As many of you will know from reading this blog over the past number of months, I am a rabid environmentalist so I am particularly excited this week about the upcoming “COP21” conference to solve the world’s climate issues, or what is called the Paris Climate Conference, because the actual name is impossible to commit to memory. As many of you will also know, the above statement is mostly tongue in cheek – I am not in any way rabid!

That said, and all kidding aside, these climate conferences, as much as they make me want to walk on hot coals, are important to the energy sector as they do set the political and sometimes actual benchmarks for emissions management, potential new costs to industry and allow industry stakeholders to gauge the level of animosity or negative sentiment directed at them.

It is safe to say that the negative sentiment towards the fossil fuels sector is, to put it charitably, on full throttle. Thus I think it is quite important to understand what is at stake here, and what the conference is all about, so with that in mind, please find below the:

Paris Climate Conference FAQ, or, as I prefer to think about it – A Lot of Hot Air About Hot Air.

What is COP21 and When is it Being Held?

The Paris meeting is the 21st annual United Nations Climate Conference or the 21st Conference of the Parties (CoP) of the United Nations Framework Convention on Climate Change (UNFCCC). The meeting runs from November 30 to December 11 (that’s a long time!), in and around Paris.

What’s the Purpose?

The purpose of this conference, as it has been with the other 20, is to come to a legally binding global consensus agreement on the reduction of man-made CO2 and other greenhouse gas emissions in order to save the world from the devastation coming, sometime in the next 100 some-odd years, from a rise in global temperatures of more than 2C. It is said that this particular incarnation of the conference is the last chance (until the next chance) to take decisive action to do this and that without concerted action, it’s game over for the planet.

Who Will be There?

This conference will be attended by representatives and leaders of (at last count) 195 countries and at least several multiples of that of special interest and lobby groups on all sides of the climate debate, which as we all know is no longer a simple believer or denier debate, but really a four-dimensional extension of the space-time continuum wherein one can simultaneously hold multiple beliefs without upsetting the balance of the Gaia, as long as these beliefs are consistent with the whack jobs on either side of the debate..

It is expected that there will be in excess of 40,000 delegates – many of them very earnest – in attendance. The number of non-delegates is harder to estimate but it’s a safe bet that there will be at least as many non-attendees vying for attention. Numerous protests had been planned by environmental organizations, however in the aftermath of the tragic terror attacks in Paris, these gatherings have been downsized to a simple side-show

Prime Minister Justin Trudeau will be there along with senior government members, the premiers of all the provinces and territories and Canadian climate whisperer Elizabeth May. In addition, there will be ample representation by the energy companies and their lobby groups. likely at various chi-chi venues around town where they will shower the green patrol with cake a la Marie Antoinette.

Will It Solve Anything?

Probably not. The likelihood of getting that many people to agree on anything is pretty low and to make it legally binding is pretty much impossible since even the most committed participants need to bring any proposals back to their own respective governments to get approval. Looking just at the U.S., even if Obama is successful at getting his legacy enabling climate agreement done at this meeting, the chances of it being approved by the Republican dominated Congress or Senate is precisely zero. There is some thought he could pass an agreement by “executive order” however that extends only to trade agreements and this is clearly not a trade agreement.

What is Canada’s Role?

As emitters go, Canada is a disproportionate emitter on a per-capita basis, although not so much on a GDP weighted basis. This isn’t surprising given the size of our oil and gas and fossil fuels industry, our relative industrial development and northern climate – let’s face it, we burn a lot of stuff. We have been variously called (mostly by our own mdia, a “laggard” on climate and at times a “climate villain”  or “environmental pariah”(my personal favourite), however it is now expected that the new Trudeau government will solve all of these problems for us, magically remediate our global reputation and in fact be a leader in reaching some form of consensus. The actions recently taken by the Alberta provincial government to place a price on carbon and limit oilsands emissions are taken as a signal of Canada’s newfound leadership on the climate file.

However, (cold water time) Canada represents a scant 1.6% of global emissions. Our ability to influence the debate or contribute in a meaningful way to reductions is the equivalent of a rounding error. It’s fair to ask what say or influence do we actually have? And why do we seem to have an internally generated target on our backs? Arguably, as a bit player, we are actually more on the receiving end of direction from larger and richer countries, making it more important to stand our ground and not be pushed into an agreement that doesn’t work for Canada.

Is it OK to be Skeptical?

Sure. Why not? Emissions are on the rise all around us. Look, this isn’t about Canada and it never will be. This is about the large emitters, the developing world and their ability or inability to commit to anything. All countries participating in this conference submitted plans for future emissions management and even under the rosiest assumption, emissions are still projected to grow 60% by 2030 – because the world wants cheap energy.

Emissions in the U.S. grew 1.4% last year, the equivalent of the entire oil sands industry. China’s emissions are 24% of the total and are expected to double by 2030. India is the third largest emitter and it is expected to triple its emissions by 2030. Russia, the fourth largest is expected to grow by 40%. All of these countries are in the “developing world” and the expectation is that the developed world (i.e. Europe, North America, Japan) will collectively cut emissions by enough or contribute to a redistributive fund (the $100 billion Green Climate Fund agreed to several COP’s ago) as compensation to encourage developing areas to cut.

Forgive me for stating the obvious – it ain’t gonna happen. Not this year, not next year. There aren’t enough emissions in the developed world to cut to offset this growth and the will is 100% not there to do the wealth transfer.

Even if by some miracle an agreement is reached, and every country delivers on its promises and commitments, the temperature reduction achievement is expected to be about 0.05C. A far cry from what the conference and the IPCC has told us is required.

So Where Does this Leave Us? Is the Planet Doomed? What About Energy?

This is the million/billion/trillion dollar question. Really, no one knows. The reality and science of climate change is there – the climate is changing, we know that. Can we do anything about it? Most say yes, some say no. I don’t know and this isn’t the forum for that discussion. A lot of people say we can with decisive action, I think of the story of King Canute and the tide (he failed by the way) and the hubris of man trying to control the forces of nature. Also, what happens if we are successful? What does the world look like then? Do we enter a massive cooling trend that we can only arrest by lighting all the coal mines on fire?

My original intent was to really lay into this whole thing, however that seemed a little offside in the circumstance, given the boidy of knowledge.

What I will say is that there is growing global commitment to tax carbon and reduce greenhouse gas emissions and as a fossil fuel industry we need to acknowledge that fact. This is why so many CEO’s of Calgary companies are onside with the climate plan for Alberta.

As energy industry stakeholders we have to deal with the hand we are dealt, recognize that pretty much everyone views us a necessary evil and carry on. There really is no such thing as clean burning fossil fuels, so the best we can really hope for is at least a little clarity in what the world will look like going forward and what the measurables are for the energy sector. That and put a little faith in the fact that countries will almost always act in their economic self-interest (except for Canada, but that’s for another day) and the likelihood of anything too damaging to a) the immediate economic situation and b) the future electability of people signing on will almost always act as a regulator on the dumbest ideas.

So if we have to accept the results of a massive carbon-bloated boondoggle to get the target off our back, I suppose that is what has to happen.

Reserve hope, don’t believe the hype, adapt. As has been repeated here endlessly, the energy sector isn’t going away anytime soon.

And oh yeah, enjoy the show – it’s going to be a full circus with no shortage of side shows, freaks, carnival barkers and clowns.

Prices as at November 27, 2015 (November 20, 2015)

• The price of oil ended the week marginally up, after a strong midweek rally.
  • Storage posted a smaller than expected increase
  • Production was down marginally
  • Markets are selling the storage story
  • The rig count decreased
• Natural gas gained ground during the week as production declines and gas oven turkey-roasting usage in the US continue to be offset by a persistently warm fall.

• WTI Crude: $41.77 ($41.60)
• Nymex Gas: $2.227 ($2.152)
• US/Canadian Dollar: $0.7483 ($ 0.7494)

Highlights

• As at November 20, 2015, US crude oil supplies were at 488.2 million barrels, an increase of 0.9 million barrels from the previous week and 105.2 million barrels ahead of last year. An increase in imports and increase in refinery utilization contributed to the inventory build.
• The number of days oil supply in storage was 30.5, ahead of last year’s 24.3.
• Production was down to 9.165 million barrels per day. Production last year at the same time was 9,029 million barrels per day. Based on the numbers, it is likely that by December year over year production growth in the U.S. will be negative. The marginal decrease in production this week came from lower 48.
• Because of American Thankksgiving there is no Natural Gas Storage Report this week. As at November 13, 2015, US natural gas in storage was 4.000 billion cubic feet (Bcf), which is 5% above the 5-year average and about 11% higher than last year’s level, following an implied net injection of 15 Bcf during the report week.
  • Overall U.S. natural gas consumption increased by 1% for the period led by consumer demand
• Oil rig count at November 25 was down to 555 from 564 the week prior.
• Natural gas rigs drilling in the United States were down from 193 to 189.
• As of November 23, the Canadian rig count was at 185 (24% utilization), 117 Alberta (22%), 34 BC (51%), 32 Saskatchewan (25%), 2 Manitoba (11%)). Utilization for the same week last year was 49%.
• US split of Oil vs Gas rigs is 75%/25%, in Canada the split is 44%/56%

Drillbits

• On Sunday, November 22, Alberta became the first government to announce a major change in its fiscal regime while teams from its two major cities were playing against each other in a football playoff game. Highlights:
  • A carbon tax, starting at $20 a tonne in 2017 and rising annually after that
  • A cap on oilsands emissions of 100 MT which is about 35 MT above today’s output, leaving room for growth up to about 4.3 miilion barrels a day of output and lots of room for efficiency – noote that upgrading and refining is not included in this target
  • A reduction target of 45% for methane emissions
  • A phase-out of coal emissions by 2030
  • Renewables subsidies
  • It is expected that the broad based carbon tax will eventually cost Alberta taxpayers $3 billion a year
• With US Thanksgiving many markets were closed so a  very slow news week
• Next Friday – OPEC Meeting!!!!! Fasten your seat belts for this ride…
  
• Drumpf Watch – Out of respect for U.S. Thanksgiving, I was looking to forgive this turkey, but on second thought, he needs to be roasted. Poll numbers are starting to crack.