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Oilpatch capital spending fell by 54% in second quarter, StatCan reports

Statistics Canada says capital spending in the country’s oil and gas sector fell by 54 per cent in the quarter ended June 30 as numerous producers chopped budgets amid sliding global oil prices.

The federal agency says the industry spent about $3.88 billion in the three-month period, down from $8.46 billion in the first quarter and $8.59 billion in the second quarter of 2019, as a global price war and demand destruction caused by the COVID-19 pandemic eroded crude prices.

In June, the Canadian Association of Petroleum Producers estimated that $23.3 billion would be spent in the oil and gas production sector in Canada this year, a downward revision from about $37 billion in its January forecast.

Last week, the Canada Energy Regulator said it expects oil production in Canada will average 4.38 million barrels per day this year, down by 6.6% compared with 2019.

Earlier this week, IHS Markit reported that world oil demand has grown by 13 million barrels per day in the four months since the bottom of the COVID-induced collapse in April to about 89% of last year’s levels.

It says it expects demand growth to plateau at roughly 92 to 95% of 2019’s average output of around 100 million barrels per day through the first quarter of 2021 as travel-related fuel demand remains subdued until virus vaccines are widely available.


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Trans Mountain pipeline restarts after light crude spills in Abbotsford, B.C.

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Trans Mountain says oil is flowing again through its pipeline after as much 190,000 litres of light crude spilled from a pumping facility in Abbotsford, B.C.

A statement from the Crown-owned company says the pipeline was restarted Sunday afternoon.

The line was shut down early Saturday when an alarm was triggered at the Sumas pump station.

An investigation continues but Trans Mountain linked the cause to a fitting on a 2.5-centimetre pipe, and says the oil was contained, recovered and slated for disposal.

A statement posted late Sunday by the Environment Ministry says Trans Mountain’s is co-ordinating the response at the site, along with environmental and emergency contractors.

The ministry says there has been no reported impact to groundwater, but monitoring continues.

Sumas First Nation Chief Dalton Silver said Saturday’s spill marked the fourth time in 15 years that the pipeline has spilled oil on their land.

He said in a statement that it happened just south of a cultural and burial ground of great significance to his people.

“Our main concern is for the cleanup of this spill and preventing further impacts to our territory. We need to have our monitors on the ground immediately.”

Trans Mountain said crews at its incident command post were working on the cleanup with local officials, area Indigenous groups, the CanadaEnergy Regulator, the Transportation Safety Board and the province.

The pipeline moves about 300,000 barrels of crude a day between Alberta and B.C.’s waterfront terminal near Vancouver.

The federal government approved expansion of the Trans Mountain pipeline last June that will triple its capacity.


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New rules to speed up approvals for exploratory drilling off Newfoundland

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The Canadian government is moving ahead with new rules it says will speed up approvals for exploratory oil and gas drilling off the east coast of Newfoundland, but conservation groups are warning the changes undermine environmental protections.

Natural Resources Minister Seamus O’Regan issued a statement last week saying the new regulation will improve the efficiency of assessments while upholding the “highest standards” of environmental protection.

“Our government recognizes that Newfoundland and Labrador’s ability to rebound from the COVID-19 pandemic will depend largely on a strong, resilient and innovative offshore,” O’Regan said.

Three environmental groups have launched a federal court challenge, arguing exploratory drilling off Newfoundland will now be green-lit without proper environmental assessments.

The Ecology Action Centre, Sierra Club Canada Foundation and World Wildlife Fund Canada argued earlier this month that the science behind the new “regional assessment” or RA process is flawed.

Lawyer James Gunvaldsen-Klaassen, whose firm Ecojustice is representing the groups, argued that the regulation “flies in the face” of the purpose of environmental scrutiny under the new Impact Assessment Act.

The court later decided the case can proceed to a judicial review, but denied the group’s request for an injunction.

“The federal government stated that it intended to use the flawed RA and a loophole in the … legislation to allow for a broad exemption of all future offshore exploratory drilling in the region,” the groups said in a statement Thursday.

“Left unchallenged, this would set a poor and dangerous precedent for regional assessments, which could otherwise be a promising new mechanism under the Impact Assessment Act.”

O’Regan said the new regulation will help the oil and gas industry remain competitive because it will provide investors with “more predictability and certainty.”

As well, O’Regan said the regulation strengthens conditions to ensure projects adhere to environmental protection standards.

The Newfoundland and Labrador government said the new assessment process will shorten timelines to as little as 90 days. The province said the existing process can take up to 900 days.

“This is a significant improvement over the previous process which caused considerable delays,” the province said in a statement.

Siobhan Coady, Newfoundland and Labrador’s natural resources minister, said the province can now “explore its offshore and hopefully make some great discoveries.”

Provincial officials say the delays started in 2010 when the responsibility for offshore environmental assessments were shifted from the Canada-Newfoundland and Labrador Offshore Petroleum Board to the Canadian Environmental Assessment Agency.

According to the Canadian Association of Petroleum Producers, environmental assessments for exploratory wells in other countries take far less time to complete: 44 days in Australia; 96 days in the U.S. Gulf of Mexico; 79 days in Norway; and 18 days in the U.K.

During a recent industry conference in St. John’s, Coady warned that with oil prices plummeting, companies are closing and jobs are being lost.

In mid-March, Equinor and Husky Energy announced the decision to defer the Bay du Nord offshore development project due to falling oil prices and the economic downturn as countries responded to the novel coronavirus.

In addition, Hibernia has recently suspended its drilling program, the Terra Nova refit for May has been suspended and the West White Rose project has been deferred.

The Newfoundland and Labrador Oil and Gas Industries Association has said in order to remain competitive with Norway, the United Kingdom and Australia, the federal government needs to provide a renewed program of “incentives for offshore exploration.”

The offshore industry accounts for close to one third of the province’s GDP, 13% of wages and 10% of all jobs.

 


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N.L. warns of exodus of oil and gas industry without more federal help

Newfoundland and Labrador’s government is looking for a rapid answer from Ottawa on its request for aid for the offshore oil sector in light of a quickening exodus of exploration rigs from the province.

Premier Dwight Ball, Natural Resouces Minister Siobhan Coady and industry leaders held a news conference May 26 to repeat earlier warnings that hydrocarbon projects could be permanently lost to the province without a commitment from Ottawa.

Ball and Coady repeatedly warned that as each week passes, companies are closing and jobs are being lost.

The global COVID-19 pandemic and plummeting world oil prices have been causing problems for the East Coast industry.

In mid-March, Equinor and Husky Energy announced the decision to defer the Bay du Nord offshore development project due to falling oil prices and the economic downturn as countries respond to the novel coronavirus.

In addition, Hibernia has recently suspended its drilling program, the Terra Nova refit for May has been suspended and the West White Rose project has been deferred.

“Time may not be our friend,” the premier during the event.

imagesThe Newfoundland and Labrador Oil and Gas Industries Association, or NOIA, has said in order to remain competitive with Norway, the United Kingdom and Australia, the federal government needs to provide a renewed program of “incentives for offshore exploration.”

The province is backing many of the industry proposals, noting the offshore industry accounts for close to one third of the province’s GDP, 13% of wages and 10 per cent of all jobs.

Coady noted in an April 20 letter to federal Natural Resources Minister Seamus O’Regan that the province appreciated a $75 million allocation to help its industry reduce greenhouse gas emissions, but it needs further assistance.

Coady wrote that the province needs a program similar to Norway’s system of stimulating exploration through “direct tax payments.”

Her letter also called for a renewal of a regional tax credit program, and the introduction of 100% deductibility of capital costs to encourage companies to continue with their exploration plans.

Charlene Johnson, the chief executive of NOIA, said during Tuesday’s news conference that there are three drilling rigs in the province and the industry is hoping they will remain there, rather than being shifted to other jurisdictions.

“It’s a real toss-up because the minute Norway approves (incentives), it’s going to be very hard to entice them to stay in our waters,” she said.

“These decisions are being made now. We’ve had over a dozen companies end their membership in NOIA because they’re closing up shop here.”

O’Regan, who is also the MP for St. John’s South, said in a tweet that he’d been in discussion with Johnson regarding the growing anxiety in the offshore sector.

“We all have friends and family who are worried about their jobs. Oil and gas is in a state of upheaval out West, and around the world. But I am a champion of our offshore. Together we will get through this.”

Ottawa has been offering programs to help companies with liquidity problems during the pandemic.

Federal agencies last month announced commercial loans, ranging in size from $15 million to $60 million each, to fund cash flow needs for a year for companies that had shown themselves to be financially viable prior to the pandemic.

A spokesman for O’Regan’s office said these kinds of programs have helped provide liquidity to the small and medium-sized players in the industry.

In addition, the Canada Emergency Wage Subsidy program covers up to 75% of an employee’s wages for an employer, and can be applied to oil and gas firms, O’Regan office noted.