the facility is expected to be operational by 2023. Woodfibre said it is targeting a final investment decision to build the project this summer.

The Woodfibre plant is on course to be Canada’s first LNG export facility, ahead of 18 other LNG export projects under development, according to government data from Natural Resources Canada.

Royal Dutch Shell recently made a final investment decision to build its CAD $40 billion LNG Canada plant in British Columbia in 2018. LNG Canada is expected to enter service in 2024.

The export terminal is crucial for Canada’s landlocked fossil fuel industry, as demand for natural gas – the cleanest of the fossil fuels – is growing fast around the world as more countries use it to meet increasing energy consumption and wean their power and industrial sectors off dirty coal to cut pollution.

The Woodfibre project is owned by Singapore-based Royal Golden Eagle’s Pacific Oil and Gas (PO&G) subsidiary. This week, PO&G agreed to purchase Calgary-based Canbriam Energy, a privately-held exploration and production company with properties in British Columbia. Woodfibre signed a preliminary agreement last September with a unit of China National Offshore Oil Corp (CNOOC) for the potential offtake of LNG starting in 2023.

Canada’s Senate passes new amendments for Bill C-69

187 amendments were passed Thursday by a Canadian Senate committee regarding the Liberal government’s controversial Bill C-69, which would change how the environmental impact of major projects like oil export pipelines is assessed. The Senate will now vote on the amendments, which will then be passed to the House of Commons for final approval, at which point the government can accept, reject or further amend the legislation.

The amendments address many concerns from the energy industry who say Bill C-69 will deter investment in the oil industry by creating uncertainty and giving too much power to the federal government by allowing ministers to veto projects.

On Wednesday, another Senate committee recommended the federal government scrap the proposed Bill C-48, which would ban oil tankers along British Columbia’s northern coast.

Among the proposed amendments are clarifying language and scope of the assessment process; weakening the ability for the Minister of the Environment to control the regulatory process including receiving written approval from both the natural resource and finance minister before rejecting a project on environmental grounds; curbing the public's participation with the process; making economic considerations a more meaningful part of the evaluation; and shortening the approval process from 600 days down to 510 days.

IEA projects global oil growth despite OPEC cuts

The International Energy Agency (IEA) says very little extra oil will be needed from Organization of the Petroleum Exporting Countries (OPEC) this year since United States’ output offsets dropping exports from Iran and Venezuela. Washington’s decision to end the Iran sanctions waivers has allowed some importers to continue to buy Iranian crude added to the “confusing supply outlook.

The IEA estimates that in April OPEC states produced 440,000 barrels per day (bpd) less than the amount agreed in a production pact, with Saudi Arabia producing 500,000 bpd below its allocation. In its monthly report, the IEA states, “However, there have been clear and, in the IEA’s view, very welcome signals from other producers that they will step in to replace Iran’s barrels, albeit gradually in response to requests from customers. There is certainly scope for other producers to step up production.

The IEA said there was a “modest offset to supply worries from the demand side” as it expected growth in global oil demand to be 1.3 million bpd in 2019, or 90,000 bpd less than previously forecast, where 2018 demand growth had been estimated at 1.2 million bpd. Global oil demand would average 100.4 million bpd in 2019, according to the IEA, and higher output from producers OPEC, especially the United States in the second quarter, would keep the market well supplied.

American production of oil and condensates was forecast to rise by 1.7 million bpd in 2019. The IEA said crude oil would account for about 1.2 million bpd of the rise, although it said this would be lower than US crude oil output growth of 1.6 million bpd in 2018.

Global oil supply in April fell 300,000 bpd, with Canada, Kazakhstan, Azerbaijan, and Iran leading the losses. However, OPEC crude output rose by 60,000 bpd to 30.21 million bpd, on higher flows from Libya, Nigeria, and Iraq. The IEA said OPEC would be 30.9 million bpd in the second quarter of 2019 and would fall to 30.2 million bpd in the second half of the year.

US LNG exporters face headwinds due to trade war with China

This week, China said it would raise tariffs on American liquefied natural gas (LNG) imports to 25 percent on June 1 from the current rate of 10 percent in retaliation against the United States’ tariff increase on USD $200 billion of Chinese goods last week. The tariffs may discourage Chinese customers from signing long-term LNG deals with American suppliers, resulting in banks and investors being less willing to finance projects under development.

There are currently six American LNG projects with units under construction, in addition to more than two dozen others seeking customers to satisfy potential investors before they can break ground. These projects may be likely to come to fruition if tariffs remain in place for an extended period. Chinese buyers have started signing deals with other suppliers, complicating US developers’ search and to start building the next generation of LNG export plants. However, major US suppliers believe low American natural gas prices will attract enough customers to justify funding new export projects, regardless of what China does.

China is among the countries rapidly increasing their natural gas use for power generation as they to wean themselves off coal, but 2017 saw the peak of Chinese imports of US LNG shipments, which has dropped to next to nothing this year so far. Prior to the US – China trade war igniting in July 2018, China was the third largest buyer of American LNG, however this year, China has not made it to the top 15, with only two US shipments reaching the country.

The U.S. Energy Information Administration (EIA) says world demand for natural gas is expected to grow from 340 billion cubic feet per day (bcfd) in 2015 to 485 bcfd by 2040 with China accounting for more than a quarter of that growth. US LNG exports are expected to nearly quadruple to 86 MTPA by 2025, equivalent to about 11.4 bcfd of natural gas, according to EIA projections, which is enough for about 55 million American homes every day.

Pay for a Green New Deal by removing “fossil fuel subsidies”? Can anyone possibly be that financially illiterate?

Recently, while wandering through the often-wondrous but sometimes-brainless world wide web, I came across an article about how to pay for a Canadian Green New Deal. Normally, except for Harry Potter, I am not much interested in fantasy literature, but this one caught my eye because it dredged up an old chestnut that I hadn’t seen for a while –  that green social schemes could be paid for by eliminating fossil fuel subsidies. “IMF economists calculate that Canada pumps a shocking $58 billion per year into propping up coal, oil and gas companies,” the article fumed.

Little work has been done in unplugging that philosophical toilet lately, so let’s revisit the “fossil fuel subsidy” landscape. The article relies heavily, almost exclusively, on an IMF Working Paper that tries to make scientific an argument not unlike who is stronger, the Hulk or Hercules. In the interest of fairness, I plowed through the paper for as long as I could endure in order to see if my assumptions about the vapid concept would stand up to the juggernaut of financial acumen that a group of IMF economists can muster. They did not let me down. Oh lord, what an academic slough the document is.

I wasn’t able to make it through the whole thing for fear of developing some sort of tumour, but here is an analysis of the fundamentals underpinning the work.

Firstly, the analysis starts with an example of what the group calls a subsidy – the difference between what oil/gas is sold for relative to what it would get in the export market. As the mock-scientists put it, “For products traded across regions, such as gasoline and diesel, this can be measured by the international reference price as reflected in the cost faced by importers or the revenue foregone by domestically consuming rather than exporting the product.”

Now it gets really funny. Consider that in the Dogwood article above the author rages at the subsidies the Canadian industry receives. Included in this “subsidy” then, by their definition, is the difference in value between what Canadian oil and gas fetches compared to what it would receive if sold on the export market (they call open-market values “efficient pricing”). Please take a second to think of the complete and utter obtuseness of that rationale. Activist lunatics destroy market access for Canadian oil and gas, then have the effrontery to include this lost value in the “fossil fuel subsidy” bucket. You know when you buy something like a meat grinder and it comes with a warning sticker that says “do not insert fingers in the meat grinder”? Those stickers are for these people. (Yes, I do promote civil dialogue – with those who want it. For those who devote their professional lives to disinformation…next.)

Then the economists tackle climate change by applying a “social cost of carbon” (SCC) to fossil fuels, declaring that to be a subsidy. The value of this social cost is calculated as the average of 3 measures: a cost derived from an estimate of what it would cost to keep global warming under 2 degrees (which is unknown and unknowable but through the miracle of modelling deemed to be $40-80/ton); an “assessed” value consistent with countries’ mitigation pledges, which are 100% unrelated to reality (because pledges are voluntary, quasi-measurable, and mostly theatre), but nevertheless deemed to be $35/ton; and a third measure defined as, and I quote, “some recent assessments suggest an SCC of around $35 per ton for 2015 emissions (in U.S. $2015), though estimates are contentious.” Based on this rock granite mountain of evidence, the grant-harvesters announce that “Based on this summary, the estimates discussed below assume, common across all countries, an illustrative value of $40 per ton.” Sure, why not, because who could possibly see any difference between Cameroon and Monaco and India and Canada? I know it’s meant to be an average, but is it meaningful to add, by country, the number of dogs to the number of apples to the number of prostitutes, and create economic policy based on the average country score? In the hallowed halls of academia, they solemnly nod yes, it is. 

This number is then applied to all fossil fuels consumed, and deemed a “subsidy”, despite the fact that life as we know it would cease to exist without these fossil fuels. By this measure, food is a “subsidy” to your life. If you insist on piling this fictitious cost on fossil fuel consumption, then it is a tax. But it is not a subsidy.

I could not take much more of this garbage, but I will leave you with one final dumpster of tortured logic. The last sentence under the section “Definition of fossil fuel subsidies” notes that “Subsidies for non-fossil fuels are excluded from our calculations” and this is footnoted. Given that the whole point of the article is to smear fossil fuels, it would make sense that the authors excluded this, but the reason given in the footnote is something else: “Renewables subsidies in power generation, for example, were $140 billion worldwide in 2016 according to IEA (2017). Note, however, that efficient fuel pricing would remove one of the key motivations for renewable energy subsidies.”

In other words, the phrase “efficient pricing”, a concept (as used in this paper) that is so daft that only economists utter it, is used to calculate “subsidies” for oil and gas that are not allowed to reach markets in Canada, and are excluded from the calculation of renewable subsidies because to use the same yardstick would discourage adoption of renewable energy. You cannot make this sh_t up.

On the Canadian front, if we step away from the loaded diaper that is this report, we find the Dogwood people thundering at Canadian-specific subsidies that include purchase of the TransMountain pipeline and accelerated write-offs of oil and gas investments. This is even more depressing; the IMF economists at least try to hide behind a veil of academic superiority; the Canadian bashers simply don’t understand what they’re talking about, like simpletons mocking a judge for wearing funny clothes.

Buying the TransMountain pipeline was not a subsidy for anything. It changed nothing for the energy business; the exact same volume flows down it every day (and it is an exquisitely perfect amount; a single barrel less and BC will sue Alberta; a single barrel more requires an unacceptable expansion. Saving the planet is an extremely precise science.)

Accelerated write-offs of capital expenditures are universal across every industry, as opposed to straight line methodology. If the zealots who want to remove fossil fuel subsidies want to tackle this one, they need to explain what the appropriate write off rate should be, because every business gets to write off its expenses. That is how business works.

However, understanding how business works is clearly not something the Dogwood crowd is interested in. As a final capitulation to brainlessness, the author declares that the money used on fossil fuel subsidies could pay for the Green New Deal. But even this cursory inspection of the components of “fossil fuel subsidies” shows that the “money” is actually an illusion, mostly a bunch of theoretical penalties that would not exist if applied because the ground would change underneath. A missing “social cost of carbon” is not a stuffed bank account. In other words, there is no pot to raid to pay for the Green New Deal here. The whole Dogwood argument is a vapid pile of hateful nothingness.

Having said that, given the sway that environmental advocates have over society via the fear hammer, there is a reasonable chance that some sort of disastrous policy like a Green New Deal could be enacted in some doomed country. If/when that happens, do try to catch the spectacle. These fools will make Venezuela look like Switzerland.


About the Author

Terry Etam is an independent senior consultant for small and midsize oil and gas companies. His website Public Energy Number One is dedicated to energy education and he is the author of The End of Fossil Fuel Insanity.

Economic Report | Part 5: Leveraging Opportunities, Diversifying Canada's Oil and Natural Gas Markets

CAPP’s Vision for the Future of Canada’s Oil and Natural Gas Industry

For more than 150 years, Canada’s oil and natural gas industry has been a reliable and affordable supplier of energy for all Canadians, and has improved the future of our nation. From spurring economic growth to developing major nation-building energy projects, our country’s energy sector is woven into the fabric of our nation, and is as much a part of Canada as the maple leaf.

The Canadian Association of Petroleum Producers (CAPP) represents an energy industry that is looking to the future – one that values sustainable development practices and lower-carbon processes. With a growing world where many emerging economies need a variety of energy products, we want to help create a vision for Canada’s oil and natural gas industry that recognizes the significant role our resources play in the world’s future energy mix.

Canada has taken a leadership role in becoming one of the world’s most responsible oil and natural gas producers, recognizing resource development needs to be done in a responsible manner. The onus is on all Canadians to ensure we remain the world’s energy supplier of choice.

Our joint vision for the future needs to look at the big picture – a global view of the long term that includes access to world markets, effective regulatory outcomes, commitments to innovation, global climate leadership, and enabling a strong, reliable and dynamic fiscal framework.

We need collaboration between industry and all levels of government to rebalance the playing field and restore our country’s competitiveness to benefit all Canadians, not just the oil and natural gas industry. We can satisfy the world’s demand for energy but to do so we need to work collectively to create an ambitious plan for the future.

Together we can provide the world with the energy of tomorrow.

Sincerely,

Tim McMillan

President and CEO, Canadian Association of Petroleum Producers



About the Author

The Canadian Association of Petroleum Producers (CAPP) is the voice of Canada's upstream oil and natural gas industry. We enable the responsible growth of our industry and advocate for economic competitiveness and safe, environmentally and socially responsible performance.

Shell sells its stake in Indonesian LNG project

Royal Dutch Shell is selling its stake in Indonesia's USD $15 billion Abadi liquefied natural gas (LNG) project following an asset disposal program that has raised more than USD $30 billion. Shell is the world's largest buyer and seller of LNG. It is raising cash to help pay for its USD $54 billion purchase of BG Group in 2015 and hopes to raise around USD $1 billion from the sale of its 35 percent stake in the project.

Southeast Asia's largest economy faces difficulty in attracting energy investment; the Masela block of the Abadi project is operated by Japanese oil and gas firm Inpex, which holds the remaining stake. Construction was due to start in 2018, but in 2016 was delayed until at least 2020 after Indonesian authorities instructed a switch from an offshore to an onshore facility. The project is not expected to be operational until at least 2026, but Inpex has started preliminary front end engineering design for an LNG plant with an annual capacity of 9.5 million tonnes. Shell's annual report revealed that Inpex and Shell are now preparing a new Plan of Development for submission this year.

Shell sees LNG as a central pillar of the world's transition to lower carbon energy in the coming decades and its decision to sell out of Abadi follows the company’s exit from a major Baltics LNG project led by Russian state gas giant Gazprom. Last year, Shell decided to move ahead on development of a USD $31 billion LNG export terminal in Western Canada, known as LNG Canada.

Russia’s Novatek sells a 20 percent stake in LNG to China

Russian gas producer Novatek has signed agreements with two Chinese companies to sell a combined 20 percent stake in its new liquefied natural gas project called Arctic LNG 2. The two Chinese firms, China National Petroleum Corporation (CNPC) and its wholly owned subsidiary China National Oil and Gas Exploration and Development Company Ltd (CNODC), will become shareholders in the Arctic LNG project with 10 percent each.

The binding agreement, signed in the presence of Leonid Mikhelson, Chairman of the Management Board of Novatek, and Wang Yilin, Chairman of CNPC, provides for the acquisition by CNODC of a 10 percent participation interest in Arctic LNG 2.

In a press release, Novatek’s Chairman of the Management Board Leonid Mikhelson said, “The agreement is an important milestone in our Arctic LNG 2 project implementation as well as a continuation of our successful cooperation with CNPC,” and “We successfully launched the Yamal LNG project on budget and ahead of initial schedule as partners, which is a unique achievement in the global gas industry. The accumulated experience of working together is a solid basis for the successful implementation of our new LNG project”.

In a separate announcement, Novatek said that it has signed a binding agreement with CNOOC Ltd on the acquisition a 10 percent participation interest in the Arctic LNG 2 project, “We are very glad that CNOOC has joined our Arctic LNG 2 project as our new partner, since China represents one of the key consuming markets for our LNG sales,” adding, “Arctic LNG 2 will be a game-changer in the global gas market, and our proven track record to successfully build an LNG facility in the Arctic zone, combined with a proven logistical model with access to prospective markets and large hydrocarbon resource base will ensure the successful implementation of this world class project.

Oregon denies water permit for Pembina’s Jordan Cove LNG export terminal

The Oregon Department of Environmental Quality (DEQ) have denied a water quality certification for Canadian energy company Pembina Pipeline Corp’s proposed USD $10 billion Jordan Cove liquefied natural gas (LNG) export terminal.

The DEQ said it originally planned to make a decision on certification, one of several federal and state approvals needed before Pembina can build the project, in September, but accelerated that schedule to ensure it does not unintentionally waive Oregon’s authority to review the water quality impacts of the proposed project.

The DEQ said its decision was made “without prejudice,” meaning Pembina may reapply for certification and submit additional information that could result in a different decision. They said they denied Pembina’s request due to the expected effects of construction and operation of the proposed pipeline on water temperature and sediment in streams, among other things. Pembina said its management team was “working to better understand this decision and its impacts and will communicate updates when available.”

Jordan Cove is one of more than three dozen LNG export projects under development in the United States, Canada, and Mexico. Analysts have said they expect only a handful or so of the plants to actually get built over the next decade. Jordan Cove is designed to produce 7.5 million tonnes per annum (MTPA) of LNG, equivalent to around 1 billion cubic feet per day (bcfd) of natural gas. Earlier in the week, Pembina delayed Jordan Cove’s planned start up by a year to 2025.

American LNG export capacity is expected to rise to 7.4 bcfd by the end of 2019 and 10.0 bcfd by the end of 2020 from 5.2 bcfd now. From the start of 2016 to the end of 2018, the United States quickly became the third biggest LNG exporter in the world by capacity,

American shale oil is the world’s second cheapest source

Norwegian energy research and business intelligence company Rystad Energy says North American tight oil is emerging as the second cheapest source of new oil volumes globally, just shy of the Middle East onshore market. They estimate that total recoverable resources from North American tight oil has more than tripled since 2014. Four years ago, United States’ shale oil was the world’s second most expensive oil resource.

According to Rystad Energy’s global liquids cost curve, North American shale ranked as the second most expensive resource in 2015, with an average breakeven price of USD $68 per barrel. The average Brent breakeven price for tight oil is now estimated at USD $46 per barrel, just four dollars behind the giant onshore fields in Saudi Arabia and other Middle Eastern countries.

Head of Upstream Research at Rystad Energy Espen Erlingsen said, “As the majors are struggling to replace conventional liquids, a wealthy source of additional resources is tight oil. The North American tight oil industry has changed considerably since 2014, as it has proven to be a competitive supply source in a low price environment. While costs for tight oil have been reduced, the resource potential has grown considerably over the last four years.”

For oil companies struggling to replace conventional resources after years of disappointing exploration results, tight oil simultaneously offers a base for growth, increased flexibility, and attractive returns. Whereas offshore normally needs seven to 12 years to recover costs, tight oil typically requires only two to four years.

Mr. Erlingsen added, “Tight oil is a short cycle investment with a relatively brief lead time from the sanctioning of new wells to the start of production. This gives E&P companies the flexibility to adapt to market conditions and easily change activity levels. In the ever-changing oil price environment, this implies tight oil investment has less uncertainty compared to offshore.

No Arctic Council deal after USA chooses not to sign on

The Arctic Council consisting of the United States, Canada, Russia, Finland, Norway, Denmark, Sweden, and Iceland met last week but failed to sign an agreement at the United States’ refusal to agree to wording over climate change. Climate alarmists claim temperatures in the Arctic are rising at twice the rate of the rest of the globe resulting in melting ice that has increased the potential for commercial exploitation of untapped oil and gas reserves.

The Council met in Rovaniemi in northern Finland on Tuesday to frame a two-year agenda to balance the challenges of climate change with sustainable development. Two diplomatic sources said the US balked at signing an agreement over disagreement with wording in the declaration stating that climate change was a serious threat to the Arctic. Finland's Foreign Minister Timo Soini said the joint declaration was "off the table" and would be replaced by a short statement from ministers attending the conference.

Addressing the Council, US Secretary of State Mike Pompeo said President Donald Trump's administration "shares your deep commitment to environmental stewardship" in the Arctic. These agreements between countries are non-binding and Secretary Pompeo said collective goals were not always the answer, "They are rendered meaningless and even counter-productive as soon as one nation fails to comply.”

President Trump has frequently expressed scepticism about whether global warming is a result of human activity and has stood by his 2017 decision to withdraw from the Paris climate accord signed by almost 200 governments in 2015.

In her address to the Council, Swedish Foreign Minister Margot Wallstrom said, "A climate crisis in the Arctic is not a future scenario, it is happening as we speak."

Chinese natural gas consumption up 10 percent in 2018

A ResearchAndMarkets report shows that in China in 2018, the consumption of natural gas for power generation, household use, and industrial purposes increased significantly while the consumption of natural gas in the chemical industry decreased slightly. Preliminary estimates show that the consumption of natural gas in China exceeded 27 million cubic meters in 2018, registering a year-over-year increase of more than 10 percent.

In 2018, the Chinese government introduced several environmental protection policies to further prevent and control atmospheric pollution and replace coal with natural gas in key areas, which pushed up natural gas consumption in China. In 2018, the consumption of natural gas in provinces such as Hebei, Jiangsu and Guangdong all saw an increase of more than 3 billion cubic meters.

Restricted by reserves and exploitation conditions, the report determines that the production volume of natural gas in China has little growth potential. Insufficient domestic production forces China to import a large quantity of natural gas to meet domestic demand. In recent years, China's reliance on natural gas imports is rising sharply with the rapidly growing import volume of natural gas. In 2018, China surpassed Japan to become the world's largest natural gas importer.

LNG dominates China's natural gas imports. According to the report, the import volume of LNG in China reached 53.78 million tons in 2018, increasing by 41 percent year-over-year. Natural gas importers in China have signed many LNG procurement contracts with global natural gas suppliers. For example, in 2018, China National Petroleum Corporation (CNPC) signed LNG import contracts with Cheniere, Qatargas and Exxon Mobil; China National Offshore Oil Corporation (CNOOC) signed LNG import contract with Petroliam Nasional Berhad (PETRONAS). In addition, CNOOC's LNG contract with British Petroleum (BP) will be honored in 2019, which means that CNOOC's new LNG contract volume will exceed 10 million tons/year.

China is also building long-distance pipelines to facilitate the transportation and allocation of natural gas on the domestic market. At the end of 2018, the total length of China's long-distance natural gas pipelines was close to 76,000 kilometers, including the Erdos-Anping-Zhangzhou Gas Pipeline, Inner Mongolia-Shanxi Gas Pipeline, and Chuxiong-Panzhihua Natural Gas Pipeline (a branch line of China-Myanmar Pipeline), China-Russia East-Route Natural Gas Pipeline, and the Qianjiang-Shaoguan Natural Gas Pipeline.

Since natural gas is environmentally friendly and easy to transport and use, its demand in China is expected to continue rising from 2019 to 2023. As the growth rate of the production volume is far lower than that of the demand, the import volume of natural gas in China will keep growing from 2019 to 2023.

New report finds the cost of oilsands projects has dropped as production rises

A new report by business information provider IHS Markit says the cost of building and operating oil sands projects has fallen dramatically in recent years and total oil production is expected to rise by another 1 million barrels per day (mbd) by 2030. Entitled Four Years of Change, the report also found that external factors, such as price uncertainty caused by pipeline constraints, are contributing to a more moderate pace of production growth than in years past.

The cost to construct a new oil sands project is anywhere between 25 percent and a full one-third cheaper than in 2014, with deflation in capital costs and reengineering playing major roles. Operating costs for both oil sands mining operations with an upgrader and steam-assisted gravity drainage (SAGD) facilities fell by more than 40 percent on average from 2014 to 2018. Increased reliability was the biggest factor in the cost savings, which went as high as 50 percent in some cases.

Cost improvements have lowered the breakeven oil price for new oil sands projects. In the report, IHS Markit estimated that the lowest-cost oil sands project (expansion of an existing SAGD facility) required a more than USD $65 per barrel price for West Texas Intermediate (WTI) crude to break even in 2014. Today, the breakeven price has fallen to the mid-$40 per barrel range. Likewise, an oil sands mining project without an upgrader required a near-USD $100 per barrel breakeven price in 2014 compared to around USD $65 per barrel in 2018.

The report said the western Canadian oil market continues to move through a period of price uncertainty due to significant delays for advancing pipeline projects and noted the lack of transport capacity forced many producers to take deep discounts for their barrels late in 2018. Growth in the Canadian oil sands will continue, albeit at a slower pace, and IHS Markit expects year-on-year oil sands production additions over the coming decade will average beneath 100,000 barrels per day (b/d) per year—down from average annual rate of 160,000 b/d or more during 2009-2018. The reduced production outlook will nevertheless be sufficient for oil sands to top 4 mbd by 2030, a million barrel per day increase from 2018.

 

As global natural gas usage rises, NE USA cuts supply to the detriment of its citizens

Natural gas, or methane, is the primary affordable, non-polluting fuel for heating, cooking, industry, and electricity generation across the world. However, American states including New England, New York, and a handful of other nations around the world are cutting their use.

Despite water vapor being the largest waste product from methane combustion, New England states have decided to curtail the use of gas to reduce greenhouse gas emissions – Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont now pursue decarbonization targets that call for a 75 to 85 percent reduction in emissions by 2050. Adopting a policy of “strategic electrification”, these states aim to eliminate natural gas and propane from home and water heating applications by replacing them with electric appliances and heat pumps that use electricity from wind and solar systems.

With negligible environmental benefit, the most significant impact of eliminating natural gas and propane for heating will be the incredible increased cost for New England residents. In 2015, the US Department of Energy determined that 58 million Americans use natural gas as the primary heating fuel, and this is highest in New England, where hydrocarbons are the primary fuel for over 80 percent of homes. A 2017 study by the New York State Energy Research and Development Authority found that only four percent of the state’s heating, ventilation, and air conditioning load could cost-effectively switch to heat pumps.

To proceed with their “strategic electrification” agenda, New England policymakers have blocked construction of new gas pipelines. As a result, New England now faces critical shortages. In January, utility Con Edison announced a moratorium on new natural gas customers in Westchester County, New York. That same month, Holyoke Gas & Electric of Massachusetts also announced that it can no longer accept new natural gas service requests due to a lack of supply. Particularly in winter months, New England residents pay high prices for heating and electricity and shortages can push residential gas prices up by as much as 400 percent.

Between 1965 to 2017, global natural gas consumption increased nearly six times, from 631 billion cubic meters to 3.7 trillion cubic meters per year. Gas use in North America doubled, increased in Europe by a factor of 14, and skyrocketed in Asia Pacific by a factor of more than 100. In 2017, natural gas delivered 23 percent of the world’s energy, up from about 15 percent in 1965. Today gas provides nine times as much global energy as wind and solar combined.

In 2017, the Netherlands’ government called for elimination of all natural gas usage by 2050. Despite the fact that 90 percent of Dutch homes are heated by natural gas, the government proposed that 170,000 gas lines would be disconnected every year, to be replaced by geothermal and heat pump systems. Last year Amsterdam announced a phase-out of natural gas in favor of more “sustainable” sources of energy.

Internationally, in contrast to efforts to curtail gas use in New England and Netherlands, global shipments of liquefied natural gas (LNG) are exploding to help satisfy growing demand. World LNG trade increased 12 percent in 2017, 10 percent in 2018, and is projected to increase by another 11 percent in 2019. LNG demand is growing the fastest in China, South Korea, and Pakistan, and Japan and South Korea remain the world’s largest importers of liquefied natural gas. This LNG supply is dominated by shipments from Australia and the shale gas in the United States.

Iran circumvents sanctions to sell oil in a “grey market”

Iran’s state media quoted Deputy Oil Minister Amir Hossein Zamaninia as saying the country will continue to export oil and has mobilized all its resources to sell oil in a “grey market”, bypassing sanctions by the United States that Tehran sees as illegitimate.

Washington’s intentions are to halting Tehran’s ballistic missile program and curbing its regional power. Last year, the United States withdrew from a 2015 Iran nuclear deal with world powers and told buyers of Iranian oil to stop purchases by May 1, 2019 or face sanctions.

State news agency IRNA quoted Minister Zamaninia as saying, “We have mobilized all of the country’s resources and are selling oil in the ‘grey market’.” Though he gave no details about it, Iran has been widely reported to have sold oil at steep discounts and often through private firms during sanctions earlier this decade.

Giving no figures for current sales, Minister Zamaninia said, “We certainly won’t sell 2.5 million barrels per day as under the (nuclear deal). We will need to make serious decisions about our financial and economic management, and the government is working on that. This is not smuggling. This is countering sanctions which we do not see as just or legitimate.

Egypt’s solar park aims to be fully operational in 2019

The 1.6 gigawatt solar park Egypt is building in the south of the country is expected to be operating at full capacity in 2019, the investment ministry said in a statement. The USD $2 billion project is on track to be the world’s largest solar installation.

It has been partly funded by the World Bank, which invested USD $653 million through the International Finance Corporation. During his visit to the site alongside Egypt’s Investment Minister Sahar Nasr, World Bank President David Malpass said, “Egypt’s energy sector reforms have opened a wider door for private sector investments.

Egypt’s goal is to meet 20 percent of its energy needs from renewable sources by 2022, and 40 percent by 2035. Renewable energy currently covers only about 3 percent of the country’s needs. Some areas of the solar park are already operational on a small scale, while other areas undergo testing.

Investors fled the country during the 2011 popular revolt that forced President Ḥosnī Mubarak, one of the region’s longest-serving and most influential leaders, from power. Egypt aims to lure investors back alongside a multitude of economic reforms and incentives that the government hopes will draw in fresh capital and kickstart growth. Most of the foreign direct investment Egypt attracts goes toward its energy sector.

Oilsands tour changes a BC Mayor’s perspective on the energy industry

Lisa Helps, the mayor of Victoria, British Columbia said that after touring Alberta's oilsands in person she now has a new appreciation for the environmental standards of the industry, though it doesn't change her commitment to phasing out fossil fuels.

Spending a full day touring the steam-assisted gravity drainage oilsands project at Cenovus’ Foster Creek facility north of Cold Lake, Mayor Helps said, "It was extraordinary. I knew nothing about the sector or very little about the sector. I had a certain point of view going in and it was limited, and the whole point of me coming and spending the day was to broaden my mind and broaden my point of view, and that certainly did happen. There's nothing like actually standing in the field to dispel some of those myths."

Canada Action, a grassroots pro-energy group that organized the trip, chose Foster Creek as a balanced representation of the technology, innovation, ingenuity, First Nations partnership, wildlife protection, water recycling, and the continuing technology that's lowering emissions.

Mayor Helps said that though she was impressed, she's not going to begin advocating for the oilsands, saying, "There are two different paradigms right now in Canada with respect to energy and fossil fuel extraction. The paradigm that I was blessed to step into on Friday, I saw a spirit of continuous improvement. I saw hard-working people. I saw people who care passionately about the work that they're doing. I saw efforts to reduce the use of fossil fuels to extract fossil fuels. I saw wastewater treatment systems that closed the loop. I saw all sorts of wonderful things in the paradigm that I visited. I live in a different paradigm, and that's the paradigm here in the City of Victoria and the region, and in British Columbia, where we're working really hard and we've got detailed climate leadership plans to phase completely off of fossil fuels by 2050 at the latest."

Earlier this year, Victoria City Council endorsed a potential class-action lawsuit against the oilsands industry. That motion was defeated last week at the Association of Vancouver Island and Coastal Communities convention. Mayor Helps said, "I felt I had kind of changed my mind on that one before we got to Alberta. The federal government released its report saying that Canada was warming at twice the global rate, and that combined with the IPCC [Intergovernmental Panel on Climate Change] report, which came out in October, makes me think that we have much better ways to spend our resources in a short time than throwing stones across the provincial border at Alberta or anyone else."

 

Alberta’s new Premier enacts “turn off the taps” bill into law

Former federal Cabinet Minister Jason Kenney officially became Alberta’s 18th Premier on Tuesday, and named Calgary lawyer Sonya Savage as the province’s new Energy Minister. As promised during the election, proclaiming the “Preserving Canada’s Economic Prosperity Act” was his Cabinet’s first order of business. The legislation, which enables Alberta to restrict the flow of oil and gas to neighbouring British Columbia, was introduced last year but never enacted by the previous New Democratic Party government in retaliation for BC’s opposition to the Trans Mountain pipeline expansion.

Premier Kenney said his government would not immediately cut oil and gas shipments but would use the legislation as leverage in discussions with British Columbia’s NDP Premier John Horgan. He said he had a “respectful” conversation with Horgan on Tuesday night, adding he would start by looking to build a relationship and find common ground over the issue of Trans Mountain. However, “If needs be, we will do what is necessary to preserve the value of our resources and to stand up for our workers. This does not mean energy shipments will immediately be reduced, but rather that our government will now have the ability to use the law should circumstances require,” Premier Kenney said, and, “It’s not our intention to reduce shipments or turn off the tap at this time. We simply want to demonstrate that our government is serious about defending the vital economic interests of Alberta.”

If Premier Kenney chooses to utilize the new law, BC will face higher gasoline prices and shortages. Alberta supplies, directly or indirectly, more than 80 per cent of the gasoline and diesel used in BC. Each day, British Columbians consume between 70,000 and 85,000 barrels of gasoline and between 55,000 and 70,000 barrels of diesel. Approximately 55 percent of BC’s gasoline and 71 percent of its diesel is imported from Alberta refineries. The majority of these refined fuels are transported to BC through the Trans Mountain pipeline.

A government energy expert from BC, Michael Rensing, said the threat of refined fuel supply shortages can have rapid price impacts and anti-pipeline protests, such as one in July 2018, where demonstrators hung on lines from a bridge above Burrard Inlet in Vancouver. He said those actions had the potential to cause fuel shortages on Vancouver Island. Interruption of the supply of gasoline to Vancouver Island for even 48 hours could affect the ability of retail gas stations there to remain open.