PIPELINE NEWS NORTH
Serving the Oil and Gas Industry in Northern B.C. and Alberta VOL. 14 • ISSUE 02
February 2022
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Survey finds strong support for higher oil and gas royalties A majority of British Columbians seem to a favour a tax-to-the-max regime for B.C.’s oil and gas industry – an approach that, if overdone, could reverse the trend that has seen more investment on the B.C. side of the Montney formation than the Alberta side. The B.C. government plans to revise how it taxes the oil and gas industry in B.C. The current tax credit and royalty regime has been criticized, notably by the Green Party, as a subsidy that gives the industry a free ride, with the government foregoing too much royalty revenue. Last year, the B.C. government appointed Nancy Olewiler, a public policy professor at Simon Fraser University, and Jennifer Winter, associate professor of economics and scientific director of the energy and environmental policy research at the University of Calgary, to assess B.C. oil and gas credits to provide some guidance for a review of B.C. oil and gas royalties and credits. In their assessment, they suggested moving to a system more aligned with Alberta’s. Based on the Olewiler-Winter report, the B.C. government
issued a discussion paper and began a public engagement. On Wednesday, the results of its public engagement were released. “Overall, the general public and various non-profit organizations (academics, NGOs, Indigenous organizations) are in favour of using an update to the royalty regime as a tool for the provincial government to pursue its net-zero emissions goals and the strategic priorities laid out in the Roadmap to 2030 plan,” a report on the public engagement states. Generally, it found strong support for “a flat royalty rate with no capital recovery mechanism” and “high royalty rates that reflect the social, environmental, and health impacts of oil and gas extraction.” That’s another way of saying “nix the deep well credits.” It also found support for “high additional fees for the use of water in operations that leave the water contaminated, such as fracking,” and fines for methane leaks.
Of the respondents, 37 per cent were from the Lower Mainland, 36% from Vancouver Island and just 5 per cent from the region where most natural gas is produced in B.C. -- the northeast. Of all the tax breaks offered to oil and gas producers, the one that has attracted the most criticism is the deep well credit, which was developed back when deep horizontal drilling was still an “unconventional,” risky and high cost approach. The credit helps defray the higher cost of deep well drilling. Deep, horizontal well drilling is now the predominant approach to natural gas well drilling. The amount the government takes in annually in natural gas royalties has been declining for more than a decade, despite the fact B.C. has seen a significant increase in natural gas production, and the deep well credits have been blamed for the government not receiving its fair share of royalty revenue.
20 The Pipeline News North, FEBRUARY 17, 2022
PNN MISSION STATEMENT Pipeline News North provides current, interesting, and relevant news and information about the oil and gas industry in Northeast B.C. and Northwest Alberta. Have an interesting story to share or a news lead? Email us at editor@ahnfsj.ca.
WILLIAM JULIAN REGIONAL MANAGER 250-785-5631 wj@ahnfsj.ca
Slight uptick in natural gas drilling expected this year Natural gas producers are expected to spend $4.1 billion in B.C. this year, which may be less than might be anticipated, owing to the uncertainty over the B.C. government’s ongoing review of oil and gas royalties and credits, according to the Canadian Association of Petroleum Producers (CAPP). CAPP released a forecast for spending in Canada’s oil and gas sector Thursday that predicts a 22 per cent increase in spending in Canada this year over 2021. Canada-wide, it forecasts capital spending in 2022 will be $32.8 billion – a slight uptick over the $27 billion spent in 2021. Alberta is expected to see the most spending in upstream oil and gas investments at $24.5 billion, followed by B.C. at $4.1 billion. Last year, producers spent about $3.4 billion in B.C. Spending in Saskatchewan is expected to be $2.7 billion, and $1.6 billion in Newfoundland-Labrador’s offshore sector. Drilling activity might be higher in B.C., were it not for the uncertainty over the ongoing review of oil and gas royalties and credits, CAPP speculates.
The B.C. government is responding to criticism that it continues to subsidize the fossil fuel industry through a number of tax credits, notably its deep well credits. Those credits, and the oil and gas royalty and tax regime overall, is currently being reviewed and may be overhauled. “With rapidly growing global demand for natural gas translating into multi-year highs in natural gas prices, producers in British Columbia are showing interest in growing their investment in the province,” CAPP says in a news release. “However, the ongoing review on royalties paired with the current moratorium on issuing development permits stalled investment in 2021. Investment in the province fell approximately $600 million short of last year’s anticipated $3.9 billion. “Rig counts in B.C. currently sit at half of the historical average for mid-January indicating producers are potentially holding off some investment until later in 2022.” nbennett@biv.com
Capstone Energy Increasing Distributor Support System JANIS KMET ADVERTISING CONSULTANT DAWSON CREEK 250-782-4888 EXT 101 C: 250-219-0369 jkmet@dcdn.ca
ROB BROWN MANAGING EDITOR DAWSON CREEK 250-782-4888 ext 112 C: 403-501-1492 editor@dcdn.ca
RYAN WALLACE ADVERTISING MANAGER FORT ST. JOHN 250-785-5631 C: 250-261-1143 rwallace@ahnfsj.ca
MATT PREPROST MANAGING EDITOR FORT ST JOHN 250-785-5631 C: 250-271-0724 editor@ahnfsj.ca
CONTACT US
A global leader in carbon reduction and on-site resilient green Energy as a Service (EaaS) solutions, announced today it is increasing its Distributor Support System, or DSS program fee to support the expanding EaaS business. The Company anticipates receiving an estimated $2.8 million in the calendar year 2022. The increase in annual DSS fee combined with the new expense reduction plan implemented last week is intended to support Capstone’s stated goal of reaching consistent quarterly positive adjusted EBITDA. The Company has recently undertaken a holistic review of the organization, taking the growing EaaS business into account. The Capstone DSS program adds diversity to the Company’s EaaS revenues which also include long-term rentals, long-term service agreements, spare parts and engineering services. The DSS program started back in calendar year 2018 when Capstone received $1.1 million from its global Distribution network through funding derived from a formula based on a Capstone global Distribution partner’s prior calendar year of Capstone-specific revenue. Today, as a result of the DSS program, Capstone has increased its worldwide marketing and customer adoption efforts without negatively affecting its adjusted EBITDA results.
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provide improved worldwide Distributor training, sales efficiency, website development, branding, and funding for increased strategic marketing and customer adoption activities. Specifically, the DSS program consolidates funding for additional support that is necessary for ongoing Distributor business development activities, improved Distributor aftermarket support, customer lead generation, brand awareness, and marketing services for each geography and market vertical served. “The DSS program has been very successful and is a key enabler of our current 17% growth in the trailing twelve months ended December 31, 2021 over the previous twelve month period and will support future EaaS revenue growth plans as we continue to focus on customer adoption efforts, marketing and branding,” said Darren Jamison, President and Chief Executive Officer of Capstone Green Energy. “The beauty of the DSS program is that it allows us to speed up the maturation process within the Capstone Green Energy Distribution channel while continuing to expand the program’s funding each year as our annual revenue increases.” Mr. Jamison continued, “In addition, it helps identify which of our Global Distribution partners are aligned with Capstone’s corporate goals and improve our ability to execute future EaaS growth plans.”
The new DSS program increase aims to support additional growth of the Capstone EaaS business and
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The Pipeline News North, FEBRUARY 17, 2022
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Oil Price Sensitivity Analysis and Macroeconomic Opportunities Analysis/Forecasts Report 2022-2025 The “Oil Price Sensitivity Analysis and Macroeconomic Opportunities” report has been added to ResearchAndMarkets.com’s offering.
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Oil Price Sensitivity Modelling and the Global Macroeconomic Transformation - An Overview Key Metrics - Oil Price Projections by Scenario Macroeconomic Growth Drivers Macroeconomic Growth Restraints 3. 2025 Oil Demand, Supply, and Price Model
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To establish the sensitivity of industry output to oil prices, a comprehensive correlation exercise was undertaken for multiple countries. Food products, chemicals, pharmaceuticals, wholesale and retail trade, and finance and insurance demonstrated a strong negative correlation with oil prices. Qualitative findings further support the nature and strength of the correlation between oil prices and these industries. The study delves into a scenario-based impact assessment across countries. The impact of the high and low oil prices scenarios was explored for a combination of net oil exporters and importers, that is, Saudi Arabia, Qatar, the United Kingdom, and India. For the United States, Saudi Arabia, and Russia, GDP growth, inflation, and fiscal deficit outlooks were explored in detail in light of price scenarios. For industries showing a strong negative correlation with oil prices, scenario-based industry forecasts were generated. Key Issues Addressed How will oil prices evolve until 2025? Which key demand- and supply-side factors are influencing the price trajectory? Will the impact of demand- and supply-side factors on oil prices vary until 2025? How strongly are oil prices correlated with output across various industries? What is Saudi Arabia’s GDP growth outlook under a high and low oil price scenario? How will the US’ fiscal deficit evolve under the baseline oil price scenario? Under a high oil price scenario, what is Russia’s chemicals’ IIP outlook? What economic diversification opportunities will oil price movements generate? Key Topics Covered:
The United States - GDP Growth Outlook by Oil Price Scenario The United States - Inflation Outlook by Oil Price Scenario The United States - Fiscal Deficit Outlook by Oil Price Scenario Saudi Arabia - GDP Growth Outlook by Oil Price Scenario Saudi Arabia - Inflation Outlook by Oil Price Scenario Saudi Arabia - Fiscal Deficit Outlook by Oil Price Scenario Russia - GDP Growth Outlook by Oil Price Scenario Russia - Inflation Outlook by Oil Price Scenario Russia - Fiscal Deficit Outlook by Oil Price Scenario 5. Oil Price and Industry Correlation Analysis Oil Price and IIP Correlation - Methodology Oil Price and IIP Correlation - Results Oil Price and IIP Correlation - Qualitative Analysis Oil Price and Service GDP Correlation Methodology Oil Price and Service GDP Correlation - Results Oil Price and Service GDP Correlation Qualitative Analysis 6. Oil Prices and Industry Impact Assessment Food Products - The United States: Outlook by Oil Price Scenario Chemicals - Russia: Outlook by Oil Price Scenario Pharmaceuticals - Germany: Outlook by Oil Price Scenario Wholesale and Retail Trade - India: Outlook by Oil Price Scenario 7. Growth Opportunity Universe
1. Strategic Imperatives Why Is It Increasingly Difficult to Grow? The Strategic Imperative The Impact of the Top Three Strategic Imperatives on the Global Economy Growth Opportunities Fuel the Growth Pipeline
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8. Appendix Oil Price Modelling - Detailed Methodology US GDP Growth, Inflation Rate, and Fiscal Deficit Saudi Arabia GDP Growth, Inflation Rate, and Fiscal Deficit Russia GDP Growth, Inflation Rate, and Fiscal Deficit Oil Price and IIP Correlation - Detailed Methodology Oil Price and IIP Correlations - Results for All Industries Oil Price and Service GDP Correlation - Detailed Methodology Oil Price and Service GDP/GVA Correlations Results for All Industries Industry Outlook For more information about this report visit https://www.researchandmarkets.com/r/kzc5t
22 The Pipeline News North, FEBRUARY 17, 2022
Schlumberger announces deployment of reservoir engineering and digital solutions Schlumberger today announced an enterprisewide deployment of the cloud-based DELFI* cognitive E&P environment for ConocoPhillips. ConocoPhillips will use Schlumberger digital solutions enabled by the DELFI environment to bring its reservoir engineering modeling, data and workflows to the cloud. “This digital platform will drive workflow and data efficiency, enabling ConocoPhillips to meet
their diverse reservoir engineering modeling needs worldwide,” said Rajeev Sonthalia, president, Digital & Integration, Schlumberger. “Expert teams from both companies will work closely together to integrate our cloud-based digital solutions and AI with ConocoPhillips’ reservoir engineering modeling and workflows.” Upon
completion
of
the
ConocoPhillips reservoir engineers will have access to cloud-based, high-performance computing resources in the DELFI environment as well as Schlumberger’s reservoir engineering solutions— including Petrel* E&P software platform’s Petrel Reservoir Engineering, INTERSECT* highresolution reservoir simulator, and ECLIPSE* industry-reference reservoir simulator.
integration,
CAPP projects investment in Canada’s Natural Gas and oil at $32.8 billion The Canadian Association of Petroleum Producers (CAPP) is forecasting a 22 per cent
increase in natural gas and oil investment in 2022. Capital spending in the sector is expected to grow
by $6.0 billion to reach $32.8 billion, compared to an estimated total investment of $26.9 billion in 2021. (All figures in Canadian dollars.) The expected growth in spending for 2022 would mark the second straight year of significant increases in investment as Canadian producers look to capitalize on stronger commodity prices due to rapidly growing global demand for natural gas and oil. Conventional oil and natural gas capital investment for 2022 is forecast at $21.2 billion, up from an estimated $18.1 billion last year, while growth in oil sands investment is expected to increase 33 per cent to $11.6 billion compared to $8.7 billion last year. While this is great news for the struggling Canadian economy, within the context of total global investment Canada is continuing to lose market share to other jurisdictions. In 2014, Canada was viewed as a top tier international investment jurisdiction for resource development and attracted $81 billion or more than 10 per cent of total global upstream natural gas and oil investment. International energy research firm Wood Mackenzie is forecasting global spending on upstream natural gas and oil production will reach $525 billion in 2022. Based on that forecast Canada has fallen to just six per cent of total market share, a four per centage point drop which represents over $21 billion in potential investment.
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