As many of you may have noticed, I’ve closed a lot of my blogs since the election with the line “where’s my damn pipeline” and guess what, as of this week, we are a whole bunch of steps closer to having our damn pipeline. Or as some commentators have said, in 4 days Donald Trump has done more for Canada’s oilpatch than Trudeau or Notley has done in 2 years.

That’s’ right, on Tuesday, Donald Trump signed an executive order asking TransCanada to resubmit its application for the northern portion of the Keystone XL Pipeline as well as authorizing the completion of the recently halted, 90% complete, North Dakota Access Pipeline.

While widely expected, these pieces of paper set off a flurry of celebration, protest and analysis, all about what is really at the end of the day a pretty mundane topic. We all know the benefits to Canada, Alberta and the oilsands of the Keystone XL so I won’t rehash those here. However, I am never one to let an opportunity slide to provide some pithy comment and make fun of media over-reaction, so I thought it might be worthwhile to take a look at some of the major actors in this Kabuki theatre and see who are the winners and losers in this deal, since that seems to be how we will have to assess these things going forward.

In no particular order then…

Alberta and the Oilpatch – Winner winner, chicken dinner. There is absolutely no doubt that Alberta, the oil patch and the oilsands are the big winner in this development. The Keystone XL pipeline is a major conduit for oilsands oil to reach the Gulf Coast refineries that are eager to receive this heavy oil. While we are all aware of the need to expand our export markets with initiatives like the TransMountain Expansion and Energy East, the US market will always be our largest export market and the investment in infrastructure and production to support the volumes needed on this project are significant and, at a time when investment in oilsands production is relatively anemic, welcomed. The permit application has already been resubmitted and the 60 day clock is ticking. Assuming a favourable outcome, dare we suggest that KXL may in fact be in service before TransMountain? Perhaps. Royalties, taxes, jobs. Whoohoo! Bring it on!

Canada – winner. For all the same reasons as Alberta. Plus, equalization, so Quebec is a tangential winner.

Donald Trump – winner. He said he was going to approve Keystone XL and this is the first step. His constituency and base want jobs and infrastructure investment. This does that, sort of. You can only imagine the conversation with his advisors…

Donald Trump: “What’s this I hear about Canada and oil – is it anywhere near Toronto – Fabulous city, I have a project there.”

Advisors: “No sir, but Canada has the 3^rd largest oil reserves in the world, in a place called Alberta.”

DT: “That’s a weird name. Just behind us in reserves, right?”

Advisors: “No sir, we’re 11^th, and that tight oil isn’t going to last forever.”

DT: “11^th? Unacceptable. Should we invade Canada and take their oil? They’re closer than Iraq.”

Advisors: “Probably wouldn’t go over too well given they are an ally. Besides, they send pretty much all their production to us because they have no ability export anywhere else.”

DT: “Aha – a trade imbalance – Let’s slap ‘em with a tariff! How about a wall?”

Advisors: “Well they buy a lot of our natural gas and they already sell their oil to us to us at a deep discount and our refiners make a killing off of them.”

DT “So wait, you’re telling me the country with the 3^rd largest reserves in the world is stuck selling pretty much all all their product to us at a discount? What were they thinking? That’s tremendous. How do we lock that in?”

Advisors: “Well, they want to build this pipeline to send more of their oil to us, but Obama didn’t want it.”

DT: “Really? Even better! Sold! That’s one of those things I can just approve, right? Wait, just for fun, let’s tell ‘em that they can only have their pipeline to give us all their cheap oil if they use American labour and steel to build it. I want to see that fella with the nice hair do a tap dance around that one.”

Justin Trudeau – Soft winner. By not getting in the way of the Keystone XL and being initially supportive before it was terminated by Obama, he wins by standing still. Now he just needs to stay out of the way and stop trying to take credit.

Rachel Notley – soft loser. Why do I say that when she is the premier of the province that stands to gain the most by building Keystone XL?  Well first off, the standard NDP position has been that they didn’t want the pipeline because it was “shipping jobs to Texas” and Rachel Notley was fully onboard with that when she wasn’t protesting the oilsands themselves before, you know, she was elected and realized they matter. But really, the main reason is that her arguments about needing social licence and how carbon taxes facilitate infrastructure projects just don’t hold up to scrutiny here. Obama as much as explicitly admitted he denied Keystone XL for political, partisan reasons. Trump approved it because he doesn’t care to appease that constituency. All the rest was just noise and feel goodiness.

The environment – soft winner. Wait. What? Aren’t  oilsands developments and pipeline investment bad for the environment? In isolation, sure. But those barrels are going to be produced regardless, because demand for oil is growing, and those barrels are going to find their way to users. So the choice is the most heavily regulated oil production in the world shipping by a massively regulated pipeline or, barrels from places like Saudi Arabia and Venezuela where “rules” are much weaker as well as barrels from Canada, all shipped by a mix of emissions belching tankers, trucks, trains and inland barges. Since no one on the consuming end, which produces 85% of greenhouse gasses, seems inclined to moderate their use, you may as well source the oil from someone who actually cares about the environment and ship it the safest way you know how, right?

The environmental lobby and professional protest movement – Loser. I have said in a previous post that the Trump administration is pretty much the worst thing ever for the environmental lobby and it is indeed turning out that way. Where for the past eight years they have had unfettered access to a sympathetic and ultimately spineless administration and a fawning, excitable press, they are now faced with a President and cabinet that, what is the best way to say this, doesn’t even seem inclined to give them the time of day, let alone listen to them.

The easiest way to see evidence of this is what I think is the relatively muted lobby response to the Executive Orders. One day of protests at the White House? With a mere  hundreds of people? When just a few short years ago we had Darryl Hannah (remember her?) chained to the White House gates and the human chain and all that? The organizers know that the only likely outcome from a massive White House protest is that they will be added to the people count for the inauguration or the administration will just say they weren’t there, so why bother right? I’m not suggesting that there won’t be protest and lawsuits and roadblocks, but judging by the initial reactions, they are pretty tame so far. Because they know they can’t compete against the reality show that is going on in the White House – it’s all-consuming and the media lurches from one Trump event to the next and ignores all else, even in Canada. Case in point, does anyone remember Kevin O’Leary? Didn’t think so, and now we’ve moved on to the imminent renewal of the US-Mexican war because of a Wall. Forget Climate – Remember the Alamo!

The media – Losers. Again. Look, I have to say it, the panicked, breathless and at times smug reporting on this (mostly from the Canadian side) has been ridiculous. Ranging from the build-up and anticipation to the wild speculation on everything from the impact of a border tax, shipper commitments, Donald Trump’s statements about a better deal, the amount of steel being used from the United States, the impact on Energy East, the political speculation and prices. Folks – give it a break, this is a long term process and not everything is going to happen at once. To whit:

• This is a long term infrastructure project being built by a private company. They will figure out what terms they can live with. If you actually read the two orders that were signed, they merely get the projects back in front of the people that will make decisions. The “America First” part of it says that the KXL will be built using American supplies and labour to the extent allowable under the law. News flash – TransCanada was always going to use American labour and American sourced steel and parts for about 80% of the project Do you know why? Well for starters, about 80% of the project is in the United States and it’s just good business sense to source locally. Plus they already committed to do all that in their original submission and have already done a significant amount of purchases – there’s a reason TransCanada was suing the US government for $15 billion in losses for the shelving of the project – because prior to the Obama bombshell, they had spent real dollars.

• TransCanada isn’t faced with any imminent decisions about Energy East, because they have only just resubmitted their application for KXL and Energy East is just restarting its consultation phases. Here’s an interesting thought – I believe that it is entirely possible for multi-billion dollar companies to work on more than one initiative at a time. In the long term, the requirement for Energy East is driven by different needs than KXL, so TransCanada will carry on with both applications, much to the chagrin of Denis Coderre, the mayor of Montreal.

• As for shipper commitments, if anyone thinks that oil and gas producers in Canada, coming out of the last two years of downturn and a decade of enviro-whacking, are going to suddenly reverse course and say “you know what, we aren’t going to fill that pipe”, then I have an organic cannabis farm in the Rose Garden that you can invest in.

TransCanada Pipelines – the Biggest Winner of all. Patience is indeed a virtue.

What a strange world we live in.

Prices as at January 27, 2017 (January 20, 2017)

• The price of oil was choppy during the week ending flat after a combination of OPEC cut and US policy uncertainty held prices down.
  • Storage posted an increase
  • Production was flat
  • The rig count in the US and Canada continues to grow

• Natural gas was volatile during the week as milder weather reduced bullish sentiment and held prices back

• WTI Crude: $53.17 ($52.42)
• Nymex Gas: $3.391 ($3.415)
• US/Canadian Dollar: $0.7619 ($ 0.7517)

Highlights

• As at January 20, 2017, US crude oil supplies were at 488.3 million barrels, a increase of 2.8 million barrels from the previous week and 34.7 million barrels ahead of last year.
  • The number of days oil supply in storage was 29.5, behind last year’s 30.5.
  • Production was up for the week by 17,000 barrels a day at 8.961 million barrels per day. Production last year at the same time was 9.221 million barrels per day. The change in production this week came from a small rise in Alaska deliveries and flat lower 48 production.
  • Imports fell from 8.378 million barrels a day to 7.810, compared to 7.609 million barrels per day last year.
  • Refinery inputs were down during the week at 16.047 million barrels a day
• As at January 20, 2017, US natural gas in storage was 2.798 billion cubic feet (Bcf), which is 1% below the 5-year average and about 11% less than last year’s level, following a lighter than expected implied net withdrawal of 119 Bcf during the report week.
  • Overall U.S. natural gas consumption was down by 8% during the week as cold weather dissipated and demand fell across all sectors
  • Production for the week was flat and imports from Canada fell by 1% from the week before in response to cold weather
• As of January 23, the Canadian rig count was 317 (49% utilization), 226 Alberta (50%), 32 BC (45%), 51 Saskatchewan (44%), 8 Manitoba (53%)). Utilization for the same period last year was about 30%.
• US Onshore Oil rig count at January 27 was at 566, up 14 from the week prior.
  • Peak rig count was October 10, 2014 at 1,609
• Natural gas rigs drilling in the United States was up 3 at 145.
  • 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)
• US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 56%/44%
• Offshore rig count was down 3 at 21
  • Offshore rig count at January 1, 2015 was 55

Drillbits

• The BP Energy Outlook for 2017 suggested that the transportation of natural gas by LNG is expected to grow 7 times faster than by pipeline. The outlook also projected continued demand growth for oil, albeit at a slower pace well past 2040.
• Haliburton and Shlumberger reported results for the most recent quarter that were positive on a profitability level yet disappointed analysts because sales didn’t grow at the same pace as the increase in US rig counts. Aside from the obvious that these are global firms that operate in a myriad of basins, it is worthwhile to point out that all that “efficiency” the analysts celebrate on the producer side have to come out of somewhere. Now we know. That said, if reports of labour and equipment shortages combined with producers freaking out about getting back to work are to believed, Q1 2017 should be markedly different than last year.
• Calgary based AltaGas Ltd. proposed to buy Washington utility owner WGL Holdings Inc. for $4.6 billion Wednesday. If approved, this deal will make AltaGas the natural gas supplier to the White House, among other residences.
• Trump Watch: He is still the President of the United States.