It’s amazing isn’t it? Last week I predicted a rebound in M&A and then whammo, here we go. I gotta get me some lottery tickets.

 
I suppose the big news this week is the announced Enbridge-Spectra mega merger, which will create the largest North American pipeline and energy infrastructure company, the fourth largest company in Canada (enterprise value of $165 billion) and an energy transportation colossus based right here in little old Calgary.

This is an exciting deal on many levels: it is a sign that M&A is back in a big way, it is great for Enbridge and Spectra shareholders who will see increased dividends from a more diversified business and the combined entity’s employees will see increased employment opportunities. It’s great for Calgary to have the business retain its head office here.

But it’s a lousy deal for Canada.

Wait… What?

Well, not completely, but I can’t help but think that this transaction is Enbridge’s way of throwing in the towel on oil exports to the coast and major infrasttructure projects in Canada. They’ll never say it explicitly, but you can’t help the feeling that they are silently admitting that Northern Gateway is done, good luck TransCanada and Kinder Morgan, we’ve learned our lesson, we took some notes and we left them in an envelope on the desk for you, but we are moving on to this gas and utility thing in the United States where, you know, stuff gets done.

So it’s sad for Canada when a mega merger creating a Canadian powerhouse is basically a sign that the acquiring company may be giving up on its home country..

Look, it needs to be said and I know that everyone and their cousin has said it before and will likely say it again andbetter, but it needs to be said.

Infrastructure development in this country is a complete farce.

What passes for consultation is really a convoluted mash-up of unbridled lobbying, state-sponsored delay tactics, uninformed political posturing and extortion. Where other countries build billions of dollars’ worth of critical, privately funded infrastructure we spend months, quarters and years engaging everyone and their favourite sock puppet to respectfully ascertain their oftentimes egregiously moronic opinion on why this, that or the other thing is going to cause calamitous environmental damage, upset their traditional way of life or otherwise threaten some theoretical or real constituency, whether it is the environmental pharaohs of the IPCC, American financial backers, spotted wood toads, the Orillia hooded house fly or voters in the latest in a series of interminable elections.

We let hooligans into public hearings, watch them disrupt proceedings, insult the government, government bodies, the intelligence of Canadians, physically threaten or otherwise intimidate government appointed officials and then turn around and reward them for their boorishness.

We get people like Montreal Mayor Denis Coderre issuing statements about how TransCanada “hasn’t done enough” to address safety concerns – really? Has he read the submission they put in? All 38,000 some odd pages in it? Does he even understand what the purpose of the NEB hearings is? Like maybe determining if TransCanada has done enough to address safety concerns and then, I don’t know, making improved safety a condition for approval?

Richer still is the Quebec contingent’s hand wringing over the potential of an oil spill contaminating the precious Saint Lawrence river. I can only assume that these bleeding heart environmentalists of convenience have never been to the east end of the island of Montreal or Levis near Quebec Citty or flown over Montreal to see the massive refining, port and storage facilities where oil arrives by tanker, by train and by pipeline UNDER THE RIVER (it’s an island, right?) every day! Do these people even know (or care) that the Island of Montreal is one of the largest refining centres in Canada?!?! Or that oil piped into Montreal is shipped by tanker up the river to Levis to be refined at that location?

It’s unconscionable. We have a process in this country to assess these projects and we are letting it be hijacked by people whose only purpose in life is to stop projects at all costs. Not to engage in reasoned and respectful dialogue about the pros and cons of pipeline or whether such and such a project is in the national interest.

Now we are faced with the spectre of further delays in the Energy East Pipeline hearings, which by the way are scheduled to run into 2018 anyway before a recommendation can even be made. There is supposed to be an announcement this month on whether the Pacific Northwest LNG project has passed the newly implemented environmental smell test. What do you think the odds are that it will be delayed again, which likely means you can kiss that economic game changer for BC goodbye. The TransMountain Pipeline, which is ALREADY APPROVED, is held up for the same review until December. Good luck with that.

Regarding Energy East. just the other day, a group of 50 environmental lobbyist groups sent a letter to the government saying that the NEB review process needed to be stopped and completely revamped to earn back the confidence of the Canadian people. In the process they call into question the qualifications and impartiality of the National Energy Board and its directors. Well of course they did. This suits their anti-development agenda just fine. And the media eats it up and treats them like they speak for the majority of Canadians.

Here, I’ll speak for the majority of Canadians. I’m fine with the NEB and their process. It’s thorough, it’s independent, it’s based on solid evidence and consultation. And yes, the people who work there have backgrounds and ties to the energy industry, that’s because it’s the National ENERGY Board. I’m not sure who these people would rather have making decisions about these projects – someone who actually understands what they are or an unemployed hipster mime maybe?

To top it all off, we have a Federal government that is asleep at the switch, so completely afraid of offending the environmental crowd and so desirous of looking good on the world stage (who by the way, couldn’t caqre less about Canada) that they are not only abandoning their responsibility to sanction national interest infrastructure to delay, deferral and defeat, they are also hanging their own people, institutions and processes out to dry in the face of this relentless antagonism. Here’s a tip for the Liberals – when someone calls into question the integrity of your people and your processes, you need to step up not clam up. (note – the Federal Natural Resources MInister did offer a tepid defense of the NEB on a conference call from India this afternoon)

**Update – it was just announced that the Energy East Panel has recused itself and stepped down to preserve the independence and integrity of the NEB. I guess we are going to get mimes after all.**

I despair for all these projects and I’m the glass half full guy. I am starting to think that we are going to see a wall built between the United States and Mexico before we get a kilometre of pipeline to a coast built or one ounce of liquefied natural gas produced in BC.

Enbridge figured it out. When will we?

Prices as at September 9, 2016 (September 2, 2016)

• The price of oil ended the week up slightly after an inventory induced prce spike on Thursday was reversed when traders actually studied the numbers.
  • Storage posted a surprise decrease
  • Production was down marginally
  • The rig count was up
• Natural gas was essentially flat during the week as bullish storage numbers were offset by the end of a heat wave

• WTI Crude: $45.88 ($44.44)
• Nymex Gas: $2.797 ($2.792)
• US/Canadian Dollar: $0.7675 ($ 0.7695)

Highlights

• As at September 2, 2016, US crude oil supplies were at 511.4 million barrels, a decrease of 14.5 million barrels from the previous week and 53.4 million barrels ahead of last year. The massive decline in inventory is a result of weather conditions in the Gulf of Mexico preventing tankers from reaching the Gulf Coast. While the decline in inventory is welcome, it is a one-off event that will likely be reversed in the coming weeks
  • The number of days oil supply in storage was 30.5, ahead of last year’s 27.8.
  • Production was down for the week at 8.458 million barrels per day. Production last year at the same time was 9.260 million barrels per day. The change in production this week came from a decline in Alaska deliveries and a slight rise in lower 48 production.
  • Imports fell to 7.069 million barrels a day, compared to 7.638 million barrels per day last year. It is hard to make any headway on US inventory numbers if the US is a dumping ground for everyone’s oil (aside from Canada’s of course)
  • Refinery inputs were high during the week at 16.930 million barrels a day
• As at September 2, 2016, US natural gas in storage was 3,437 billion cubic feet (Bcf), which is 10% above the 5-year average and about 6% higher than last year’s level, following an implied net injection of 36 Bcf during the report week.
  • Overall U.S. natural gas consumption fell by 8% during the week on decreased power consumption
  • From June through August, power burn averaged 35.2 Bcf per day, 9% higher than the same months last year, and 23% higher than the five-year (2011-15) average. The total number of cooling degree-days (CDD) from June through August were 12% above the same period last year, and 24% above normal for the period.
  • Production for the week was flat and imports from Canada fell 14%
• As of September 6, the Canadian rig count was at 102 (15% utilization), 60 Alberta (15%), 10 BC (13%), 32 Saskatchewan (28%), 0 Manitoba (0%)). Utilization for the same period last year was about 25%.
• Oil rig count at September 9 was at 414, up 7 from the week prior.
  • Rig count at January 1, 2015 was 1,482
• Natural gas rigs drilling in the United States was up 4 at 92.
  • Rig count at January 1, 2015 was 328
• US split of Oil vs Gas rigs is 82%/18%, in Canada the split is 52%/48%
• Offshore rig count was up 8 at 18
  • Offshore rig count at January 1, 2015 was 55

Drillbits

• EOG agreed to combine with Yates Petroleum, a private company, to access its Permian Basin assets in a deal valued at $2.5 billion
• The Fort Mackay First Nation purchased a stake in Suncor’s East Tank Farm storage development for $350 million
• Apache announced a significant discovery in the Alpine High Permian acreage it has been assembling
  • 3 billion barrels of oil
  • 75 TCF of natural gas
  • The company announced an expansion in its capex budget for 2016 of $200 million to begin exploiting this find
• Saudi Arabia is slashing its budget and abandoning projects to the tune of about $20 billion
  • Yet still, not wanting to admit that its do-nothing strategy is a colossal failure
• Crescent Point announced a $600 million increase in its planned capex for fiscal 2016 and 2017
• OPEC and Russia (OPECR?) continue to send mixed signals about the possibility of a freeze, production cut, quota, production ceiling agreement in Algiers at the end of the month. Stay tuned for a discussion about nothing happening.
• Drumpf Watch – in a painful televised “Commander in Chief Forum”, Donald Drumpf expressed his undying love and devotion for Vladimir Putin. Well not really, but his statement about how he wants to work closer with Russia was probably the highlight of an otherwise horrible Q&A session filled with the usual Trumpian obfuscations, contradiction, falsehoods and self-aggrandizement.