Issue link: http://resourceworld.uberflip.com/i/1058321
D E C E M B E R / J A N U A R Y 2 0 1 9 www.resourceworld.com 73 OUTLOOK 2019 Lawrence, who referred to many mergers as the "impetus towards consolidation has increased due to the need for more scale and reduced leverage." The trade situation and the strength of the dollar will play important roles in the 2019 global economy, he said. "The US is unique in its current economic strength but the emerging economies bear watch- ing," and the sanctions policy with Iran, Venezuela's economic deterioration and other geopolitical "flashpoints" must be monitored along with underinvestment and shale longevity. "We are now a 100 mmb/d market and there is a small spare capacity cushion (around 1-2 mmb/d) compared to the past, so keep an eye on inventory balance and demand growth." PSAC's Whalen said the problems for Canada fall into two categories: disruption from outside Canada and "bottlenecks and blunders" from inside, with both likely to continue into 2019. He cited "mostly US-influenced" disruptions such as fund- ing anti-industry activism, the US's more favourable tax regime, the pricing differen- tial, America's progress on LNG facilities and supply, and the lack of a business-friendly environment in Canada that's pushing capi- tal south of the border. Also, rapid resource development in the US makes them now Canada's largest competitor. We are in fact dying by our own sword," Whalen said, "as we are making the situation worse by sending equipment, resources and expertise from Canada to help them grow their production. This is driven by low activity and the inability to make any profit in Canada by the service companies." And Canada hinders itself through carbon taxes and "tax stacking" in gen- eral, and by creating roadblocks to access to tidewater – TMX, Northern Gateway, Keystone XL, Enbridge Line 3 expansion and Energy East pipelines – resulting in Northern Gateway and Energy East being killed. Then there's the legislation: Bill C-12 and Bill 126, energy export legislation by Alberta and Saskatchewan to try and leverage BC to approve the TMX pipeline; Bill C-69, viewed as a "project killer" that creates investment uncertainty; and Bill C-48, the tanker moratorium on Canada's west coast. And BC is threatening to sue Alberta to ensure they don't stop shipping oil and finished goods to BC – for their own needs. Whalen views that as a "contradic- tory message", blocking TMX expansion on one hand but demanding that Alberta keep supplying their local needs. Brunnen, of CAPP, said 2019 will be "another year of transition" which could see the differential tighten somewhat and more crude shipped by rail, along with more mergers and acquisitions but a "flat" drilling forecast. Whalen agreed, saying the differential must be managed as Canada is losing more than $100 million per day in value of its oil resource. The alternative is shutting in and dialing back production. PSAC says 14% of its members say they're looking to exit the Canadian market while 10% say they are looking to other markets for any expansion of growth. "It will take certainty for investors, less regulation and red tape, a more business- friendly tax regime," said Whalen. "The Canadian industry will recover but only once we get access to tidewater and we have access to new customers and markets globally." n