These are stories Report on Business is following Tuesday, May 14, 2013.
Oil supply to climb
Canadian oil production is projected to surge over the next five years, but with some bumps along the way, part of what the International Energy Agency calls a “supply shock” from the North American boom.
However, the Paris-based group warns today that oil sands production will be greater than current pipeline capacity can handle in the medium term, and that the discount on western Canadian oil will probably delay “incremental volumes” if it keeps up.
The report from the IEA, a forecast through to 2018, comes amid the controversy over “dirty oil,” trade negotiations with the European Union and severe pipeline constraints that have played a role in the hefty discount on Canadian oil to other world benchmarks.
Over all, the “supply shock created by a surge in North American oil production will be as transformative to the market over the next five years was the rise of Chinese demand over the last 15,” the group says in its accompanying statement, referring to both the oil sands and the projected increase from U.S. shale.
“Following several years of stronger-than-expected North American supply growth, the shockwaves of rising United States (U.S.) shale gas and light tight oil (LTO) and Canadian oil sands production are reaching virtually all recesses of the global oil market,” the IEA says in the medium-term market report.
“This North American supply revolution is not happening in a vacuum. Sustained high oil prices helped unleash it.”
The IEA projects oil sands projection to increase by 1.3 million barrels a day by 2018, raising production of total Canadian liquids to 5 million barrels a day in 2018, from 3.7 million now.
The increase in output will be limited in 2014 and 2015 given pipeline constraints, it adds, but “growth rates should subsequently pick up.”
It notes the contribution of Imperial Oil Ltd.’s Kearl project, and Suncor Energy Inc.’s Fort Hills operation.
“For oil sands production in particular, production growth is centred largely in the in situ production of bitumen, though mined bitumen production from the first and second phases of Imperials Kearl project, as well as Suncor’s Fort Hills, is also a component,” the IEA says.
“The economics of upgrading mined bitumen for production of light synthetic crude oil are challenged in light of the large volumes of incremental output occurring in the U.S.”
The discount on Western Canadian Select to other West Texas Intermediate and Brent is a trouble spot, one caused by the U.S. boom and the pipeline troubles.
TransCanada Corp.’s controversial Keystone XL pipeline to the Gulf Coast, for example, has been held up by environmental concerns in the United States and is still awaiting approval.
“Whether or not the trans-border portion of the Keystone XL pipeline is approved will affect this discount and clearly the impetus for government is there as the discount of Western Canadian Select (WCS) to other oil benchmarks reduces Alberta and Canadian government revenues,” the IEA says, notably amid an aggressive push by Canadian officials to get Keystone approved.
“Higher-cost-rail transport is an alternative option but would likely eat into producer margins, and thus might slow projects.”
- Nathan VanderKlippe travels the Keystone route
- CN tries out liquefied natural gas to power locomotives
- Alberta revamps energy regulator in bid to polish environmental image
- With pipelines on hold, oil storage services boom
- EU dismisses Canada’s threat to appeal dirty oil designation
- Canadian economist takes his anti-oil sands message to Europe
- ‘No such thing as ethical oil,’ Al Gore tells Toronto audience
- Al Gore isn’t overly pleased with Canada
EC raids oil companies
European Commission regulators raided several oil companies today in an investigation into whether oil benchmarks have been manipulated.
“The commission has concerns that the companies may have colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for a number of oil and biofuel products,” the commission said in a statement.
“Furthermore, the commission has concerns that the companies may have prevented others from participating in the price assessment process, with a view to distorting published prices.”
No allegations have been proven. Such raids are an initial step in investigating, the commission said, and "the fact that the commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour." Nor does it "prejudge" the outcome of a probe.
“The prices assessed and published by price reporting agencies serve as benchmarks for trade in the physical and financial derivative markets for a number of commodity products in Europe and globally,” the commission said.
“Even small distortions of assessed prices may have a huge impact on the prices of crude oil, refined oil products and biofuels purchases and sales, potentially harming final consumers.”The EC did not name the companies, saying only that authorities raided several. The Financial Times reported that Norway’s Statoil was among them, and that Royal Dutch Shell and Platts, a reporting agency, are involved in the probe.
Shell and Statoil both said they were helping in the investigation, while Platts said authorities had paid a visit to its operations.
"The suspected violations are related to the Platts’ Market-On-Close (MOC) price assessment process, used to report prices in particular for crude oil, refined oil products and biofuels, and may have been on-going since 2002," Statoil said.
RIM launches Q5
Research In Motion Ltd. unveiled another new smartphone today, and chief executive officer Thorsten Heins says he’s “already in love.”
The lower-end Q5 unveiled at a BlackBerry event in Florida runs the new BB10 operating system, comes in black, white and red, and is “youthful and fun,” Mr. Heins says.
This one, which follows the launch of its new BB10 touchscreen and keyboard models, is aimed at different markets, notable Europe, the Middle East, Africa, Asia and Latin America, The Globe and Mail's Shane Dingman writes.
“I’ve been using this device for a few days now and I’m already in love,” Mr. Heins said, also announcing plans to share access to its BBM messaging feature on iPhones and Android devices.
- RIM unveils new BlackBerry Q5 handset for emerging markets
- Nokia unveils new metal-body Lumia smartphone
House price gains slow
Canadian house prices continue to come off the boil.
Prices climbed 2 per cent in April from a year earlier, according to the Teranet-National Bank house price index released today, marking the slowest 12-month gain since November, 2009.
On a monthly basis, prices rose 0.2 per cent from March.
“Except for April 2009, when the country was in recession, it was the weakest monthly change the 15 years since the inception of the index,” said the report prepared by senior economist Marc Pinsonneault of National Bank of Canada.
Prices rose over the 12 months by 6.1 per cent in Quebec City, 5.5 per cent in Calgary, 5.4 per cent in Hamilton, 4.4 per cent in Winnipeg, 4.3 per cent in Toronto, 3.6 per cent in Edmonton, 2.8 per cent in Halifax, 1.5 per cent in Ottawa-Gatineau, and 1.3 per cent in Montreal.
Prices slipped by 3.3 per cent in Victoria and 1.5 per cent in Vancouver, marking the ninth month of decline in the latter.
- David Parkinson in Economy Lab: In Canada's housing market, the other shoe has already dropped
- House price gains expected to dip to lowest since 2009
- Flaherty's concerns throw 30-year mortgages in spotlight again
- Vancouver home resales down 6.1% in April from year ago
- GTA home resales fall only 2% in April in wake of steep declines
- Why is the man who bet against U.S. housing so worried about Canada?
- Peter Munk's contrarian bet on Toronto's condo market
Loeb targets Sony
Daniel Loeb is going after Sony Corp., urging a break-up that would see the company spin off its entertainment operation, which boasts the likes of musicians Adele and lucrative movie productions.
Mr. Loeb’s Third Point hedge fund, in a letter to Sony’s chief executive officer, said such a move could boost the company’s shares by some 60 per cent, according to reports today.
Third Point owns more than 6 per cent of Sony’s stock and is prepared to pump almost $2-billion (U.S.) more into an IPO of the entertainment group.
BHP pulls back
BHP Billiton Ltd.’s new chief is looking to slash spending, telling a conference today that “strict adherence” to the company’s strategy has helped sharpen its focus.
“We must challenge ourselves to increase returns from new investment, in the same way that we need to squeeze returns from our installed infrastructure,” chief executive officer Andrew Mackenzie said.
“In this regard, capital and exploration expenditure for the 2014 financial year will decline significantly, to approximately $18-billion, and the rate of spend is expected to decline substantially thereafter,” Mr. Mackenzie added.
“By reducing our annual spend and increasing internal competition for capital, we expect to maximize returns from incremental investment, while delivering a substantial increase in the group’s free cash flow.”
Streetwise (for subscribers)
- In Canada's housing market, the other shoe has already dropped
- Pragmatic conservatives missing in the climate change debate
ROB Insight (for subscribers)
- Competition Bureau appealing Toronto Real Estate Board online listings case
- Teachers taps Mock as new CEO
- Rona loss widens, revenue dips
- Benetton becomes latest big retailer to agree to Bangladesh safety pact
- Visa to cut some fees in Europe to ease antitrust regulator's concerns
- Former BlackRock fund manager arrested in insider trading probe
- Suncor Energy Inc$40.41+0.64(+1.61%)
- Imperial Oil Ltd$35.97-1.26(-3.37%)
- TransCanada Corp$63.66+0.10(+0.16%)
- Crude Oil Front Month Futures$49.56+0.52(+1.06%)
- BlackBerry Ltd$12.09-0.13(-1.06%)
- Statoil ASA$18.60+0.15(+0.81%)
- Sony Corp$40.94-0.35(-0.85%)
- BHP Billiton Ltd$41.10+0.30(+0.74%)
- Updated July 28 2:06 PM EDT. Delayed by at least 15 minutes.