Crude Observations

Of losers and goats

Last week’s ranty diatribe about the Canadian energy sector sure seemed to strike a nerve with a number of readers, as it certainly appears that there are many people who, like me, are completely frustrated with the state of the industry and the attitude of various levels of government towards it.


This frustration reached an almost fever pitch this week as the BC provincial government announced on Tuesday that it would appoint a special council to study and comment on diluted bitumen and what mitigation measures would be needed in the event of a spill in inland or coastal waterways. In the meantime, it would seek to ban expanded shipments of diluted bitumen until the consultation was over.


It doesn’t take an advanced degree or anything to realize that this is a direct assault on the TransMountain pipeline expansion and an attempt to yet again delay the construction of this vital piece of infrastructure.


Reaction of course was swift and outraged. Outraged! Dammit!


Never mind that the pipeline has already been approved subject to significant spill response measures and been studied to death, or that this is a preposterous over-reach of provincial authority into federal jurisdiction or that the pipeline has already been given the green light by the BC government’s own environmental department. Never mind all that and focus on the fundamental issue here.


We have a provincial government that is determined to drive a spike into an economy and industry boosting project that has been subject to relentless and thorough analysis over the past five years. A provincial government determined to act against its own, and its country’s, economic self-interest so determinedly that it is willing to cast aside decisions already made, change the rules after the fact and otherwise upset the regulatory and investment landscape all while holding an industry hostage.


If I am in any industry and am thinking that I want to invest in BC, I am now seriously reassessing ALL of my plans. If the government thinks it can so spuriously and cavalierly toss convention, certainty and the rule of law overboard, why in the world would I consider investing a single red cent in that jurisdiction?


This reckless act is sure to send LNG proponents rushing to the pause button on all of their projects. After all, if the government can change the rules of the game so easily for a pipeline, imagine what they might do once an LNG project gets started.


It has been said much more eloquently before, but if you want an industry to take shape and grow and have the ability to both participate and profit from it, government’s role is to set the rules and regulations for that industry and the preconditions for responsible participation in it and then – GET OUT OF THE WAY. BC has demonstrably failed on that front, to their own detriment. Does this kill the pipeline? Probably not. But does it send a shudder through the energy industry and put pause to a lot of plans? Most assuredly.


Dear Premier Horgan. You only have 29 rigs drilling in NE BC when you should have twice that many. The Montney and the Horn River are two of the most prolific natural gas and liquids rich plays in North America. Like Alberta, BC is blessed with a world class resource that could generate wealth and prosperity for decades for your province, but the only way to exploit it is to export it. Your determination to thwart Alberta and deny your own industry is puzzling to put it mildly. Changing the rules before you’ve even finished writing them can only result in chasing all forms of investment away. This latest folly may play well to the coalition partner you so desperately need to retain power, but its long term effects on the province will be significant. Clever politics is not sound economics. But at least you get to stave off the non-confidence vote a little longer. Well done. I guess.


So after writing the preceding, the latest developments on this have the Alberta government acting all tough and threatening economic retaliation – which is great, if not a tad hypocritical since in the fall when Jason Kenney suggested the same thing and much the same tactics, they laughed at him, dismissed the idea and said everything was going to be fine.


Anyway, water under the bridge right? But here’s the thing, while I think economic sanctions or retaliation are fine, this requires bolder action. So accordingly I suggest dusting off the Secret Alberta PC party BC invasion plan (betcha didn’t know there was one), otherwise known as Operation Blaze the Bud.


This is a three part invasion that requires skill, daring and a fair amount of executional panache, but I know the Alberta side is up to it.


The key to a successful execution is the fact that the majority of BC’s population is located in Metro Vancouver and the Fraser Valley and that much of the interior is ideologically inclined towards Alberta anyway, if not outright owned by Alberta vacationers. This will allow rapid deployment of troops into the border regions. A final demographic aid is that many Vancouver residents are blissfully unaware of much that goes on outside their surroundings (see BC bud reference earlier) so a surprise attack will be easy to execute.


Phase I is the Calgary army approach involving two rapid pincer movements with the Southern attack moving to Cranbrook via Fernie and the northern portion travelling the TransCanada corridor to Kelowna and Kamloops, sending a division south via Radium to connect the southern flank and continue on to Creston and Osoyoos via the Crowsnest highway.  Once these two forces connect in Kelowna they will be ready for the final push into the Fraser Valley.


Meanwhile, Strike Force Whitecourt is charged with securing the Jasper to Valemount region which as we know is where the original TransMountain pipeline crosses from friendly Alberta into hostile BC.


As the same time, ground forces out of Grande Prairie will advance into NE BC to liberate what has often been called NW Alberta, holding the line at Prince George.


The last part of the strategy is a bold two simultaneous paratroop attack on Burnaby Mountain and the Abbotsford Airport to secure both the southern end of the TransMountain pipeline as well as vital road links back up the Fraser Valley towards Chilliwack and Hope. Control over the airport will allow the newly nationalized WestJet to land reinforcements for an eventual march into Vancouver.


If it’s not raining the Burnaby troops are authorized to advance as far as the Second Narrows Bridge. Closing off that crossing will grind the city to a halt.


The plan was for the invasion to last no more than 3 to 4 days depending on traffic, avalanche danger and wildlife on the roads but if traffic is really bad, it could take several weeks and become a protracted war of attrition with no winners on either side – just like the pipeline impasse.


Or, BC could just agree to an existing pipeline being expanded for everyone’s mutual benefit.




Anyway, since I don’t like to end my blog on such a down note, I did want to spend a few paragraphs talking about winning instead of losing. Specifically let’s talk about goats.


I am a big NFL football fan. I am an Eagles fan, a Denver fan and an Arizona Cardinals fan. If I step into the way-back machine, I can even remember a time when I was a Buffalo Bills fan (so painful) and an occasional 49er and, yes, an old timey Patriots fan.


I am old enough to remember the New England team led by Steve Grogan and Tony Eason that slipped into the Super Bowl only to get completely waxed by the Chicago Bears in 1985. I cheered for them then because they were lovable underdogs who didn’t stand much of a chance.


Then I didn’t cheer for them when they made the Super Bowl again even though they had Drew Bledsoe at quarterback, who I liked, because they had Bill Parcells who I didn’t like at all.


Then I kind of forgot about them until a fateful day in the September 2001, when Drew Bledsoe got hit by Mo Lewis of the New York Jets and some punk kid named Tom Brady took over. At the time, not much was expected of this unknown player – the 199th pick in the draft, but he never relinquished his spot and the rest is history with the Patriots winning the Super Bowl that year and setting the stage for greatness to come.


Which is great, right?


It is to me, because no matter how much of a fan I am of a specific team, I am more a fan of the game. For this reason, I am also a fan of Tom Brady and the New England Patriots because of what they have achieved over these past 17 years and change.


Look, I know it’s stylish and trendy to be on the “anybody but” bandwagon and it’s easy to pretend to hate them, and there’s all the allegations of cheating and referee favouritism, but I look at it another way – if all your opponents and haters can come up with is half-baked theories about deflated footballs and the like, you have probably done your job on the field pretty well.


I personally think it’s time to appreciate the level of sustained greatness that is the hallmark of the New England Patriots organization.


It’s not hard to appreciate. It’s public record and there’s this thing called the internet.


What has Tom Brady accomplished in partnership with Bill Belichek since his unheralded ascenscion to the throne in Foxboro?


His won-loss is 196 and 55 in the regular season and 29 and 9 in the postseason. That’s the best winning percentage among NFL quarterbacks – by far.


He is playing in his record 8th Super Bowl. He’s won 5. He leads the NFL in pretty much every conceivable quarterback category except rushing.


He will retire, sometime, without a doubt, as the greatest quarterback of all time.


Look, I know I sound a bit like a fan boy, but think about his record in the context of a league where players regularly wash out after three years.


Here he is in the Super Bowl again. Except this time he is 40 years old. The oldest quarterback to start in the Super Bowl. And we hate him for that? What were you doing at age 40? I know what you weren’t. You weren’t having the statistically best season of your career. You weren’t looking to win your 3rd Super Bowl in four years. You weren’t getting flattened 325 pound freight trains on a regular basis.


I know he does the weird diet thing, his health guru is creepy, he’s worth gazillions of dollars and he’s married to a supermodel. So I get it, we should be envious.


But you know what? Not me.


I’m appreciative. We are watching the twilight part of what is perhaps the single greatest career by an athlete across any sport, combined with probably the greatest coach of all time as part of the most disciplined and stable franchise in the league. Heck, Tom Brady even plays for LESS money so the team can fit better players under the salary cap. Who does that in this greed is good age?


This isn’t just “look the Pats are in the playoffs and SuperBowl again, yawn I hope they lose”. This is generational. We will not see their like again probably in all of our lifetimes.


They’re that good. This is (long time ago) Montreal Canadiens style sustained excellence, against way tougher opposition.



Remember. He’s 40. And he may only have another couple of years left.


It’s OK to appreciate him.




Why do I bring this up and what does it have to do with energy? Not much directly but then you start to think about the relentless pursuit of a singular goal, accomplished from humble beginnings, the result of energy, dedication, teamwork and opportunity. Mix in an unparalleled ability to adjust on the fly, yet be disciplined and stay in the designated lane. Flawless preparation mixed with visionary leadership and a steady hand on personnel and spending has produced a once in a generation opportunity that is awesome to behold.


Sounds like a good recipe for success in pretty much any world including energy.


I like the plucky underdog story as much as the next guy, and I truly like the Eagles. Just not this year. So rather than jeer and hope the Pats lose, I am celebrating that I have been able to witness it. Dynasties are cool, slow old guys dominating a young man’s game is cool and watching it will help me, at least for 12 hours on Sunday (I’m big on pre-game) forget about the sh**show that is the TransMountain pipeline impasse and, hopefully, witness history.


Go GOAT, go Pats.


Oh, one last thing! 10 million barrels, that’s a lot. Question is, what kind of liquid is it?


Prices as at February 2, 2018 (January 26, 2018)

  • The price of oil held steady during the week before selling off on Friday.
    • Storage posted a big increase
    • Production was up
    • The rig count in the US was up modestly
  • Ahead of a deep freeze and another large withdrawal, natural gas completely fell apart, falling almost 20% – expect continued volatility…


  • WTI Crude: $65.45 ($66.21)
  • Nymex Gas: $2.846 ($3.511)
  • US/Canadian Dollar: $0.8059 ($ 0.8116)



  • As at January 26, 2018, US crude oil supplies were at 418.4 million barrels, a increase of 6.8 million barrels from the previous week and 76.4 million barrels below last year. Note too that the Strategic Petroleum Reserve is also some 30 million barrels below last year’s level)
    • The number of days oil supply in storage was 25.1 behind last year’s 30.2.
    • Production was up for the week by 41,000 barrels a day at 9.919 million barrels per day. Production last year at the same time was 8.915 million barrels per day. The change in production this week came from an decrease in Alaska deliveries and a increase in Lower 48 production.
    • Imports rose from 8.051 million barrels a day to 8.430 compared to 8.290 million barrels per day last year.
    • Exports from the US rose to 1.765 million barrels a day from 1.411 and 0.549 a year ago
    • Canadian exports to the US were 3.481 million barrels a day, down from 3.045
    • Refinery inputs were down during the week at 16.013 million barrels a day
  • As at January 26, 2018, US natural gas in storage was 2.197 billion cubic feet (Bcf), which is 16% lower than the 5-year average and about 19% less than last year’s level, following an implied net withdrawal of 99 Bcf during the report week.
    • Overall U.S. natural gas consumption was down during the report week by 2%, influenced by warming weather
    • Production for the week was up 1%. Imports from Canada were down 2% compared to the week before. Exports to Mexico were up 3%.
    • LNG exports totalled 18.4 Bcf.
  • As of January 15 the Canadian rig count was 323 – 221 Alberta, 27 BC, 68 Saskatchewan, 7 Manitoba. Rig count for the same period last year was about 270.
  • US Onshore Oil rig count at January 19 was at 765, up 6 from the week prior.
    • While other areas generally declined, the Permian added 18 rigs
    • Peak rig count was October 10, 2014 at 1,609
  • Natural gas rigs drilling in the United States was down 7 at 181.
    • Peak rig count before the downturn was November 11, 2014 at 356 (note the actual peak gas rig count was 1,606 on August 29, 2008)
  • Offshore rig count was down 1 at 16
    • Offshore rig count at January 1, 2015 was 55
  • US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 70%/30%



  • Suncor implemented a fleet of Autonomous Vehicles into their mining operations.
  • A number of Canadian drilling companies are taking advantage of divergent utilization levels to send excess equipment to the Untied States to capitalize on the tighter market there
  • On Wednesday, an explosion was reported on the Seneca Lateral pipeline near Summerfield, Ohio. Tallgrass Energy announced flows on the segment would be curtailed until repairs were completed. The Lateral is part of the Rocky Mountain Express (REX) pipeline system
  • Trump Watch: The State of the Union is Trump. Trump delivered his State of the Union address on Tuesday and the very next day, a train carrying the Republican House to a retreat collided with a truck. Coincidence? I think so. Conspiracy by snowflake Democrats – you be the judge.


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