Page 9 - NorthAmOil Week 26
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Outlook remains bleak for Canada’s energy industry
CANADA
The lack of new pipeline capacity out of Western Canada is a major factor in the oil industry’s declining competitiveness.
THE outlook for Canada’s oil and gas indus- try remains bleak, as illustrated by new reports emerging in recent days. e Fraser Institute, a Canadian think-tank, has released a report that has found the country’s mining industry – which includes oil and gas – experienced the largest decline in investment over 2014-17. Mining investment dropped 44% over this period, the Fraser Institute found.
Regulatory and legal red tape was cited among the policies that have “substantially” reduced the pro tability of investing in Canadian oil and gas. e institute noted that much of the concern about government policies detrimental to busi- ness investment centred on the energy industry. But it added that while oil and gas was impor- tant to Canada’s economy, the country’s declin- ing competitiveness was more broad-based and a ected a number of other sectors too.
As far as oil and gas goes, however, a num- ber of reasons have been cited for the industry’s weakening competitiveness, none of which are surprising. Delays to new pipeline projects are still limiting exports of crude from Western Canada, putting downward pressure on local oil
prices and hitting the pro tability of producers in the region. Indeed, even Canadian companies are turning their attention to shale plays in the US, with Encana a prominent example of this. Meanwhile, international players continue to exit Canada, with Devon Energy the latest to do so. e US-based company closed the sale of its Canadian assets to Canadian Natural Resources Ltd (CNRL) – a $2.8bn transaction – on June 27.
Separately, Petroleum Labour Market Infor- mation (PetroLMI), a division of Energy Safety Canada, found that oil and gas employment in Alberta had decreased by 2.02% between April and May. is equates to almost 3,000 workers. According to the data, the total Canadian labour force, including unemployed workers seeking jobs in the industry, fell by 1.17%. PetroLMI has found that around 6,600 oil and gas jobs have been lost in Alberta so far this year, and it predicts the total to hit 12,500 by the end of 2019. Service sector jobs such as those in drill- ing, hydraulic fracturing and exploration are reported to have been the hardest hit, re ecting the tough operating environment for the sector, both in North America and globally.
Pennsylvania gas impact fee revenue rises to record high
PENNSYLVANIA
PENNSYLVANIA’S Public Utility Commission (PUC) said on June 27 that the state’s impact fee on natural gas wells had yielded its highest pay- out to date this year.
e annual fee, which is levied on wells tar- geting the Pennsylvania’s Marcellus and Utica shale plays, resulted in revenues of $243mn for 2018. e gure was boosted to nearly $252mn in total thanks to $8.9mn in back fees from com- panies that had withheld payments for several years amid a legal battle over whether low-pro- ducing stripper wells should be included in the levy. In December 2018 the Pennsylvania Supreme Court agreed with the PUC that strip- per wells must be included the fees.
“Because of the unique circumstances sur- rounding this issue, and the potential nancial impact on municipalities where the disputed wells were located, the commission felt it was important to thoroughly calculate the stripper well collections and allocate the corrected well distributions to the municipalities that did not
receive those impact fees during the years the well status had been disputed,” the PUC said in a statement. It attributed the higher revenue to an increase in the number of wells paying the fee – 9,560 in 2018 compared with 8,518 in 2017. Impact fee revenues were $210mn in 2017, while the next highest gure was recorded in 2013, at $226mn. Natural gas prices were relatively stable over the course of 2018 and did not a ect the g- ure, the PUC noted.
As well as stripper wells being included, more wells were assessed because producers continue to drill new ones. e Pennsylvania Department of Environmental Protection (DEP) said that 779 unconventional wells were drilled in the state last year.
Of the total collected for last year, $135mn will be paid to counties and municipalities that are directly a ected by gas drilling. e state spends the money on projects that include emer- gency preparedness, storm water systems and water preservation.
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