Resource World Magazine

72 www.resourceworld.com D E C E M B E R / J A N U A R Y 2 0 1 9 OUTLOOK 2019 reduce health and safety or reduce perfor- mance. But the (government) ministries are operating in isolation without understand- ing the ripple effects." Alberta's government is "fighting for what matters," said energy minister, Marg McCuaig-Boyd, like getting pipelines built, diversifying its energy economy and creating good jobs – remedying the dam- age caused by the previous Conservative government that drove the economy "into the ditch". She cited the creation of 90,000 jobs in the province last year, aided by 6.4% per growth in the oil and gas sec- tor, which included new oil sands projects like Suncor's Fort Hills Project, a record drilling in the Montney play in BC And Alberta, up 24% year over year to about 7 billion cubic feet per day. "We know there's more work to do but overall, there are really positive trends that we expect to continue in the New Year. We're focused on moving forward, not backward." McCuaig-Boyd said her government is working to secure market access through the Trans Mountain pipeline and diversify the energy sector while continuing devel- opment for unconventionals – programs expected to attract $10 billion in private investment. "Nobody wants to go back to the days of boom and bust. That's why we're work- ing to ensure the recovery is built to last by diversifying our energy economy. We're leveraging major private sector investments in petrochemicals and partial upgrading to turn our oil and gas resources into more valuable products." The numbers ultimately tell a differ- ent tale for Canada as a whole. In a news release the Petroleum Services Association of Canada (PSAC) predicted a drop in wells drilled from 6,980 in 2018 to around 6,600 in 2019. In a release PSAC president Tom Whalen said while the industry in Canada has recovered from the "very dark days" of 2015 and 2016, there's little cause for celebration as drilling activity has pla- teaued. He said in an interview that 2018 was "by and large flat" compared to 2017 and that the unprecedented wide heavy oil price differentials caused by chronic pipeline constraints is "nothing short of a crisis" for Canada, costing more than $100 million annually. The year-over-year decrease of 380 wells nationwide means up to $1.8 billion less in capital spending by exploration and production companies. In addition, he said, the "on again, off again saga" of the Trans Mountain pipeline didn't help investor confidence, even after the federal government purchased it from Kinder Morgan. "We are more or less watching the world pass us by while the global demand is increasing for both oil and gas," Whalen said, "all at a cost to Canada and Canadians in the billions of dollars. "This 'lower for longer' is forcing com- panies to consider alternatives such as moving more of their operations to other jurisdictions outside of Canada in an effort to survive..." Among the growing list of defectors is Encana Corp. [ECA-TSX], arguably the nation's highest-profile energy firm, now relocating much of its capital – and operations – to the US. That follows major companies like Shell [RDS.A-NYSE] and ConocoPhillips [COP-NYSE] along with Statoil, Total [TOT-NYSE] and Marathon [MRO-NYSE], who have been divesting their Alberta oil sands holdings worth more than $37 billion in sales. All this while refineries in Eastern Canada imports about 600,000 barrels of oil per day from the US, Middle East and Africa, about 2.4 billion cubic feet per day of natural gas from the US, and new liquefied natural gas (LNG) plants built on the US Gulf Coast are being fed in part by Canadian gas. Canada may find the current conditions even harder to bear given its proximity to the US, which is enjoying a revitalized energy sector. But even the American oil industry saw prices dip as low as $50.42 in November, down 20% from a four-year high in October, when some had expected prices to hit $100 – a drop largely due to oversupply issues – while natural gas prices are hovering around US $4/MMBtu, thanks to increased demand for LNG. This nation, once a major importer of Canadian product, has now become self-sufficient and, in fact, is now net exporter, the world's largest oil producer at 11.6 mil- lion bpd. But even it is not immune to a broad market selloff as investors shed risky assets, facing the likelihood that, world- wide, the growing oil supply will swamp demand in 2019. Thanks in large part to shale and inde- pendent producers, the US has set new records for the production of oil and natu- ral gas, and new records for exports of all products – from oil, to petroleum prod- ucts, to pipeline natural gas and LNG. The US has effectively become much less reli- ant on imports and has also grown into an impressive exporter which industry lead- ers say helps allies and trading partners diversify and add a stable importer to their energy needs portfolio. "The US became a net natural gas exporter in 2017 and looks to continue this achievement," said Fred Lawrence, Vice- President of economic and international affairs for the Independent Petroleum Association of America (IPAA). "It has also become much less reliant on petroleum and associated products over the past few years. Due to our refinery needs, we will still need (medium-heavy/sour) crude from Canada and other countries for some time, but we are much less reliant than we used to be and will play a growing role as a global exporter." But while the industry has continued to recover, the improvements have come in "fits and starts" and in 2018 the infra- structure challenge and lack of takeaway capacity slowed growth. "The inventories globally have come into closer balance but the US will need to continue to ramp up its export infrastructure to accommodate production and efficiency growth," said We are watching the world pass us by while the global demand is increasing for oil and gas…

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