Resource World Magazine

D E C E M B E R / J A N U A R Y 2 0 1 8 www.resourceworld.com 79 coast, and the cancellation of the Petronas [PGAS-KL] $36-billion Pacific NorthWest LNG project and the TransCanada [TRP- TSX] $15.7-billion Energy East Pipeline and Eastern Mainline Project. That jibes with a year-over-year PSAC forecast which predicts modest upticks in the year ahead, ranging from 19% more wells drilled in British Columbia to 4% more in Alberta and an increase of 3% in Saskatchewan. Salkeld said there is con- fidence that oil will not drop below the mid-US $50 range it now enjoys, thanks to marketing constrictions and lowering inventories, while there's growing interest in Canada's vast liquids-rich natural gas, combining for a 4-5% increase in activity. DN PSAC is basing its 2018 forecast on average natural gas prices of C$2.50/mcf, crude at US $53 a barrel and the Canadian dollar averaging US $0.82. "2017 proved out to be better than expected," Salkeld said. "We forecast 4,175 wells to be drilled/rig released in 2017 and are forecasting a total of 7,550 to close out the year." Salkeld said while 2018's activity will be better than recent years, projections remain 30% below the number of wells drilled in 2014. He said the industry has been hit with "regulatory uncertainty and a lack of noticeable support" from the Canadian government. "We were hit with low com- modity prices [and] changes of government provincially and federally who want to diversify the Canadian economy away from oil and gas, and it can't be done as easily as they thought," he said. "Canada needs an energy mix and government should not be picking the winners and losers as they seem to be trying to do." Markets and how to reach them com- petitively will be among the key concerns going forward. Zelinsky said CAPP is pre- dicting oil production to increase to 5.1 million barrels per day by 2030 from 3.9 mmbpd. Additionally, the International Energy Agency (IEA) expects crude oil will represent 31% of the world's energy demand and will be the world's largest energy source through 2040. "We have the energy the world needs, our challenge is getting it there," Zelinsky said, adding that with cancellation of the Energy East pipeline and the Pacific NorthWest LNG Project, "it is imperative that government continue to support these nation-building projects to ensure they are built." Yet the National Energy Board (NEB) asserted recently that the use of fossil fuels will peak in two years, then start to decline and flat-line over the next two decades, a departure from NEB's own fore- cast a year ago of continued slow growth all the way to 2040. Now, the NEB suggests that if Canada's carbon tax grows past the current plan of $50 a tonne by 2022, or if the use of electric cars and solar power is faster than expected, fossil fuel consump- tion will decrease more quickly. They also believe wind energy production will double and solar will triple over the next quarter century. That didn't get much traction with Tim Pickering, founder and Chief Investment Officer with Auspice Capital Advisers Ltd. He called the NEB's prediction a "ridicu- lous assertion that is unfounded and politically motivated." Nor does the effort of environmental groups to stall the oil and gas sector find favour with him. More than two dozen community, First Nations and environmental groups are calling for a fracking public inquiry in BC due to con- cerns it causes earthquakes and uses too much water in its processes. "It's a distraction on doing what's right," Pickering said. "Getting the best price for resources we, as a society, have agreed to extract is more than common sense – it is an obligation." Nor does PSAC's Salkeld have much time for environmentalists. "They have tried to slow or shut down the…oil and gas indus- try and to some degree have had some success, but in the great, grand scheme of things they are nothing more than a mos- quito on an elephant's backside. "The ENGOs (environmental non- governmental organizations) have cost Canadians and industry a lot of money and Canadians are beginning to realize this," he continued. "Influencing decisions on pipelines, paying protesters with funding from foreign sources as well as earning a paycheck for themselves, it's all coming to light and Canadians are getting tired of their antics." IPAA Executive Vice-President, Lee Fuller, said the environmental movement has shifted in the past 20 years from a focus on managing environmental impacts such as emissions control to a "Keep It in The Ground" movement designed to pre- vent the development of fossil energy. "For example, despite the key role that natural gas has played in reducing America's greenhouse gas emissions, the environmental movement is opposing progress in all elements of the natural gas value chain – production, transportation and use," he said. One environmental group seeking more funding, he added, has announced that it wants to have at least 100 court cases against the Trump administration by the end of 2017. "It is an organization with a $136 million annual budget for use in impeding American energy development," he said. Pickering said he is encouraged by the price rally of the past year and predicts oil, capitalizing on momentum that has been building since June, will reach $60 a bar- rel by the end of 2017. He said that will be driven by lower inventories and higher exports in the US against growing global demand led by China and India, met by a "stronger but lean and mean" North American industry. If it didn't kill you, the downturn made you stronger.

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