Tag Archives: Oil And Gas Sector

Warren Buffett’s exit from $9-billion Quebec LNG project after rail blockades ‘a signal’ to investors

‘We’re not going to find $4 billion tomorrow morning, and we sure aren’t going to find it in the region,’ says Saguenay deputy mayor

Warren Buffett, one of the world’s most influential investors, has pulled out of a proposed $9 billion liquefied natural gas project in Quebec over concerns about railway blockades and infrastructure challenges.

The domestic oil and gas sector was already reeling after Teck Resources cancelled its $20.6 billion Frontier oilsands project in Alberta last month, partly over fears about rail blockades, and as other strategic investors have avoided the industry.

“Over the last month, a clear signal has been sent to businesses across Canada that the rule of law will not be upheld and that major projects cannot get built,” Conservative MP for Chicoutimi-Le Fjord Richard Martel said in an email, adding that Quebecers “risk losing out” on a multi-billion project.

GNL Quebec confirmed Thursday it had lost a major potential investor as it seeks to build the $9 billion Énergie Saguenay project to export Western Canadian natural gas from a proposed facility in Quebec.

“This was a major private investor who left at the last minute,” GNL Quebec spokesperson Stephanie Fortin said in an interview.

“The reason is the recent challenge in the Canadian political context.”

She declined to provide the name of the investor or confirm the identity, but Montreal-based La Presse cited unnamed sources when it reported Thursday the investor was Omaha, Neb.-based conglomerate Berkshire Hathaway Inc., which is controlled by Buffett.

The identity was confirmed by Saguenay deputy mayor Michel Potvin to the Montreal Gazette.

Potvin, who heads the local investment agency known as Promotion Saguenay, said Berkshire would have invested about $4 billion.

“We did not need this, especially at this stage of the project,” Potvin said. “We’re not going to find $4 billion tomorrow morning, and we sure aren’t going to find it in the region. So we have to roll up our sleeves.”

In recent weeks, rail blockades and protests have also snarled major infrastructure in Canada, disrupting port shipments and stalling the delivery of grains and other commodities across the country.

“Add it to the list,” Raymond James analyst Jeremy McCrea said of Berkshire Hathaway’s decision to pull out of the LNG project in Quebec.

Major resource companies such as ConocoPhillips Co., Total SA and Devon Energy Corp. have sold billions of dollars in assets in Canada in recent years as an exodus of investors have caused activity in the energy sector to plummet.

“Reported news of a large investor pulling out of a major LNG project echoes what we have been independently hearing from other investors,” Alberta Associate Minister of Natural Gas Dale Nally said in an email to the Financial Post. “It’s undeniable that weeks of railways and ports being blockaded would deter international investors from doing business in Canada.”

Quebec Premier François Legault has frequently called for action to end the rail blockades in recent weeks as they hurt his province and much of Eastern Canada. His office declined a request for comment Thursday about how the blockades affected investment in the LNG project proposed for Saguenay.

Berkshire Hathaway did not respond to a request for comment.

Financial analysts, investors and energy executives say losing funding from Buffett is a major blow to the industry, which has already seen other investors quit, because other fund managers take cues from the so-called Oracle of Omaha’s investment strategy.

Buffett is the fourth-richest man in the world with an estimated net worth of US$81.2 billion and he built Berkshire Hathaway into a $508-billion conglomerate over the past few decades.

Berkshire Hathaway continues to own shares in Calgary-based oilsands producer Suncor Energy as well as U.S. energy companies Occidental Petroleum and Phillips66.

But the company’s decision not to invest in Énergie Saguenay “sends a signal that all governments and particularly the federal government should pay attention to,” said Tristan Goodman, president of the Explorers and Producers Association of Canada, which represents mid-sized oil and gas companies.

“We have to have foreign investment,” Goodman said. “We do need to ensure that major infrastructure projects can be built across the country.”

In addition, Berkshire Hathaway’s reported decision not to invest in a Canadian infrastructure project – even when other firms like Teck have pulled out of major projects – is particularly troubling because the company has a history of spending money when other investors are fearful.

“He’s a contrarian, which makes it even more of a message,” said Martin Pelletier, chief investment officer with TriVest Wealth Counsel Ltd. in Calgary.

GNL Quebec’s Fortin said the company is looking for additional investors for the project, which is expected to create 6,000 direct and indirect jobs across in Quebec during construction.

“I cannot say where our new investor will come from,” Fortin said, noting that publicly losing a strategic institutional investor “will make it harder” to find more investors.

She said the company still has 15 other unnamed investors in the project but will continue looking for more investors.

Still, she said, the company’s timeline for Énergie Saguenay has not been compromised. GNL Quebec is planning to make a final investment decision on the project at the end of 2021.

By Geoffrey Morgan, the Financial Post, March 5, 2020.


Photo credit: Ryan Remiorz/The Canadian Press

Uncertainty Abounds As Canada’s Energy Sector Enters 2016


Stephen Ewart, Calgary Herald

About the only certainty for the Canadian oil and gas sector is that the number of known unknowns abounds.

Uncertainty has always been a hallmark of the oil industry and the current list of variables is led by particularly volatile crude prices, but also includes the review of oil and gas royalties in Alberta, Ottawa’s plan to roll out a national framework on climate change along with implementation of Alberta’s newly released GHG strategy, and the industry’s enduring concern over access to foreign markets.

It was a second straight year of steep oil price declines in 2015 as crude slumped to its lowest levels since the global financial crisis in 2009 and added clarity may simply reaffirm the bleak outlook for the industry entering 2016.

With Canadian producers and drillers facing what’s been called “one of the most difficult economic times in a generation” significant change is needed — and already underway as the job losses will attest — to address the fundamentals of doing business in a high-cost basin in a low-price environment but there’s tremendous uncertainty over how companies will react and adapt.

Investment firm ARC Financial has calculated revenues for the oil and gas industry in Canada will be $91 billion in 2015 — or almost 40 per cent less than a year earlier.

Bankruptcies are already occurring in the especially grim junior sector.

Capital spending by oil and gas producers in Canada plunged from $81 billion in 2014 to $45 billion in 2015 as West Texas Intermediate crude declined by more than 30 per cent from January and closed 2015 at US$37.04 a barrel. The International Energy Agency conceded in December “there are very few reasons” to expect a price recovery in 2016.

The main energy index on the Toronto Stock Exchange similarly fell by almost 30 per cent in 2015.

During the year, the North American benchmark crude averaged US$48.76 a barrel; or only slightly more than the price WTI has averaged, in today’s dollars, over the previous 50 years. However, after three years of averaging more than US$90 a barrel, WTI hit a recent peak at $107 in June 2014 and has lost approximately 70 per cent of its value since then.

Influential U.S. financial institutions Citigroup and Goldman Sachs have warned crude could retreat into the $20s if the persistent global supply glut increases while Morgan Stanley said in its recent outlook for 2016 that “headwinds growing for 2016 oil” as production continues to defy lower prices and falling rig counts.

The U.S. Energy Information Agency predicts WTI will average $51 a barrel in 2016 but acknowledges that’s “subject to significant uncertainties as the oil market moves toward balance … prices could continue to experience periods of heightened volatility.” In Canada, Scotiabank has warned it expects WTI to average “no more than $40-45 a barrel” in 2016.

The new year will be rife with challenges as a number of key developments occur.

Alberta Premier Rachel Notley delayed the royalty review report scheduled for December to early January to ensure “we don’t kick something out the door that’s not ready” but has already promised no surprises for industry and delayed any changes until January 2o17 as industry adjusts to what’s been a historic downturn.

Notley’s strategy to address greenhouse gas emissions are already announced with a carbon tax, 100-megatonne cap on GHGs from oilsands and the Alberta Energy Regulator assuming responsibility to reduce methane emissions from well sites and oilfield facilities. It remains to be seen what will comprise the national climate strategy Prime Minister Justin Trudeau has promised this spring. He’s said the plan with the provinces will be in place 90 days after the UN climate summit in Paris — so about March 12.

On May 20, the National Energy Board is scheduled to release its recommendations on Kinder Morgan’s plans to twin the existing Trans Mountain oil pipeline from Alberta to suburban Vancouver.

With TransCanada’s Keystone XL pipeline denied in the U.S., Enbridge’s Northern Gateway pipeline facing intense opposition in northern B.C. and TransCanada’s Energy East still early in the NEB’s review process, Trans Mountain’s project is key to the industry’s goal of accessing more global export markets.

In a decision critical to the beleaguered gas industry, the Canadian Environmental Assessment Agency is expected to rule this spring on the application of Malaysia’s Petronas to build a terminal in B.C. to ship liquefied natural gas to Asian markets. A final investment decision from Petronas for the first of the LNG facilities for the West Coast would likely follow government approval.

It will be the oil price that determines the fate of the industry more than anything else.

After effectively scrapping production quotas in December — and with renewed U.S. and Iranian oil exports expected to hit global markets this month — the Organization of Petroleum Exporting Countries is to meet June 2 to discuss the price war orchestrated by Saudi Arabia topush high-cost non-OPEC supply, including the oilsands, out of the market.

In an industry defined by uncertainty, Canadian producers have always known there’s nothing they can do about the price of oil and understood it’s up to them to change with the times to survive.

Stephen Ewart is a Calgary Herald columnist


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CSIS Warns Of ‘Extremist’ Opposition To Oil And Gas Sector

A burned police vehicle blocks a road in Rexton, N.B., as police began enforcing an injunction to end an ongoing demonstration against shale gas exploration in eastern New Brunswick in October 2013.

A burned police vehicle blocks a road in Rexton, N.B., as police began enforcing an injunction to end an ongoing demonstration against shale gas exploration in eastern New Brunswick in October 2013.

By: Alex Boutilier | Toronto Star, Published on May 14 2015

OTTAWA—Canada’s spies are warning the federal government about an “extremist” threat to natural resource development, internal documents show.

“Extremists” have united both in person and online in their opposition to Canadian natural resource projects, according to a September 2014 “threat overview” prepared by CSIS for Public Safety Minister Steven Blaney.

The heavily censored document does not outline specific threats or projects, nor does it single out particular groups. But it lists the threat between sections on terrorist travellers and a growing anti-Muslim movement advocating violence in Canada.

The CSIS report, obtained under Access to Information law, mirrors strong language in a January 2014 report from the RCMP warning of an “anti-Canadian petroleum movement.” The report, obtained by Greenpeace, said that movement is well financed and organized, and includes “peaceful activists, militants, and violent extremists.”

The RCMP specifically referred to 2013 shale gas protests in New Brunswick, where protesters from the Elsipogtog First Nation clashed with police.

Canada’s spies and police have monitored all manner of protests — including environmental activism — even if those demonstrations remained peaceful.

The Conservative government has defended the practice of monitoring that dissent, saying even peaceful protests can turn ugly and public safety must be maintained in the event of violence.

Activists have expressed concerns that expanded powers for CSIS, contained within the government’s anti-terror legislation, Bill C-51, will mean increased monitoring and “disruption” of environmental and First Nations protests.

Craig Forcese, who specializes in national security law and has been a vocal critic of Bill C-51, says violent protests may fall under CSIS’s purview. The question for Forcese, however, is how many people fall under CSIS’s definition of extremist.

“It’s not improper, it seems to me, to be concerned about someone who might be preparing a pipe bomb, or might be involved in the sabotage of a pipeline,” Forcese said in an interview Thursday.

“The question is how broad the brush stroke is, and that’s really difficult to answer.”

The Star requested an interview with Blaney’s office, and included specific questions about how the government defines “extremist” activity and what natural resource projects have been threatened by extremists.

“The safety and security of Canadians is of the utmost importance to our government, and we take any threat to the security of Canadians and their livelihood seriously,” said Blaney’s spokesperson, Jeremy Laurin, in a written statement.

“Our police officers have a mandate and responsibility to investigate threats as they arise.

“Our government respects and protects the right of Canadians to participate in lawful protest activities.‎”

NDP environment critic Megan Leslie said there are valid reasons to monitor people suspected of plotting attacks or violence. But Leslie worries that the “extremist” label could be applied too broadly.

“Because of the way (the government is) so carelessly using language, or purposefully using language to be very broad and apply to everyone, that’s where the danger lays,” Leslie said Wednesday.

“Either they’re tossing around words like ‘extremist’ willy-nilly, which is pretty terrible, or they’re doing it intentionally, which is just as terrible. People are going to get scooped up in this who are not threats to national security.”