December 06, 2017

Affordable Energy News Service for December 6, 2017

Affordable Energy News Service for December 6, 2017

Overhauled carbon tax will cost big industry $1.2B by 2020 — Reid Southwick & Chris Varcoe

Alberta’s carbon tax will cost large industrial emitters – from oilsands mines to fertilizer plants – a total of $1.2-billion a year by 2020, but the NDP government isn’t projecting job losses as a result of the sweeping new levy. Postmedia has learned details of the province’s plans to overhaul the carbon tax for big industrial facilities that are heavy polluters and could lose a competitive edge against other global players that aren’t facing similar tax regimes. To help reduce these risks, the Notley government plans a system of credits, called output-based allocations, that reward highly efficient operations with relatively small carbon footprints, while charging more emissions-heavy facilities in the hopes that they will improve. The government is expected to release details of its plan in Calgary on Wednesday. The new costs for industry – including $400-million a year for all oilsands operations by 2020 – come at a time that large global players have backed away from Alberta’s oilpatch, and as U.S. lawmakers consider big corporate tax cuts. - Ottawa Citizen  

Alberta unveils $1.4B plan to drive innovation, boost energy industry, diversify economy — Robson Fletcher

The Alberta government plans to direct nearly $1.4-billion over the next seven years toward fostering innovation in the oil and gas sector with the goal of reducing the carbon-emitting intensity of those industries while developing new ones. "In a word, this is about competitiveness," Economic Development Minister Deron Bilous said Tuesday, as several senior members of the province's NDP government announced the broad strokes of the complex plan. "This is about partnering with industry to ensure that they are investing in innovation so that they do reduce their carbon footprint but they also lower their costs and they remain competitive." The biggest chunk of funding – about $440-million – will be targeted directly at the oilsands. Another $225-million will be aimed at driving innovations that reduce greenhouse gas emissions across a wider range of industries. A further $240-million will be devoted to energy-efficiency projects in large-scale industrial, agricultural and manufacturing operations. - CBC News  

With the OPEC meeting done, oil demand is getting into the driver’s seat — Jason Schenker

Now that OPEC and non-OPEC members have agreed to extend oil production cuts through the end of 2018, the priorities for markets will be global demand and shale oil production. The demand side looks strong for the year ahead, and shale investments will be held back by three factors: a backwardated forward curve (or when near-term futures are costlier than later contracts), a desire by drillers to not get burned like in early 2016 after prices collapsed, and a dwindling number of ideal distressed assets for investors to buy. Demand was a hot topic at the Organization of the Petroleum Exporting Countries meetings in Vienna, referenced repeatedly by OPEC President and Saudi Oil Minister Khalid Al-Falih. As with all commodities, oil is bought and not sold. This means oil demand is the most important driver of prices in the short term. And OPEC's forecasts for oil demand growth in the year ahead are strong. What underpins this expectation of oil demand growth? A strong macroeconomic outlook, in which major economies are likely to show solid levels of growth and monetary policy is likely to remain relatively loose globally. While progression through the credit cycle presents some risks, those are likely to be a greater concern in 2019, but not 2018. - Globe & Mail  

Brampton natural gas plant 'gamed' the system out of $100M, report finds — Allison Jones

A natural gas plant in Brampton, Ontario, "gamed" the system and ratepayers out of approximately $100-million, a regulatory investigation found – and it's not alone. The Ontario Energy Board (OEB) quietly posted a report online last month that was largely complete about a year ago into Goreway Power Station, concluding it repeatedly exploited defects in the system over several years. "The systems that are in place ... have created opportunities for exploitation, to the serious financial disadvantage of Ontario ratepayers," the OEB's market surveillance panel concluded. "The panel has frequently commented on the substantial inefficiencies and opportunities for exploitation that are associated with different elements of the design of the wholesale electricity market. Goreway's conduct offers a clear illustration of some of these flaws and of the market's vulnerability to exploitation by market participants." Goreway agreed to a settlement in 2015 with the Independent Electricity System Operator to repay a "substantial portion," but the amount is blacked out in the report at Goreway's request. - CTV News  

First Nations bond deal breaks ground for Indigenous Canadians, sets stage for future business partnerships — Maciej Onoszko

An unprecedented foray into the Canadian bond market by two small First Nations communities in northern Alberta may provide a template for future business partnerships involving Aboriginals. It took three years to engineer a deal that turned Fort McKay and Mikisew Cree First Nations into owners of a 49% stake in a Suncor Energy Inc. storage facility near the country’s oilsands region in Fort McMurray. The bond market was a crucial part of the solution, with investors buying $545-million (US$430-million) of 4.136% bonds due in 2041 last month. It was the largest debt sale for an Indigenous group in Canada. A lack of cash has often prevented First Nations from taking equity stakes in projects as opposed to signing a traditional impact and benefit agreement that outlines how they will be affected and share in production. Mistrust between the peoples who have inhabited the country for thousands of years and the newcomers who have developed businesses is another hurdle. - National Post  


Kinder Morgan Canada down 4% after more potential pipeline delays — Reuters

Kinder Morgan Canada Ltd shares fell as much as 4.7% on Tuesday after the company said there could be more delays in the expansion of its $7.4-billion Trans Mountain pipeline expansion, raising concerns about cost blowout. Kinder Morgan's Trans Mountain expansion to Canada's west coast has already been delayed by nine months. The company said late on Monday that the lack of clarity around municipal permit processes and related judicial process could push it back further. It did not provide a time frame. - Business News Network  


United States

U.S. energy chief discussed LNG exports with Saudi — Reuters

U.S. Energy Secretary Rick Perry said on Wednesday that he has held discussions with Saudi Arabian officials on possible exports of liquefied natural gas (LNG) from the United States into the kingdom. Perry was speaking at an industry conference in Abu Dhabi, part of his first official visit to Saudi Arabia, the United Arab Emirates and Qatar this week. Perry has met with Saudi Crown Prince Mohammad bin Salman and Energy Minister Khalid al-Falih and visited state oil giant Saudi Aramco during his trip. - Reuters  



Liquid Natural Gas oversupply to last until 2027: Macquarie — Angela MacDonald-Smith

An ultra-bearish forecast by Macquarie of a decade-long glut in LNG and rock-bottom prices has been questioned by Woodside Petroleum and industry consultants, who say demand growth is robust and a shortfall may emerge sooner than many anticipate. The bank predicts global oversupply lasting until 2022, or even as long as 2027 if the U.S., Russia and Qatar push forward with more new projects and fight it out for market share, ignoring economic drivers. The rise of renewables and outperformance by production plants could extend the glut even further, it said in a bleak assessment that drove a downgrade on Santos and a negative call on Woodside Petroleum. - Australian Financial Review  


Other international

China's drive for cleaner energy is causing a gas shortage for winter — Huileng Tan

China's push to clean up its environment may have had an unintended consequence: a shortage of heating fuel supply is hitting some regions in the dead of winter, sending prices of domestic liquefied natural gas (LNG) to a three-year high. To combat air pollution, Beijing this year implemented stringent measures restricting the use of coal for residential and industrial heating, sending demand to the cleaner alternative – natural gas. However, even with a supply glut of natural gas globally due to mega-projects coming online, infrastructure constraints – such as slow pipeline construction – within the country limit gas use. - CNBC