Frustration is apparent among Canadian energy leaders who flocked to Calgary’s annual oil festivities in Canada’s capital this week, though the recent pipeline approval gives them something to celebrate between rodeo races, parties corporate and breakfast pancakes.
The approval of the federal government for Trans Mountain expansion last month was a boost to the hitting industry. On top of that, crude oil prices have stabilized, an aggressive pro-energy party has come to power in Alberta, and the country’s total production is about 5 million barrels a day – making Canada the world’s largest producer world.
However, millions of crude barrels remain in storage due to stubborn delays in pipeline expansion caused by legal challenges from environmental and indigenous groups. Transport problems have forced the Alberta government to limit crude production to support Canadian oil prices, which trade with US cargo discounts. Foreign investment in the Canadian energy industry has fallen sharply, and unemployment remains stubbornly high.
All this has faded the mood in Stampede, the largest Canadian energy industry party, a 10-day drinking film, western dress, and networking in straw-clad tents.
RS Energy Analyst Samir Kayande for Reuters in a telephone interview said “The pipeline projection has held capital outside Canada and is not getting better”.
Canadian energy companies rely on pipelines to get crude from the provinces of the Alberta oil mountains in the markets. Canadian energy capital investment in 2019 is projected to be $ 37 billion, less than half its $ 81 billion in 2014. Many foreign oil companies have emerged from Canada, leaving the industry largely in the hands of domestic producers.
For some, this may be an option – but only if market access is processed.
“Canada is on sale, the question is whether it’s a temporary sale or a permanent loss,” Rob Dionne, vice president of fund manager Scheer Rowlett & Associates, referring to the low ratings of Canadian companies.
In the Saloon Wildhorse boat tent, elevated to a parking lot in downtown Calgary, the atmosphere was quieter than in previous years, according to an oil trader at a corporate event on Monday night, even as hundreds of entertainers in hats cowboy dance floor.
High unemployment in the industry brought a noticeable glare to the celebrations, the indicator said, with Repsol SA’s latest foreign firm to cut jobs.
Many think if Alberta can increase market access by building more pipelines, manufacturers can open billions of barrels of bitumen and boom times will return at the country’s third-largest oil tanker in the world .
TC Keystone XL of Energy, Enbridge Inc.’s 3th Line, and the government-owned Trans Mountain Canadian extensions have all been overdue for years by legal and regulatory challenges. The existing Enbridge Line 5 line is also facing legal challenges in Michigan over its submarine passage to the Great Lakes.
“The most important thing in the short to medium term is the completion of these gas pipeline and service development projects,” said Cenovus Energy Executive Director Alex Pourbaix for Reuters at the margins of a conference held this week.
“If all these projects are going, this industry probably has a significant runway before we worry again about market access.”
The key word is “if”. A Calgary based source at a large Canadian average company noted that it was at a low level when Keystone XL was first proposed, so he is skeptical of the recent adoption of Trans Mountain.
BIGGER IS BETTER
Trans Mountain’s experiment will triple pipeline capacity on the Pacific coast, but supporters are prepared for legal challenges since the approval of the previous government overturned.
The industry has learned to have its hardened and crumbling expectations, making investors shy about Canada. Investors focus on large oil companies, while smaller companies are ignored, said Laura Lau, senior portfolio manager at Brompton Group.
Lau added that Investors want construction to begin on Trans Mountain and progress on the LNG Canada project run by the Royal Dutch Shell in northern British Columbia.
However, the Canadian oil sector’s view is better than at the end of 2018 when well-organized environmental activists helped overturn Trans Mountain’s original approval and oil production surpassed the pipeline’s capacity, pushing down the oil Canadian to record levels that exceed $ 50 a barrel.
Alberta’s government reductions, announced at the end of last year, aided margins for domestic struggling manufacturers, but as shipping improves, crude Canadian pricing will squeeze.
Since December, oil prices have strengthened, and Western Canada’s inventories have fallen slightly more than 30 million barrels, down from about 35 million euros last year.
In Calgary there is still hope that the global appetite for Canadian oil will grow at the expense of less sustainable jurisdictions such as Venezuela, while pipelines will expand.
Lau said “Canada needs all the stars to connect to attract people’s attention. They have been disappointed for so long.”/Investing.com