Page 5 - NorthAmOil Week 05

NorthAmOil COMMENTARY NorthAmOil
barrels per day (bpd) of Alberta’s oil, though this capacity was being underused before the loophole came into e ect, with roughly 310,000 bpd being shipped at the start of November. In December, however, oil-by-rail shipments shot up to a record high of 500,000 bpd, according to Tudor, Pickering, Holt & Co.
But with a nite amount of spare crude-by- rail capacity remaining, there is only so far it can go in making a di erence in the absence of new pipeline capacity. And with producers continu- ing to struggle in the low commodity price envi- ronment, Alberta has taken other steps to spur oil and gas investment.
e province lowered its corporate tax rate to 10% from 11% starting in January, as part of a longer-term plan to reduce corporate income tax from 12% in 2019 to 8% in 2022. New conven- tional oil drilling is also permitted to go ahead unrestricted in Alberta, and while this accounts for a far lower share of production than the oil sands, the province nonetheless hopes that this will encourage more industry spending.
Once some – though not as much – invest- ment in other provinces is taken into account, the CAPP projects that conventional oil and gas spending will reach CAD25.4bn ($19.1bn) this year, up from an estimated CAD24.4bn in 2019. e group forecasts that total capital investment will be CAD37.0bn ($27.7bn) this year, up 6% from an estimated CAD35.1bn ($26.4bn) in 2019. Like the projected oil sands gure, this remains considerably below levels of invest- ment seen in 2014, when total spending reached CAD81bn ($61bn).
Pipeline hopes
e CAPP noted that on top of more favoura- ble scal policies in Alberta and other Western
Canadian provinces, there was more cautious optimism over new pipeline capacity soon com- ing online, a er years of delays.
“With the Line 3 project scheduled to come on stream in late 2020, the Trans Mountain expansion underway and pre-construction activities ongoing for Keystone XL, there is potential for medium and long-term produc- tion growth with access to global markets and expanded transport capacity into the United States,” the CAPP said in its statement.
Indeed, there has been some good news on the pipeline front this week. On Feb- ruary 3, Minnesota regulators approved a court-ordered revised environmental review for Enbridge’s Line 3 replacement plan, also reinstating two approvals that the company needs to proceed with the project, which car- ries crude between Alberta and Wisconsin. en on February 4 a Canadian Federal Court of Appeal dismissed objections to Ottawa’s approval of the Trans Mountain expansion, removing the last active legal hurdle to the completion of the pipeline from Alberta to the British Columbia coast.
Some potential obstacles still remain. In the case of the Line 3 replacement, Enbridge still needs to obtain two remaining major state and federal permits, as well as some minor permits. Meanwhile, the First Nations involved in the case against the Trans Mountain expansion are con- sidering appealing against the Federal Court of Appeal decision in the Supreme Court.
Nonetheless, the victories for both pipelines are being hailed as signi cant. And with fewer hurdles now standing in the way of new takea- way capacity starting up, it increasingly looks as though the CAPP has good reason to expect an increase in capital spending in the oil sands.™
On February
4 a Canadian Federal Court of Appeal dismissed objections
to Ottawa’s approval of the Trans Mountain expansion.
The rail system can handle 500,000- 600,000 bpd of Alberta’s oil.
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