The last barrel

Last month’s Gas and Oil Expo (GO EXPO), the largest industry trade show in Canada this year, was a rousing success. The Calgary-hosted event also symbolized the quiet, cautious optimism expressed by many industry professionals about Canada’s upstream sector.

Roughly 25,000 people attended GO EXPO during June 11-13, compared to 17,500 in 2011. This year, SPE’s second annual Heavy Oil Conference was held with the exhibition. Wes Scott, executive vice president of dmg events, the firm that runs the exhibition, said that “Alberta is increasingly recognized as an epicenter for technological advances and products and services, and Calgary is a major headquarters base in Canada for all the major energy companies.”

Overall, among the attendees that this editor spoke with on the show floor and in the conference, there was optimism about the Canadian E&P sector, although most folks would like to see natural gas prices improve. Producers and service providers, alike, expect a moderate increase in new Canadian wells drilled this year, with oil activity continuing to grow. This common viewpoint dovetails well with projections at the Canadian Association of Petroleum Producers (CAPP). “We’re forecasting 11,500 wells this year, up about 9% from 2012,” said CAPP’s statistical manager, Stephen Rodrigues. “About 80% of drilling will be oil-directed, up from 70% in the last couple of years.”

A significant, unsung factor affecting the profitability of Canadian producers is the Canadian dollar’s strength vs. the U.S. dollar. Recently, the Canadian dollar has been a bit weaker, hitting a two-year low and helping to boost oil exports.

On the negative side, a big question for Canadian firms remains transportation—whether the Keystone XL pipeline will ever receive approval, and whether Enbridge can overcome opposition from British Columbian authorities to build the 1,170-km Gateway twin pipelines. In a number of conversations with this editor, Canadian professionals excoriated U.S. President Barack Obama for not acting to approve the Keystone XL project. “Uninformed,” “ignorant,” “stubborn,” “anti-oil” and “anti-Canadian” were some of the kinder words used to describe Obama.

Meanwhile, Albertans’ optimistic nature was tested during the week after GO EXPO. From June 19 through June 21, unusually heavy rainfall in Calgary, and the mountains to the west, resulted in record flooding. So high was the water on the Bow and Elbow Rivers, that for the first time, ever, water flowed through the streets of downtown Calgary. On June 21, Calgary Mayor Naheed Nenshi ordered all of the downtown area evacuated. In addition, 75,000 people were evacuated out of 25 neighborhoods throughout the city. Even the Saddledome on the famous Stampede showgrounds suffered significant damage to its ground floor. 

Sixty-five miles west, in the Canadian Rockies town of Canmore, the severe flooding completely washed out a stretch of the four-lane Trans-Canada Highway. The Canadian army was called out to help construct a temporary two-lane fix to the highway, but officials said that a permanent reconstruction will take quite some time.

Calgary’s downtown began to re-open around June 26, but recovery has been slow. “Our office was closed down from June 21, and we weren’t open again until this Tuesday (July 2),” said Bob Curran, a spokesman for the Alberta Energy Resources Conservation Board. “We worked from home, as did so many people in Calgary.” Curran said that the flooding did not affect upstream operations in Alberta significantly, partially because some areas were still “wet” from the spring thaw, and service trucks had stayed away. “However, it’s certainly possible that some facilities were shut in,” added Curran. 

Enbridge did shut down its Wood Buffalo pipeline between Fort McMurray and Cheecham, following a leak in another pipeline using the same corridor. The 750-bbl leak of Line 37 was caused by heavy rainfall, which triggered ground movement on the right-of-way, said Enbridge. The Wood Buffalo line was re-started on July 2.

Obama’s goofy rhetoric continues. We cannot seem to go a whole month without some ridiculous energy-oriented comments or actions emanating from the Obama administration, and June was no exception. On June 25, as part of his climate change strategy, Obama continued what critics call his “war on coal,” announcing a new round of strict carbon emission cuts at new and existing U.S. power plants, many of which are coal-fired. Obviously, this will reduce U.S. coal usage, and it also will cost jobs and result in higher electricity rates. “I don’t have much patience for anyone that denies that this challenge is real,” said an undeterred Obama, who seems to not give a tinker’s damn about destroying the economies of some counties in West Virginia, Pennsylvania, Kentucky, Ohio and Virginia, where coal has been a financial lynchpin.

Meanwhile, during an African trip, Obama put his foot in his mouth while talking with college students at a June 29 town hall event in Johannesburg, South Africa. Insisting that the U.S. and other highly developed nations need to do even more to reduce carbon emissions, Obama said that less-developed nations should not be penalized for not matching those efforts, although at some point, “Everybody is going to have to make some important choices here.” He then said, “If everybody is raising living standards to the point where everybody has got a car, and everybody has got air conditioning, and everybody has got a big house, well, the planet will boil over, unless we find new ways of producing energy.”

In other words, he told the students, you can improve yourselves but just don’t improve too much—don’t be too successful, or it will kill the planet. What rubbish! This President’s arrogance and narcissism know no bounds.