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Kenney chases investment, gives Alberta’s advantages positive spin
Gary Park for Petroleum News
Alberta Premier Jason Kenney made a pitch to private equity firms and investment banks in New York on Sept. 18, in a bid to revive investment for his province’s oil and natural gas industry.
His agenda included 14 meetings with hard-nosed audiences and his message, after a summer dominated by short-selling of stocks in companies such as one-time hot investments such as Athabasca Oil, Pengrowth Energy and Bonterra Energy, accompanied by a dramatic scaling back of enthusiasm by banks in oil sands companies on environmental, social and governance (ESG) grounds.
But he had solid backing from industry leaders such as Steve Laut, executive vice chairman of Canadian Natural Resources, who argued Canada is “doing very well if not better” in lowering greenhouse gas intensity while performing at the “very top” of the social and governance issues.
Good timing? Fleetingly it seemed as if Kenney’s timing might have been impeccable.
It coincided with one report from the United States that pointed to a souring of market sentiment in the booming U.S. oil sector - notably development of shale deposits - as investors and global energy giants started pulling out of the plays, bankruptcies rose and drilling stocks swooned.
It has been an astonishing reversal of the surge in shale production that played a leading role in the crumbling of Canada’s petroleum sector.
The emergence of a bear market is viewed by observers as a rebellion by investors against the strategy of production growth at any cost.
Peter Tertzakian, director of the ARC Energy Research Institute, told the Globe and Mail that investors have suddenly demanded a dividend and near-term returns, while critics have decided the shale boom is unsustainable.
A second lift to Alberta’s confidence occurred with the attacks on Saudi Arabia’s oil infrastructure that prompted the Kenney government to consider relaxing its oil production limits while presenting itself as a reliable, responsible and low-risk source of oil.
“Alberta is the most secure major source of energy on Earth,” he immodestly told those he met with on a trip that also took in Ohio and Texas.
Attractive prospects And even if Saudi Arabia’s loss of production accounting for 5% of global supply is short lived, Kenney offered a full plate of attractive prospects to investors who are pinning their demands on clear evidence that Alberta can move more oil products out of the province.
He told a teleconference from New York he is counting on advances in technology and new oil-by-rail contracts to boost Alberta’s exports by 200,000 barrels per day within the next year.
He said opposition within Canada to new and expanded pipelines is shrinking, including from indigenous people.
In addition, Kenney forecast that Enbridge’s Line 3 from Alberta to Wisconsin should raise output by 370,000 barrels per day by late 2020 which he said generated a “tremendously positive” response.
Among other selling features in Alberta is low real estate prices in Calgary and Edmonton, a large, talented labor pool left over from layoffs in the tens of thousands since 2014, streamlined provincial immigration policies and a series corporate tax cuts planned over the next three years.
Jackie Forrest, senior director of the ARC Energy Research Institute, told the Calgary herald that any move to relax production caps to markets such as the U.S. Gulf Coast would benefit both production and refining sectors.
“By doing that we can keep our price differentials (between West Texas Intermediate and Western Canada Select, Alberta’s heavy crude benchmark) as narrow as possible and get the best price for our crude by allowing volumes to be high through the crude-by-rail policy. We can maximize both volume and price.”
Hiccups But, typical of the setbacks Alberta has experienced over the past five years, the efforts to restart construction on the C$7.4 billion, 590,000 bpd Trans Mountain expansion has experienced another in a series of hiccups.
The British Columbia Court of Appeal ordered the B.C. government to reconsider environmental assessment certificates on the basis that those approvals have been overturned by the Canada Energy Regulator (formerly the National Energy Board).
However, Alberta Energy Minister Sonya Savage said nothing in the ruling “should delay the current construction schedule,” adding there is no reason why the B.C. government should be delayed in quickly reissuing the approval.
Even B.C. Environment Minister George Heyman, one of the most outspoken energy pipeline projects, seemed to share that view.
He said B.C. had no intention of using the court decision “as a tactic” to delay work on trans Mountain, noting that only the federal government and courts had the power to stop construction.
- GARY PARK
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