Page 12 - NorthAmOil Week 16

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Ottawa to fund well clean-up, emissions cuts
CANADA
THE Canadian government has said that it will provide CAD1.7bn ($1.2bn) to help clean up abandoned oil wells, as well as creating a CAD750mn ($529mn) fund to help energy companies reduce methane emissions. Around 10% of the fund will be directed to rigs offshore Newfoundland and Labrador.
The moves come as the Canadian oil indus- try has been calling on Ottawa for assistance in response to collapsing oil prices. Several energy executives reacted negatively to the announce- ment, saying the initiatives fall far short of oil companies’ needs and expectations.
Canadian Prime Minister Justin Trudeau said that the two initiatives would keep 10,000 people employed.
“Our goal is to create immediate jobs in these provinces, while helping companies avoid bank- ruptcy and supporting our environmental tar- gets,” he said.
Industry groups such as the Canadian Associ- ation of Petroleum Producers (CAPP) had called on environmental restrictions to be relaxed dur- ing the coronavirus (COVID-19) outbreak, but Ottawa has insisted that its priorities will not change despite the health crisis.
“Right now, many energy firms are experienc- ing a cash crunch, so they don’t have the funds
to invest in technologies to reduce emissions or fix methane leaks,” Trudeau said on April 17. “Today’s announcement will allow this type of work to be done and create jobs that people need during this difficult time.”
The announcement was welcomed by the premiers of Alberta and Saskatchewan – major oil-producing provinces. Alberta Premier Jason Kenney wrote on Twitter that the federal move was “critical” in order to restore employment for workersintheenergysector“immediately”.
Others were more critical, however.
“This is not going to do anything,” Whitecap Resources’ CEO, Grant Fagerheim, was quoted by the National Post as saying. “If this is as good as it gets, it will do very little or nothing to assist with operations for companies,” he added.
Another energy industry executive, who wished to remain anonymous, told the National Post that rather than addressing company con- cerns, the announcement appeared to be more about environmental messaging.
“I think they made the calculation that it would be politically unpalatable in Ontario and Quebectoprovidedirectsupportstooilandgas,” the executive said.
Further details of the initiatives have yet to be provided.™
Texas postpones production cut decision
TEXAS
THE Railroad Commission of Texas (RRC), which regulates oil and gas activity, has post- poned a vote on a proposal to impose mandated production limits in the state.
The three-member commission met on April 21, the day after West Texas Intermediate prices fell into negative territory for the first time in his- tory. (See: Examining the WTI collapse, page 4) After briefly debating the issue at a hearing, they agreed to return to it on May 5.
Certain producers in the state, including major Permian Basin players Pioneer Natural Resources and Parsley Energy, back the intro- duction of mandatory oil output curtailments. The idea first arose in late March, by which point WTI prices had already tumbled into the $20s per barrel. This had come about as Saudi Arabia and Russia threatened to engage in an oil price war while global demand was collapsing owing to the coronavirus (COVID-19) pandemic.
Now, Saudi and Russia have backtracked and agreed to cut production, but the reduc- tions agreed by OPEC and its allies do not go far enough to restore balance in the oil market. US
producers have been announcing voluntary cuts – including significant volumes in Texas – but some producers support mandatory restrictions because they believe this approach will go fur- ther towards protecting the survival of smaller players. By contrast, super-majors ExxonMo- bil and Chevron, which have become increas- ingly prominent in the Permian in recent years, oppose mandatory cuts, as do pipeline operators.
This week, only one of the three RRC com- missioners, Ryan Sitton, said he was ready to vote on the issue.
“Taking weeks, even days, right now to act is in itself a choice,” Sitton said. “We are seeing a level of demand destruction and a level of oil industry downturn that in the past happened over a course of years, now happening over a course of days.”
Sitton is proposing a 20% oil production cut – or 1mn barrels per day (bpd) – in Texas contin- gent on other states and countries following suit with similar moves to curtail a combined 4mn bpd. He has said that he would direct staff to pre- pare his plan for a vote at the May 5 hearing.™
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w w w . N E W S B A S E . c o m Week 16 23•April•2020