Page 8 - NorthAmOil Week 17

NorthAmOil PIPELINES & TRANSPORT NorthAmOil
Dispute between Enbridge and certain shippers continues
WESTERN CANADA
Enbridge proposed changing the way it allocates capacity on its Mainline system last year.
THE fight between Canada’s Enbridge and some of the shippers on its Mainline system continues, having started last year when the pipeline opera- tor proposed changes to how it allocates capacity on the system.
In letters filed with the Canada Energy Reg- ulator (CER) last week, both Canadian Natural Resources Ltd (CNRL) and Suncor Energy urged a delay in considering an application by Enbridge to re-contract Mainline capacity. The two pro- ducers cited the coronavirus (COVID-19) pan- demic, which is wreaking havoc on oil prices and forcing producers to cut output as they battle to survive. They also accused Enbridge of behaving like a monopoly.
“Enbridge’s insistence on continuing the hear- ing process under current conditions demon- strates a disregard for the plight of its customers which would not be possible in a more com- petitive industry and is further evidence of the monopoly power Enbridge exerts,” CNRL’s law- yers wrote in a letter filed with the CER on April 20. “The CER’s economic regulation of Enbridge exists to serve the public interest, including the protection of shippers and producers from the exercise of monopolistic power. The current cir- cumstances demonstrate why such protection is
necessary,” they added.
In a separate letter, Suncor argued that the
pandemic made it more difficult to compile data and information related to Enbridge’s application.
“Important information includes the data sufficient to determine whether the proposed tolls are above a competitive, cost-reflective level and therefore represent an exercise by Enbridge of its market power, with respect to the provision of oil transportation services,” Suncor’s lawyers wrote.
Enbridge said it would provide a written response to parties involved in the regulatory process by May 1. The company had argued in an April 9 letter to the CER that its application should not be delayed, saying this would be unfair to those shippers that support the new contracts.
The pipeline operator has had to ration space on the 3mn barrel per day (bpd) Mainline in recent years owing to high demand as Canadian producers have grappled with takeaway capac- ity bottlenecks. However, with both Canadian production and US demand falling amid the COVID-19 crisis, Enbridge found itself running the system with unused capacity this month.™
PERFORMANCE
Diamond files for bankruptcy protection
US
Diamond owns rigs that can drill in water depths of more than 2 miles (3.2km).
HOUSTON-BASED Diamond Offshore Drill- ing filed for Chapter 11 bankruptcy protection on April 26 in an illustration of the threat low oil prices represent to the industry. The company, which has debts of more than $2.6bn, cited the “unprecedented” impact of the oil price war last month, combined with the toll the coronavirus (COVID-19) pandemic was taking on demand.
The bankruptcy filing came 10 days after the company missed an interest payment on $500mn worth of bonds, saying at the time it was exploring its options for the future with advis- ers. Diamond had already taken various steps in an attempt to bolster its balance sheet, includ- ing cutting jobs and borrowing $400mn under a revolving credit facility in March. However, it now says the Chapter 11 bankruptcy filing repre- sents the best return for shareholders.
Diamond owns rigs that can drill in water depths of more than 2 miles (3.2km). The deep- water industry had already been struggling since the oil price downturn that started in 2014, with
exploration relatively limited given the high costs and risks of coming up dry involved. As US benchmark prices collapsed to $30 per bar- rel and below last month, deepwater drilling was quickly identified as one area that would suffer as operators focus on assets with lower risk.
Diamond has not yet disclosed further details of how it plans to restructure its debt. However, the company said it would continue operating as normal during the bankruptcy process.
Hess was Diamond’s biggest customer in 2019, accounting for 28.9% of its annual revenue, while Occidental Petroleum was its second-larg- est customer, generating 20.6% of its revenue.
The company has about $434.9mn of cash on hand, according to its Chapter 11 filing, which was submitted in Houston. Its bankruptcy adds to more than 200 oilfield services bankruptcies dat- ing from 2015, according to law firm Haynes & Boone. The law firm had also counted 215 North American exploration and production bankrupt- cies over the same period as of April 1.™
P8
w w w . N E W S B A S E . c o m Week 17 30•April•2020