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      This is your public service 1-stop-shop for Alaskan and Canadian Arctic energy commentary, news, history, projects and people. We update it daily for you. It is the most timely and complete northern energy archive anywhere — used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to name others existing before 2001.  -dh


You Read It Here First

1-23-16 Lisa Murkowski On Energy Policy - Sarah Palin On The Donald - DiCaprio And Trudeau

23 January 2016 9:38am

Robert Dillon, Senate Energy Committee, Communications Director, Photo by Dave HarbourYesterday was Robert Dillon's (NGP Photo) last day of service to Senator Lisa Murkowski's Senate Energy Committee.  He was thoughtful enough to share his news with regular correspondents and we pass it on, here, for some of you who know Robert well and wish to remain in touch with him.  (Other Murkowski staff changes noted here at APM.)  -dh

Senator Lisa Murkowski, Radio address, Photo by Dave HarbourWASHINGTON, D.C.In the Weekly Republican Address, Sen. Lisa Murkowski (NGP Photo), Chairman of the Senate Committee on Energy and Natural Resources, discusses the Energy Policy Modernization Act, the first broad bipartisan energy legislation to be considered by the Senate since 2007

Trudeau, DiCaprio face-off over energy industry comments.  Calgary Herald.
Trudeau has promised significant action to reduce greenhouse gas ... the environmental efforts will break down resistance to new pipeline projects, ...
Sarah Palin, Copyright Dave Harbour 2008, Permission - 907-227-7110, Donald TrumpAn Alaskan's View of Palin's Trump Endorsement.  I was moderately surprised that Sarah Palin made an endorsement at all, but not ... way he was dealing with the oil companies and the proposed gas pipeline. ... As for the income tax, Alaska's state government is mostly funded by oil ... Not in any way Sarah Palin's fault, but her response was to blame PTSD ...

This bill ‘will help America produce more energy,’ Senator Murkowski says, ‘It will help Americans pay less for energy. And it will firmly establish America as a global energy superpower.’The Weekly Republican Address is available in both audio and video format and is embargoed until 6:00 a.m. ET, Saturday, January 23. The audio of the address is available here, the video will beavailable here and you may download the addresshere. A full transcript of the address follows: 


“Hi, I’m Lisa Murkowski. 


“I’m proud to represent the great state of Alaska in the U.S. Senate, where I serve as Chairman of the Energy and Natural Resources Committee.


“And I’m pleased that just days from now, the Senate will consider broad energy legislation. 


“Following the passage of a highway bill, education reform, and many others, the energy bill promises to be our next bipartisan accomplishment on behalf of the American people. 


“It will also be the first major energy legislation considered on the Senate floor since 2007.


“It’s been over eight years, folks.


“Back then, we were living in an era of energy scarcity, with many afraid that America was running out of resources. 


“But since then, an energy revolution has occurred in our country.


“Newer technologies have allowed oil and natural gas production to soar on state and private lands, creating hundreds of thousands of jobs.   


“On top of that, the cost of many other technologies – from solar panels to batteries for electric vehicles – has declined dramatically. 


“Unfortunately, the passage of time has also brought new challenges. 


“Our infrastructure continues to age. 


“Access restrictions, permitting delays, and other bureaucratic hurdles are sapping the competitiveness of our energy sector.  


“And President Obama has ignored the good work going on in Congress as he attempts to unilaterally recast our nation’s energy policy.      


“His gauntlet of burdensome regulations, many just beginning to take effect, threatens the affordability and reliability of our energy. 


“His policies are shutting down energy-rich states like Alaska.


“He rejected the Keystone XL pipeline on political grounds. 


“And then his administration imposed a moratorium on federal coal leasing. 


“Decisions like those cost us jobs.  They weaken our growth.  And they strengthen some of the world’s worst actors, at the expense of hard-working Americans. 


“There is a better path for our energy policy.  And under Republican leadership, Congress is taking it.


“While the President lifted sanctions on Iran, letting the regime sell its oil into global markets, we ensured American producers can do the same by repealing an outdated export ban that applied to the United States.


“Instead of standing in the way of new infrastructure, members of both parties have supported it. 


“And instead of relying on burdensome mandates and regulations, many of us have chosen to promote innovation.   


“But our work is hardly finished.  In order to truly protect our nation, we must do more to update our energy policies.


“That’s why I worked with my colleagues on the Energy Committee to develop a broad, bipartisan bill.


“It will help America produce more energy.  It will help Americans pay less for energy.  And it will firmly establish America as a global energy superpower.    


“We agreed to expedite liquefied natural gas exports to boost our economy and the security of our allies.


“We agreed to bolster our mineral security so that we don’t have to rely on foreign countries for the raw materials needed for everything from smart phones to military assets.


“We agreed to promote hydropower – not to mention geothermal and other clean, renewable resources.  


“We focused on innovation and efficiency – both of which lead us to a brighter energy future.


“We started to tackle permitting reform. 


“And we agreed to increase government accountability, and took steps to prevent another Solyndra.


“We did this by working together.  And our bill – the Energy Policy Modernization Act – passed our committee with strong bipartisan support. 


“It is our latest contribution to a better energy policy for the United States.  It is our latest effort to restore regular order.  And it will be on the floor, on the Senate floor, starting this week. 


“Thank you for listening.”


Today marks the end of my seven years serving as communications director for the Senate Energy and Natural Resources Committee and as spokesman for Chairman Lisa Murkowski. As I make my exit – in a snowstorm, no less – I wanted to take this opportunity to simply say thank you. I can’t thank you all enough for the kindness and generosity you’ve shown me over the past seven years. I feel blessed not only to have been a member of such a dedicated and talented staff, but to also have had the opportunity to get to know so many of you. 
I am leaving you in the capable hands of Deputy Communications Director Michael Tadeo. Michael can be reached at Michael_Tadeo@energy.senate.gov or (202) 224 5810
As for me, I’m not going far so please stay in touch. I am heading over to the DC office of the public policy and communications firm Strategies 360 starting Monday– unless it’s a snow day, of course. I will be just down Pennsylvania Avenue from the Capitol so please stay in touch. My new work email is robertd@strategies360.com. My personal email is dillon@radillon.com and my mobile is (202) 288 7207
One final word of advice from an old Alaskan – Don’t fight the weather; just go out and enjoy the snow. But whatever you do – avoid the Beltway!

1-20-16 Supreme Court Hears John Sturgeon's Case Today

20 January 2016 11:32am

Supreme Court Hears John Sturgeon's Case Today

Arlon Tussing, Arctic Gas, NEB, Permanent Fund, Alcan, Marathon, Photo: Copyright Dave Harbour 2012, Photo: all rights reserved, Dermot Cole biographyWe just learned today of the passing of our longtime friend: Arlon Tussing (NGP Photo).  We thank Dermot Cole for his thoughtful biography and offer a few comments of our own, here.  -dh

Juneau Empire by James Brooks.  The state’s budget crisis​...

Here is our position on what adults owe the coming generations.  

We mention it here, because all policies of oil producing U.S. States and Canadian Provinces revolve around energy production and consumption.

...and, because we detest intergenerational enequity!                -dh

... isn’t a laughing matter, but a new group is trying to inject a little humor into the issue. For Our Alaska, which launched a Kickstarter fundraiser Monday, the goal is to reach younger Alaskans who might not initially care about arcane financial matters in Juneau.

The group is hoping to raise $10,000 to produce videos and a “Budget Balancing Game” to be distributed across the state. The project can be seen online at   https://www.kickstarter.com/projects/ouralaska/funding-alaska


​Juneau Empire by Elizabeth Earl.  With the annual lease sale approaching and the Alaska LNG Project proposed to enter Cook Inlet, some groups are asking what oil and gas development may do to beluga whale habitat in the inlet.   

Today, our Joe Balash, John Sturgeon, U.S. Supreme Court, Photo by Dave HarbourWashington / Alaska friend, Joe Balash (NGP Photo) posted this very current Supreme Court report on his personal FB page, for which we are grateful:  "Joe BalashI didn't make it in until half way through the arguments .... the feedback I received, though, was that Matt Findley did a great job. Nearly the entire time was spent on the word "solely". When the NPS lawyer stepped up, it was pretty brutal. I think it is pretty clear that the court will strike the 9th Circuit's reasoning but it is unclear whether they will recognize any of the other arguments offered."

ADN by Erica Martinson. (See our commentary and links posted yesterday.

The U.S. Supreme Court is hearing a case Wednesday questioning whether the federal government has authority over navigable waters in Alaska's national parks -- a case brought by a moose hunter barred from using his hovercraft by the National Park Service.

The case is largely specific to Alaska, where the moose hunter in question -- John Sturgeon (NGP Photo) -- argues that a provision the 1980 Alaska National Interest Lands Conservation Act gives authority to the state to set the rules for waters in national parks. 

Sturgeon used his hovercraft on annual moose hunts in the Yukon-Charley Rivers National Preserve for more than 15 years before he was stopped by three National Park Service employees in 2007 and told ....     


At one time (circa. 2001), we wrote this about Tussing: 

Educator, author, lecturer & consultant: Arlon R. Tussing, PhD. is an economic and policy analyst in the fields of energy, public utili­ties, the en­vironment, natural resources, national and regional economic development, and corporate and government finance.  You will see from his extensive bibliography that he is a prolific economic advisor, whose counsel--it may be easily presumed--has significantly affected history.  Click here for the bibliography, which we asked him to prepare for our original Northern Gas Pipelines website.  Send Northern Gas Pipelines a request here, for his resume and several important papers on northern gas pipeline issues.


1-14-16 ISIS Needs (FEARLESS) Oil Workers

14 January 2016 5:16am

Larry Persily, LNG, Alaska, Federal Coordinator, Copyright Dave Harbour 2012Please enjoy Larry Persily's (NGP Photo) Alaska gas/LNG related links TODAY!

From our anonymous Aussie energy analyst today, several points of interest re: oil and gas prices and the state of LNG..., and, ISIS NEEDS (FEARLESS) OIL AND GAS EMPLOYEES....

ADN by Yereth Rosen.  A coalition of environmental groups filed a motion Wednesday to intervene in support of the Interior Department’s decision to reject Royal Dutch Shell's request to extend its offshore Arctic leases.

The groups filed their motion with the Interior Department’s Board of Land Appeals, an agency tasked with reviewing disputed department rulings.

Our comment: The agency appeal process generally tends to side with the agency's position.  But going through it is a step toward a court appeal, which is more objective and whose decision is more honestly based on the record, hopefully.  We wish Shell well in this process and to the enviro-activist groups seeking to impose more delay or roadblocks, we say, "Enough is enough; go away."  -dh


From our anonymous Mid Atlantic energy analyst comes word today that low energy prices are creating deficits among middle eastern producers as the cost of production exceeds the value of oil produced.  -dh

OP-Ed by Rich Coleman, BC Minister of Natural Gas Development.  British Columbia’s liquefied natural gas industry made unprecedented progress this year.

The first final investment decision was made by Pacific NorthWest LNG, marking their commitment to move forward with construction and operation. That pledge had two conditions; with the first requiring government to finalize a project development agreement with them, which we did.

The other outstanding condition – environmental approval by the Government of Canada – is scheduled for a decision in 2016.  ...  That could all happen while the expansion of FortisBC’s Tilbury LNG facility continues in Delta which has already provided $50 million in contract work to over 100 companies in neighbouring communities like Vancouver, Langley, Abbotsford, Coquitlam, and more.

These are positive developments for just three of the 20 facilities now proposed in our province. Other exciting news included LNG Canada finalizing the very first substituted environmental assessment in our province, keeping their proposal on track to be one of B.C.’s most promising export operations.   Full story here....

Mining.com by Cecilia Jamasmie.  New climate change regulations, fraud in e-payment systems, “poison pills”, privacy class actions and cybersex in the workplace are among the top 10 legal risks companies operating in Canada will face this year, according to Canadian law firm Borden Ladner Gervais LLP (BLG).   --  and -- Canadian Oil Sands is claiming victory over Suncor Energy’s $4.3 billion hostile takeover attempts 







From our anonymous Mid Atlantic energy analyst comes word today that low energy prices are creating deficits as the cost of production exceeds the value of oil produced.  -dh

Comments, from Bernstein Research today, summarize well the current financial state of Saudi Arabia (SA), relative to its cash reserves. They also show why SA is considering an IPO in the depths of the current oil price decline: THEY NEED THE MONEY.

We are strongly in the camp that Saudi Aramco will only include downstream assets (or at best throw in a small amount of dedicated production from some minor upstream capacity). There are a host of reasons:

·        Large-scale upstream assets within a public entity would involve disclosures and fiduciary compliance to which they would never agree

·        Such an offering would be wildly unpopular within the country, and the House of Saud has always to consider its actions in the eyes of the Wahabis

·        The company is adding significant gas production and processing capacity over the next couple of years, which will require capital infusions that cannot be taken out of normal cash flow in these troubled times.

·        The Saudis find themselves in the classic “Run Away From the Bear” race. They do not have to outrun the bear; they just have to outrun the others who are also trying to outrun the bear. As dire as their draw on their cash reserves might seem, they are in much better shape than a lot of others in the race.  

The similarities between the current oil price crash and that experienced in the mid 1980s has been remarked upon by many.  This is illustrated by the following quote from Daniel Yergin’s The Prize, commenting on the sector in 1986: “Many oil companies were unprepared for this latest crisis, their executives having been convinced that “they” – OPEC – would not do something so silly as to eradicate a large part of their own revenues”.

The Wall Street Journal reported yesterday that Asian LNG demand in 2015 declined (including a first ever decline from China).  This was notwithstanding the very substantial spot and contract price falls and increased regional supplies.

The EIA weekly report issued yesterday was largely negative.  Crude stocks increased by 0.2 mmbbls – and worse news came from a substantial build in product stocks (gasoline by 8.4 mmbbls and distillate by 6.1 mmbbls).

Reuters recently noted that the US oil and gas industry itself was a cause of declining demand for distillate (in the form of diesel).  Less drilling activity, by more efficient rigs, had reduced total diesel demand in the US

As we noted yesterday (Note new KTVA story), BP is shortly to add another 4,000 souls to the swollen ranks of redundant oil and gas workers that have fallen out of the industry since the November 2014 OPEC meeting.

However, we have come across one organisation in the sector that is currently actively seeking engineers of all stripes: ISIS.

Last week the International Business Times said it had seen documents from ISIS seeking staff to assist it in bringing back to production various assets it had "acquired" in Libya.

It did not disclose the fringe benefits it was offering - perhaps low taxes; multiple wives; a free knife; company uniform (black); etc.  (Note of caution to our job hunting friends in Canada, Alaska and the Lower 48: failure to meet daily ISIS production quotas could result in decapitation.  -dh)


Global LNG production rose in 2015, but sales to Asia dropped
(Wall Street Journal; Jan. 13) - Liquefied natural gas shipments to Asian economies that are the world’s biggest gas importers dropped in 2015, according to a report published Jan. 13, including a first-ever decline in China. The decline in Asia came as global LNG global production rose 1.6 percent to 250 million metric tons, or 32 billion cubic feet a day, energy consultant Wood Mackenzie said in an annual report on the industry.
The increase in LNG supply comes amid a steep drop in spot-market prices in Asia over the past year to below $7 per million Btu. Prices may remain depressed with the start of shipments this year from the U.S. Gulf Coast and a ramp-up in exports from Australia. The new supplies will help boost global LNG production by an estimated 50 percent over the next five years, which is beyond the capacity of Asia to absorb, Giles Farrer, Wood Mackenzie’s research director for global gas and LNG, said in an interview.
Asia represents more than 70 percent of worldwide demand for LNG, but Wood Mackenzie said demand from the region’s largest buyers dropped in 2015, including a first-ever decline in shipments to China, which fell about 1 percent after years of double-digit growth. South Korean imports of LNG fell 11 percent on the year and shipments to Japan declined 4 percent, the report said. That was offset by growing demand from newer importers such as Egypt, Jordan and Pakistan, the report said. And lower prices for LNG will likely spur increased demand from other markets, Farrer said.
Korea Gas wants to reduce its stake in proposed LNG Canada project
(Platts; Jan.12) - South Korea's state-owned Korea Gas Corp. will press ahead with a long-delayed attempt this year to sell part of its 15 percent stake in the proposed LNG Canada project, a company official said Jan. 12. KOGAS aimed to sell the stake by the end of 2015, but the plan was delayed due to the falling price of natural gas and some delays to the LNG project, a company official said. However, KOGAS will continue the plan to sell the stake this year as part of its efforts to improve its finances, he said.
The official declined to disclose how much the company would sell, but it most likely will be one-third of its stake. KOGAS currently holds a 15 percent interest in Shell-led LNG Canada after selling a 5 percent slice to Shell in May 2014. KOGAS and its partners in May 2013 launched LNG Canada, a project to produce 12 million metric tons per year of LNG from two trains at Kitimat, B.C. Shell holds a 50 percent stake, China National Petroleum Corp. 20 percent, and Japan’s Mitsubishi 15 percent.
The LNG Canada consortium plans to make a final investment decision on the project this year. KOGAS is under pressure from the government to reduce its debt, which has grown after massive overseas projects in the past few years. KOGAS is owned 54.55 percent by the state — 26.15 percent by the central government, 20.47 percent by state power monopoly Korea Electric Power Corp. and 7.93 percent by local governments. 
China’s push to cut air pollution could help boost natural gas demand
(Nikkei Asian Review; Jan. 11) - The serious and endemic air pollution that has engulfed major Chinese cities in recent years is not only a growing health threat, but may well have a significant impact on the global market for cleaner-burning natural gas. The formidable environmental challenge forced the government to issue its first-ever air pollution red alert in December. Under the five-year economic development plan that begins this year, Beijing is set to make a concerted effort to reduce air pollution.
The government intends to curb growth in oil and coal use, while promoting renewable energy. Efforts to slash coal consumption, the main contributor to pollution, have barely begun, but there have been some encouraging signs. The International Energy Agency says China’s coal use in 2014 was down 3 percent from 2013, marking the first decline since 1999. And China's maritime imports of coal for power generation fell about 30 percent in 2015 from the previous year, according to Bank of America Merrill Lynch.
Driven by the government's efforts to promote its use, China's natural gas imports will triple from 2014 to 2020, according to British financial services company Barclays. In November, the Chinese government lowered wholesale prices of natural gas for nonresidential users by about 30 percent in Beijing and other major markets, in a move to boost flagging growth in demand for natural gas. The measures taken to push up natural gas consumption also include allowing third parties to use liquefied natural gas import terminals and private-sector companies to build such terminals.
This could be the year for investment decisions on B.C. LNG projects
(Canadian Press; Jan. 10) - After much anticipation, Canada could see final approval of the first liquefied natural gas export projects on the West Coast this year. Proponents behind some of the 20 proposed LNG projects in B.C. say they should be in a position to make final investment decisions this year as environmental approvals, permits and First Nations support fall into place. And while a supply glut has pushed down natural gas prices and reduced short-term prospects, some experts say projects remain viable.
“These are long-term, multi-decade projects,” said AltaCorp Capital analyst Mark Westby. “Current gas prices are only one factor.” However, spot prices for LNG have dropped by more than half in Asia over the past two years. Westby sees the Shell-led LNG Canada facility in Kitimat, and the much smaller barge-mounted Altagas-led Douglas Channel project also planned for Kitimat, as most likely to proceed this year.
LNG Canada’s final barriers are securing assurances from First Nations and a permit from Fisheries and Oceans Canada, while Douglas Channel still needs to settle a 25 percent excise duty being levied on its LNG facility, Westby said. Another possibility is the Pacific NorthWest LNG project led by Malaysia’s Petronas. But Westby said while it remains promising, it faces uncertainty. An environmental assessment should be done by March, but Petronas still has to resolve significant fisheries issues with First Nations.
Mary Hemmingsen, global head of LNG at KPMG, said the drop in oil and gas prices has diminished the likelihood of multibillion-dollar projects going ahead. She said low oil prices have reduced cash flow at project developers, while also making alternatives to LNG cheaper. The “gold rush mentality” that was in place the past couple of years has been replaced by a somber, realistic outlook, she said. “What everyone was chasing two years ago was volume, volume, volume. … Now it’s about value, value, value.”
Australia LNG project ships first cargo; Conoco one of three partners
(Houston Chronicle; Jan. 11) - The first cargo of liquefied natural gas has sailed from the Australia Pacific LNG facility in Queensland, Australia, ConocoPhillips and its partners in the project announced Jan. 11. For the companies behind the project, the cargo is an important first step toward transitioning from a cash-sink to cash-generator after years of construction and more than $17 billion (U.S.) in investment to develop the facility capable of making 9 million metric tons of LNG per year.
ConocoPhillips and Australia’s Origin Energy each own 37.5 percent of the venture; China’s Sinopec owns 25 percent and is its largest customer. Japan’s Kansai Electric Power also has signed contracts for some shipments. The Australia Pacific LNG plant takes coal-seam gas through a 330-mile pipeline from Eastern Australia, liquefies it and then ships the fuel to customers in Asia. The initial shipment came from the plant’s first liquefaction train; a second production train is due online in the second half of 2016.
The project’s backers have continued to pour billions into APLNG despite a collapse in oil prices that has crimped cash flow and dragged down LNG prices across the globe. That collapse has left immediate profitability of the project uncertain — Origin has said it needs oil prices at between $38 and $42 per barrel before it will see positive cash flow from its investment, according to the Sydney Morning Herald. ConocoPhillips said it expects the project to be self-funding after the second train comes online later in 2016.
Oregon LNG developer withdraws lawsuit over proposed plant site
(Daily Astorian; Astoria, OR; Jan. 11) - Oregon LNG has voluntarily withdrawn from litigation with the U.S. Army Corps of Engineers before a federal district court judge could officially dismiss the developer’s claims. The company wants to build a liquefied natural gas plant and export terminal in Warrenton, Ore., near the mouth of the Columbia River, but the Army Corps has asserted its exclusive rights to the proposed plant site under a nearly 60-year-old easement to deposit dredging spoils.
In late December, Magistrate Judge John V. Acosta ruled against Oregon LNG in a lawsuit the company filed against the Army Corps. Oregon LNG failed to prove, Acosta said, that the Corps has abandoned property. Acosta’s ruling still needs to be signed by Anna J. Brown, a federal district court judge, to become official. By choosing to drop its lawsuit ahead of Brown’s signature, the company preserves its ability to refile its complaint against the Army Corps at a later date.
Opponents of the $6 billion terminal and pipeline project welcomed the move as another setback for the company. “The direct implication is that there won’t be an official court judgment saying that Oregon LNG ‘loses,’” said Miles Johnson, a lawyer for Columbia Riverkeeper, an environmental group opposing the project. “It’s just one more legal defeat for Oregon LNG in kind of a long string of them,” he said. “It makes it harder for them to see how they’re going to get this project off the ground.”
Chevron-PetroChina venture starts production at gas field in China
(Bloomberg; Jan. 10) - Chevron and PetroChina started gas production in China’s southwestern regions of Sichuan and Chongqing, eight years after signing a production-sharing agreement. The well in Chongqing’s Luojiazhai gas field began commercial gas production Dec. 30, China National Petroleum Corp., PetroChina’s parent, said Jan. 11. PetroChina in 2008 signed the 30-year agreement with Chevron, under which the U.S. producer took a 49 percent stake in the parcel and became the operator.
The Luojiazhai project, the first phase of development, will produce at its peak an estimated 300 million cubic feet of gas per day, according to the PetroChina statement. China currently consumes almost 18 billion cubic feet of gas per day. Both parties will work on two more phases in the same area. Chevron beat Shell, Statoil and Total to win the right to develop the so-called sour-gas reserves at Chuandongbei. Sour gas refers to natural gas that contains a high level of hydrogen sulfide.
Gulf of Mexico tugboats to benefit from start of LNG exports
(Bloomberg; Jan. 11) - Somewhere in the Gulf of Mexico right now, the Energy Atlantic is headed for Louisiana to collect the first exports from America’s shale gas revolution. Waiting to steer the tanker into Cheniere Energy’s Sabine Pass terminal is a fleet of tugboats that’s spent the past seven years killing time — some days holding emergency exercises, some days racing each other. They were ready to escort ships for natural gas imports, but that never arrived. Now, they will work escorting ships for LNG exports.
“The boats are beautiful — you could eat off the floor in the engine room,” said Richard Ennis, head of natural resources at ING Capital. With the switch to exports, the tugs will at last have a job to do — even if it’s not the one they expected. The surge in oil and gas output from U.S. shale drillers has the potential to transform world markets. At home, it left a chain of idle LNG import facilities from the Northeast to the Gulf Coast. Now, some of those facilities will go to work exporting liquefied natural gas.
It’s about putting to use for export what was not being used to import gas. At Sabine Pass, empty LNG storage tanks designed for the import terminal will be repurposed for exports. And, at last, there’ll be work for the ochre-colored tugboats with their fire-engine-red hulls. They’ll no longer be waiting for phantom ships.
B.C. government will oppose oil pipeline expansion project
(Vancouver Sun; Jan. 10) - The B.C. government will formally oppose the Trans Mountain oil pipeline expansion in a written submission to the National Energy Board. Environment Minister Mary Polak told The Vancouver Sun that the provincial government believes that pipeline proponent Kinder Morgan has failed to provide the NEB with an adequate plan to prevent or respond to an oil spill. “We are asking them not to recommend approval,” Polak said of the Alberta-to-B.C. coast pipeline project.
The B.C. government laid out in five conditions in 2012 that it said all oil line projects would have to meet before they would be allowed in the province. The second and third conditions require “world-leading” prevention and response plans if a pipeline fails on land or if oil is spilled into any rivers, lakes or the ocean. “As far as we’re concerned, we have not seen the evidence in the hearings to support a conclusion that they’ve met our conditions,” Polak said. “So we won’t be supporting their approval at this time.”
The $6.8 billion Trans Mountain project would involve twinning Kinder Morgan’s existing 715-mile pipeline from the Alberta oil sands to its costal terminal in Burnaby, B.C. It would increase capacity between Edmonton and Burnaby from 300,000 barrels a day to 890,000 barrels, and lead to as much as a seven-fold increase in tanker traffic. Kinder Morgan has said it will mitigate increased risks of oil spills by increasing tug escorts in inland ocean waters and beefing up spill-response capacity. “They did not submit evidence of their ability to respond in a world leading way on the land,” Polak said.
Hard to see ‘any company making money’ at $30 oil
(Calgary Herald; Jan. 12) - Crude proved it can indeed go “lower for longer,” falling briefly Jan. 12 to below $30 per barrel before closing at $30.44. “At these prices, I can’t think of any company making money,” said Gary Leach, president of the Explorer and Producers Association of Canada. At a conference in Calgary, meanwhile, a panel of commodities experts agreed that prices will come back — eventually — but no one sees West Texas Intermediate ever getting back to above $105, where it was in June 2014.
Martin King, an analyst with FirstEnergy Capital in Calgary, pointed out that Canadian crudes are being hit particularly hard, with Western Canadian Select, a heavy oil and oil sands blend, recently falling below $20 per barrel. “Prices remain under pressure,” said panelist Michael Wittner, global head of oil research for Societe Generale, listing China’s market turmoil and currency uncertainty around the world as recent influences on the price. But he did predict that oil could return to the $70s by 2020 as cheap oil cannot keep up with demand growth, forcing the market to call on costlier supplies.
Meanwhile, Ed Morse, global head of commodities for Citi Research, said new production from Iran as sanctions are removed in the next month or so will cause ripple effects on global oil markets. “It’s hard to be optimistic over the short term when you have as much inventory being put into storage as we’ve seen happening right now and when Iran is going to put out a significant amount of oil into the market,” he told reporters.


1-12-16 Weak Energy, Etc. Policies = Lackluster Last State Of The Union Speech

12 January 2016 3:46am

Calgary Herald by Dan Healing.  ... Seven Generations Energy Ltd., considered one of the bright lights of the Calgary oilpatch, announced it would postpone about $200 million of planned capital investment in 2016....

David Holt Commentary, FuelFix.  ...a second major oil company was forced to abandon plans to drill in the Arctic Ocean off the coast of Alaska...for those who live close by..., the news is devastating.


After rejecting the Keystone XL pipeline for the U.S., the Obama administration is now encouraging construction of an oil pipeline in Kenya, according to a WSJeditorial.

U.S. Ambassador Robert Godec reportedly told Kenya’s energy minister last week that the administration would help the African country raise $18B to finance its PowerAfrika pipeline project.

Meanwhile, TransCanada (TRP +0.4%) is bringing an international arbitration case against the U.S. for not treating the Canadian company the way it would a U.S. company as it is seeks to recover $15B in costs and damages

Today we have more evidence (Column right, lower story) that White House disapproval of Keystone XL was based, pure and simple, on politics -- not on environmental considerations.   Remember, our first evidence was that the State Department (i.e. the jurisdictional agency since the pipeline would cross the international border) released multiple determinations that the project should be approved.

Such presidential policies cannot produce much of a record to be proud of during tonight's last State of the Union Speech.

Note as well that last year's disapproval of Keystone XL coincided with the administration's continuous delay and the eventual demise of Shell's Arctic Alaska oil and gas exploration program.  

Killing of these high profile energy projects was perfect preface to the President's participation in the United Nations' Paris Climate Change conference in December, 2015.  This negative, domestic energy policy strategy surely delighted the United Nations climate change cabal, whose leader* admitted that the goal of environmental activism is not to improve the environment but to destroy capitalism.  (*Christiana Figueres {Photo} Executive secretary of U.N.'s Framework Convention on Climate Change)  Note: Figueres has now added another goal: depopulating the earth, except for her family, US funded UN coworkers and friends, we assume. -dh

Blocking these and other major fossil energy projects -- which would have been good for American jobs and consumers -- would also have pleased Arab countries intent on diminishing American energy competition.  

These dots may eventually connect to possible efforts of the outgoing president to purchase a Dubai mansion.  Could this possibly happen while bidding to become Secretary General of the United Nations?  

The sooner the United States withdraws funding, support and even participation in the United Nations, the better.  With China, Russia, Arab and liberal coalitions in charge, the interests of America -- including energy interests -- cannot be achieved.  

Tom Harris

From reader Tom Harris we have this commentary on tonight's State of the Union Speech: "...But what Obama did not tell Americans, and will undoubtedly not admit tonight, is that the accord is dangerously flawed. It is, in effect, another Kyoto Protocol since, like all United Nations greenhouse gas (GHG) emission reduction agreements, it provides an opt-out clause for developing nations, the source of most of today’s man-made GHG.   More

Think about it: the U.N. energy producers wish to diminish North American oil and gas production, purely to reduce competition.  The liberal countries vote and work against (i.e. the climate change activist states) coal, oil and natural gas production to reduce supply and increase costs so consumers will use less.  The world's poor countries cast their votes in favor of the climate change agenda so long as the U.S. pays its taxpayer dollars VIA THE UNITED NATIONS to their officials who may or may not responsibly transfer those dollars to the intended alternate energy projects.

There is also another beneficiary of diminished North American oil and gas wealth and economic strength: ISIS.  ISIS has oil money.  The stupid or devious (i.e. take your choice) action of United States leaders is unfreezing billions in cash to terrorism state sponsor Iran.  These facts logically lead to a weaker North American defense capability and a stronger terrorism capability.  

Accordingly, we do not look forward to a very pithy, last State of the Union performance this evening.

Putting the nail in the coffin are current Canadian and U.S. leaders who wholeheartedly endorse the anti fossil fuel, transfer of North American wealth programs.  

With such leadership, can economies be expected to perform better than they now are?


Original Story Here, with videos.  Christiana Figueres, the Executive Secretary of the United Nations Framework Convention on Climate Change, recently stated in an interview that the Earth is already over burdened with people and that we should look at depopulating the planet.

“There is pressure in the system to go toward that; we can definitely change those, right? We can definitely change those numbers,” Figueres stated.

“Really, we should make every effort to change those numbers because we are already, today, already exceeding the planet’s planetary carrying capacity.” she claimed.

“So yes we should do everything possible. But we cannot fall into the very simplistic opinion of saying just by curtailing population then we’ve solved the problem. It is not either/or, it is an and/also.” Figueres continued.

Figueres also blatantly stated earlier this year that the true purpose of the entire global warming scare is to kill off capitalism. Now, even after this admission, she’s claiming we need to get rid of a large percentage of the world’s population due to climate change. Of course, most of the sheeple in the world will ignore her admission as well as the undeniable evidence that climate change is the greatest science scandal of all time – as illustrated by the fact the someone has been ‘fudging the numbers’ that give credit to this scam.

The other great lie is that we have a problem with the Earth’s population. Actually fertility rates are falling. More below the video.


Climate One is a self described public affairs forum which advocates extreme action to combat climate change. It is a branch of The Commonwealth Club of California based in San Francisco, essentially a talking shop visited regularly by heads of government and corporate business.

Figueres is no stranger to controversial statements when it comes to climate change. The UN official previously described the goal of the UNFCC as “a complete transformation of the economic structure of the world.”

She has also repeatedly said that a Chinese style communist dictatorship is better suited than the U.S. constitutional system to fight “global warming.”

Figueres told Bloomberg News last year that the Chinese government (which continues to enforce forced abortions, infanticide and compulsory sterilization) is “doing it right” when it comes to climate change, even though China is by far the biggest emitter of greenhouse gasses.

Figueres noted that a partisan divide in the U.S. Congress is “very detrimental” to passing climate related legislation, while the Chinese Communist Party, sets policies by decree. President Obama clearly agrees given that he continues to bypass Congress by issuing executive orders on climate change.

As InfoWars has continually noted, there is a fundamental flaw in associating climate change with overpopulation.

Populations in developed countries are declining and only in third world countries are they expanding dramatically. Industrialization itself levels out population trends and even despite this world population models routinely show that the earth’s population will level out at 9 billion in 2050 and slowly decline after that. “The population of the most developed countries will remain virtually unchanged at 1.2 billion until 2050,” states a United Nations report. The UN’s support for depopulation policies is in direct contradiction to their own findings.

Once a country industrializes there is an average of a 1.6 child rate per household, so the western world population is actually in decline. That trend has also been witnessed in areas of Asia like Japan and South Korea. The UN has stated that the population will peak at 9 billion and then begin declining.

In addition, as highlighted by the Economist, global fertility rates are falling.

Since radical environmentalists are pushing to de-industrialize the world in the face of the so called carbon threat, this will reverse the trend that naturally lowers the amount of children people have. If climate change fanatics are allowed to implement their policies, global population will continue to increase and overpopulation may become a real problem – another example of how the global warming hysterics are actually harming the long term environment of the Earth by preventing overpopulated countries from developing and naturally lowering their birth levels.

Even if you play devils advocate and accept that humans do cause catastrophic warming and there are too many of us, and if you can skip past the eugenics connotations of population control and depopulation policies, those methods are fundamentally still not a valid solution to the perceived climate change threat.

The real solution would be to help increase the standard of living of the cripplingly poor third world, allowing those countries to industrialize, and seeing the population figures naturally level out.

Instead, the third world has seen a doubling in food prices owing to climate change policies such as turning over huge areas of agricultural land to the growth of biofuels.

In addition, Climate legislation continually pushed by the developed world has those nations taking on less of a burden than anticipated demanding more of poorer countries, despite the fact that any further cuts in CO2 emissions will further cripple their flimsy economies and poverty-stricken people.

Previous legislation, such as the Copenhagen agreement, allowed people in developed countries to emit twice as much carbon per head than those in poorer countries, who have not caused the rise in emissions said to be threatening our existence on the planet. The revelations have led third world leaders to accuse the developed world of “climate colonialism”.

Linking environmental policy to depopulation agendas opens the door to eugenics and it is no surprise that through that door have come pouring hordes of elitist filth just begging to be on the front line of the extermination policy.

One example is UK-based public policy group The Optimum Population Trust (OPT), which has previously launched initiatives urging wealthy members of the developed world to participate in carbon offsets that fund programs for curbing the population of developing nations.


Yea for TransCanada! Prepare For The Alliance Tomorrow!

07 January 2016 3:37am

Rebecca Logan, Alaska Support Industry Alliance, Meet Alaska, 2016, Photo by Dave Harbour

Considering our editorial Tuesday, Tomorrow's ALLIANCE MEET ALASKA conference may be the year's most important meeting for readers living in/visiting Anchorage.  Agenda.

Following Tuesday's editorial on the rating agencies' downgrades of Alaska's creditworthiness, see these reader comments by: an Alaska couple, an Alaska university professor, and our anonymous, Australian energy analyst friend (We hope his tough but realistic predictions are ameliorated by a successful TransCanada suit, as described below.  -dh

Speaking of the Alliance (i.e. upper right), our Mid Atlantic anonymous energy analyst friend has this to say about the plight and the future of petroleum industry service companies.  Hopefully, the better support industry environment in Alaska will sustain it!.  -dh

Tom Barrett, Alyeska Pipeline Service Company, TAPS, Trans Alaska Pipeline System, 3/4 empty, Photo by Dave HarbourOil Voice by Tim Bradner.  ​'Our operations in winter are becoming increasingly complex,' Alyeska CEO Thomas Barrett (NGP Photo) said in a briefing.  ...   'The real solution for us is finding more oil on the North Slope and adding new production and throughput,' Barrett said.

TransCanada will sue the Obama administration...

Image result for transcanada pipeline logo

...for $15 billion for violating NAFTA because the President disapproved the Keystone XL pipeline by fiat, and because he overreached his authority on multiple occasions.  (Read the Calgary Herald story here, and subscribe!)

Sound familiar?  Hopefully this will be another defeat in the growing record of so-called executive actions that the courts reject.  We are respectful of TC for standing tall, in the spirit of the old Peter Finch movie theme by saying, in effect: "I'm as mad as hell, and I'm not going to take this anymore!".  

The administration's arbitrary and capricious acts have alienated it from the Constitution its executives are sworn to protect--as Alaska and others have learned only too well (Ref. 1, 2, 3).

During Obama's last year in office, Congress, companies and individuals experiencing harm by an unlawful administration should push back very hard, lest more freedoms become lost during these last few months.  -dh

Calgary Herald/Canadian Press by Ian Bickis.  TransCanada launched a double-barreled legal salvo Wednesday against the U.S. government over its rejection of the company's proposed Keystone XL pipeline.

The company said it intends to file a claim under Chapter 11 of the North American Free Trade Agreement in response to the decision, which it called arbitrary and unjustified.

...     TransCanada alleges that, as a signatory to NAFTA, the U.S. government failed in its commitment to protect Canadian investors and ensure the company was treated in accordance with international law.

In its notice of intent to initiate the NAFTA claim, TransCanada said that the U.S. government concluded five times that the pipeline would not have a significant impact on greenhouse gas production, but still rejected the pipeline to appear strong on climate change.

"Stated simply, the delay and the ultimate decision to deny the permit were politically-driven, directly contrary to the findings of the administration's own studies, and not based on the merits of Keystone's application," TransCanada says in its notice of intent.

...     TransCanada said it has also filed a lawsuit in the U.S. Federal Court in Texas asserting that President Barack Obama's decision in November to deny construction of Keystone XL exceeded his power under the U.S. Constitution.

...     The White House and the State Department both declined to comment on the lawsuit or the NAFTA challenge.

...     Adam Barratt, a spokesman for Foreign Affairs Minister Stephane Dion, had little to say on the matter Wednesday, although he noted the lawsuit is "not entirely unexpected" and falls within TransCanada's purview.

"We're aware of recent developments with this file and TransCanada," he said. "As this is a matter which is expected to go before arbitration, or before a court, we don't have a comment at this time."

...     "This is about a foreign company trying to undercut safeguards that protect the American people," said Anthony Swift, director of Natural Resources Defense Council's Canada project.  (Note: typical, non substantive outcry by a special interest activist.  -dh)

Saskatchewan Premier Brad Wall, who supports the project, tweeted: "We support @TransCanada #KXL NAFTA challenge. Pipelines safest way to move energy in N. America, get more $ for SK oil."

Read full story here..., and subscribe!



Note from our anonymous Australian energy analyst following Tuesday's editorial


Firstly - thanks for promoting my blog again recently!

I presume you will already have seen the story below.

Point Thomson condensate will help TAPS.  Beyond that though, things look tough.  Exploration on the NS with current oil prices (and current Governor of AK…) will not be material.  A likely Hilary win in the 2016 Presidential election will mean ANWR will remain inactive.  Offshore is dead for a “generation”.   AKLNG has great merits - but it is a tough LNG market and it is ~10 years away.  Help!


PS - Happy New Year! 

From an Alaska couple after reading Tuesday's piece:


An Alaska professor commented on Tuesday's editorial.  He writes frequently and is extremely hostile to oil companies, the biggest benefactors of education in the state.  When he retires, he will have free insurance for life and an extremely enviable defined benefit pension payment.  I'm sure if I asked him what more the state could reasonably want of oil investors, he would say, "More".

"Dave:  I agree that we have been very inconsistent with our oil tax policy, but if we would have taxed them more way back when, we would be really sitting pretty.  Just saying."  

(Our response: You know I couldn't let the last part of your statement stand without response.  

If our elected officials had taxed oil more, 1) we would likely have seen less investment, less oil over time; and, 2) the government would have started new programs with the extra money, which would have been an additional anchor around the economy's neck during volatile, low price eras -- like now.  

We should be encouraging and not criticizing oil investors, because we want them to invest more and not less.  To attract more investment, we should be a place where, "a deal is a deal". 

More investment leading to more production is essential if the state is to meet its financial obligations.  One of those obligations is eliminating the almost $10 billion unfunded liability of the PERS/TERS public employee/teacher retirement funds, of which you are a beneficiary.  

Currently, there are not sufficient, available funds to both run our subsidized government for the next few years and make the retirement fund whole.  

Accordingly, teachers should be among the most vociferous supporters of oil investment, not some of the industry's most hostile critics. 

Happy New Year!




Rebecca Logan, Alaska Support Industry Alliance, Meet Alaska, 2016, Photo by Dave HarbourFrom ALASKA SUPPORT INDUSTRY ALLIANCE General Manager, Rebecca Logan (NGP Photo):

"The Alaska Support Industry Alliance is once again proud to announce that our annual Meet Alaska Conference and Tradeshow is TOMORROW!

"As the largest one-day event of its kind in Alaska, Meet Alaska features more than 500 Alliance members including industry leaders from across the state. In addition to meeting fellow Alaskan industry leaders, attendees will be invited to hear a dozen presentations from economic authorities and Alaskan lawmakers on the industry climate in Alaska.

"Meet Alaska hasn’t disappointed in 33 years – and Friday will be no exception. If you are interested in joining us, click here to find registration information. Stay tuned this week to Headlamp’s blog and Twitter through #MeetAlaska16 for the latest.

"And for those joining Meet Alaska in person AK Headlamp will be on hand.  Ever wondered how you and your business can stay engaged on key political and business issues facing Alaska?  Need help signing up for Twitter?  Come find us Friday at the AK Headlamp booth."

From our Mid Atlantic anonymous energy analyst friend:

Last night, as a closing preview, we said, “In the next few days, we will deal with another major evolution to the pricing mix: Major changes for the Oil Service Industry.”  (Unnamed) immediately challenged us: “I'm going to be very interested in your next articles on the OFS industry.”  

Anyone who follows this corner knows there are few, if any, better analysts of the Oil Service business than Unnamed. He was an excellent sell-side Oil Service Analyst with CIBC for many years, and serves on the board of several Oil Service companies. Also, we are quite confident he will cover the issue soon in his bi-weekly Musings (possibly next week). Unnamed's dive into any subject is always deeper than mine, and more informative (in fairness, we cover at least ten topics in a two-week period, compared to Unnamed’s four-to-six subjects). That is why we always pass along Unnamed’s great writings.

That being said, we have decided to get into the subject of the outlook for the Oil Service industry, with an eye to what it means for the longer-term outlook for crude oil and natural gas prices. But it will take several comments over the next couple of weeks; any note too long will not get read. So bear with us.

Our Thesis: Projected cash flow for the E&P industry will likely be bleaker in to 2016 than almost all analysts have been projecting. Further, most companies have vowed to live within their opex cash flow in 2016 (mostly because they have little choice), a dramatic change from prior years. In order for the E&Ps to survive (or in the stronger cases, muddle through), they will insist that the Service Companies work for what amounts to either 1) a fixed cost, or 2) a price contingent upon the rate of production. In short, the Oil Service business will have virtually no pricing power. Further, they will be subjected to the heightened credit risks associated with their customers.  The good (?) news: There is likely to be another surge in innovative efforts to generate greater efficiency in field operations.

We have referred to our analogy of the Orlando Hotel Syndrome so often that many readers will skip past this section. But there is a specific reason for bringing it up again now. Briefly, when Disney announced it would build Disney World in Orlando, every developer, orthodontist and his brother invested in building hotels/motels in Orlando. Anyone could look up and down the streets and know it was being overbuilt. But almost no one wanted to give up his project and concede market share to the other developers. After all, the only real barrier to entry was money. As a result, by the time Disney World opened up, almost all of them were wildly overextended, and went bankrupt. Some of them went through bankruptcy twice. It was not until the cost of the projects (through forced sales) came down AND Orlando developed more attractions that the lodging industry stabilized. In the process of the overbuilding, many of the contractors were also subjected to extreme financial distress by the construction of the hotels/motels.

The point of bringing this up is that we are entering the bankruptcy phase of the Syndrome. And the Oil Service is going to feel the financial stress even more than is being projected. As a result, we have entered the bankruptcy phases for the E&Ps, but it should get much worse in the first six months of this year. In advance of this we will see many more outlooks lie this one from CONSOL Energy today:

CONSOL Energy (CNX/$8.53) reduces 2016 E&P capital budget by 40% and production guidance. Responding to challenged natural gas prices, CONSOL management significantly reduced its E&P capital budget. The E&P division budget was reduced to $205-325 million, down ~40% from previous guidance of $400-500 million and down ~67% y/y.

The Bottom Line: The Service industry will have almost no pricing power over their services. Quite the opposite; they have almost completely become price takers, to an industry teetering on the edge.

We will have more on this topic in the next few weeks. We will start with this article from Fuelfix about the ongoing shrinking of capex and opex budgets.


1-5-15 Alaska Is A Betting State - Aussie Oil & Gas Analyst Review & Outlook

05 January 2016 8:31am

You May Not Be A Betting Man or Woman, But Alaska Has Become A Betting State

For years Alaska leaders have shunned warnings about overspending and being too dependent on volatile oil prices.  How many still think placing bets on the volatile gas market via equity ownership in an LNG project is wise?

Commentary by

Dave Harbour

Today Standard & Poor's and Moody's credit rating agencies lowered the credit rating of the State of Alaska.  

Here are today's Standard & Poor's and Moody's rating announcements.

Here is Governor Bill Walker's response to those ratings.  Governor Bill Walker, Photo by Dave Harbour(We are a little surprised that he considers these third party creditworthiness ratings "premature".  

Alaska's whole budget problem is that it has, in effect, considered disciplined budgeting "premature", year after year.  Note 1. Also, the agencies have warned Alaska that, absent significant improvement, this was coming.  -dh  Note 2.  Note 3.)

Other reference points:

Kenai Peninsula Clarion Report

Today's energy outlook from our anonymous Australian energy advisor, and

Yesterday's energy outlook from our Mid-Atlantic energy advisor.  


According to a December Gallup Poll, when asked to choose among "big government," "big labor" and "big business," respondents overwhelmingly selected big government as the biggest threat to the country in the future.

The negative outlook expressed by the agencies applies not only to general obligation debt, which pledges the full faith and credit of the state to bondholders, but also to revenue bonds and other "moral obligation" debt -- like that which may subsidize the building of a government created gas utility in Fairbanks.  

We have long predicted this turn of events and have also advised readers that political realities and human nature would not likely result in spending restraint until elected officials were faced with a head-on crash into a fiscal brick wall.  

While today's reports were troubling enough, they do not fully explore the negativity of Alaska's budget imbalance.  

Just imagine how continuing lowering of creditworthiness affects the desire to invest in Alaska by major oil and mining companies!  Or tourism and commercial fishing companies!  Or those considering the buying or building of new homes or offices!  

Will not thoughtful investors be thinking, "Gee, if Alaska can't balance its budget and is within a few years of spending all of its available savings and still owes the state employee retirement funds billions of dollars there's no doubt that state and municipal tax hawks will want me to pay more for their lack of planning!"  

Today's credit downgrades and negative outlooks by credit raters is either step one toward establishing reasonable budget practices in Alaska, or the first step toward an economic depression that could be more severe than the one Alaska experienced in the late 1980s.  

Back then, Alaska and its producers suffered from low oil prices but was producing a huge volume of oil in a full pipeline that helped the economy survive, albeit in rags.  


  • oil prices are low,
  • Alaska's dependence on oil remains close to 90%,
  • Alaska's oil pipeline is nearly 3/4 empty,
  • the State's available savings are fast depleting,
  • half the State operating budget is subsidized by plundering savings accounts and, finally,
  • elected officials are focusing on expanding taxes on Alaska investors at a time when their economic wellbeing is already threatened.  

How does a state or nation controlled by freely elected politicians control its addiction to over tax and to over spend?

Wise minds have already provided a proven answer to this question.  Perhaps the first step toward controlling overtaxing and overspending is to admit the problem exists.

"We admitted we were powerless over our addiction - that our lives had become unmanageable"


Alaska's Institute of Social and Economic Research (ISER) has been warning Alaskans and their elected leaders since the early 1990s to control spending, to develop a sustainable budget, to create a "safe landing" for a state economy overly dependent on the historic volatility of energy prices. 

We will be very disappointed in any leader who begins a scapegoat tirade to the effect that: "We didn't know", or, "It's big oil's fault."

Finally, anyone who still thinks that Alaska should be owing equity interest in a gas pipeline that has not even been proved economically feasible (i.e. betting on the price of gas in a historically volatile energy industry) is wishing the state to become even more dependent on volatility, risk and purely lucky betting.  Meanwhile, equity interest requires, "putting up the ante", as costs to determine feasibility increase.

What if the State continues its socialistic, quixotic quest for ownership of the State's private energy industry?

Some will say, "Don't be so hard on the State; we're not gamblers, we're just taking partial ownership."

To that, a wise observer might respond, "You say you are not gamblers.  We investors already know what you are; we're just waiting to see to what degree you continue your irresponsible behavior."

The truth hurts, doesn't it? 

Maybe thoughtful decision makers will review their history of increasing taxes to create and bloat new, unsustainable spending programs.  Maybe they'll analyze why they've doubled the size of government in the past few years.  Maybe they'll realize their undisciplined practices have been the very reasons pressure is now building to increase taxes.

For, from an investor's viewpoint, Alaska's volatile tax/spending structure is not inviting.  Alaska's retroactive taxation history is downright highway robbery.  

You'd think that a place with the most harsh climate, most difficult geography, highest labor costs, and highest logistical prices and history of mistreating investors would be bending over backward to retain spending and taxing discipline.  

You'd think that such a State -- at least from this day forward -- would want to be known as a place where, "a deal is a deal."

Energy Perspectives From Our Anonymous Energy Analyst Advisors in Australia and the Mid-Atlantic States:

Yesterday, we brought you the 2016 oil and gas perspective from our Mid-Atlantic, anonymous  energy analyst friend (Scroll down).  Today, comes a perspective half a world away, from our anonymous Aussie oil and gas analyst friend who understands the Alaska and Canada energy picture a well as any North American.  You can also find his blog here....  -dh


As well as making prognostications, the start of a new year is a time to look back and learn.  The top 5 lessons for this blogster from 2015 were as follows:

  1. Oil supply in the face of falling prices has been far more resilient than we expected.  This prevails across the globe - in the tight oil fields of the USA, the old Russian fields, in a falling-apart Iraq, for small Mom and Pop stripper wells, etc.  This is partly due to good old fashioned ingenuity in the face of adversity - and partly due the extreme prisoner's dilemma that the industry faces (everyone should just cut production by 1-2% and the market would re-balance - but why do so if others won't?).
  2. The US gas price continues to be ultra-low and well below break-even levels, even in the face of increasing exports by pipe and soon to be by boat.  And a massively lower rig count.  For 2015 this was arguably due to the afore-mentioned resilience combined with the very mild US winter.  We still expect US gas prices to rise materially - but as John Meynard Keynes famously said - "The market can stay irrational longer than you can stay solvent.”
  3. Don't believe in the conspiracy theories of an efficient Machiavellian OPEC that is employing smart strategies to destroy US and/or Russian competition.  These guys cannot organise their equivalent of a p*ss-up in a brewery - the Haj.  OPEC is Saudi Arabia and there is a largely hidden "Game of Thrones" likely afoot in the Kingdom over the succession.
  4. "Events" in the Middle East in 2015 did not disrupt oil markets in meaningful ways - surprisingly so compared to other times in the oil market's history.  This may of course change (see 3 above) - the key is where the "events" occur.  Syria is not a material oil producer.
  5. The "Golden Age of Gas" has yet to arrive - and indeed in many markets gas is being squeezed between coal and renewables.  LNG markets have accordingly been weak and their outlook is poor in the medium term.  It remains to be seen whether policy mechanisms will change this - the evidence is scant to say that they will, even in mature countries like Australia.

Commodity prices

Crude prices finished fairly flat yesterday, with Brent closing at US$37.27 and WTI at US$36.76.  However, during the course of the trading day there was much volatility, as markets tried to balance bullish news from Middle Eastern "events" (i.e. the shocking escalation of Sunni/Shia tensions induced by the KSA's recent executions) and bearish news from Chinese stock-market falls.

Henry Hub closed down 2% at US$2.30.

LNG and international gas

With US LNG exports imminent, weak Asian demand and an "anybody but Gazrprom" buyer mindset, Europe is the destination of choice for the global LNG market at present.

However, we note that the warm winter weather being experienced in the US is also present across the Atlantic, and this, combined with economic weakness, has led to European gas storage levels being at 6 year highs.

Company news - AWE

AWE announced today that it (and partner Origin Energy [ORG]) has FID'ed stage one of its Perth Basin gas project.  Underpinned by a short term gas contract with retailer Alinta Energy, the joint venture has committed to connect a couple of cased-and-suspended recent delineation wells to existing production facilities.

Capturing market (albeit on confidential terms and only for small volumes for a couple of years) is arguably the key news item here.  The future of Western Australia's gas market is currently clouded with uncertainty as massive volumes of "domestic reservation" gas from Gorgon and Wheatstone over-hang the supply side.

Company news - ORG

Yesterday's Australian Financial Review (AFR) noted that ORG's sale process for its Perth and Cooper Basin assets was on track to receive expressions of interest by the end of this month.

The AFR quoted an analyst from Citibank as estimating the value of ORG's Perth Basin assets as being ~A$300M - a figure we note as being higher than the market cap of its partner AWE.

Analysts are less bullish on ORG receiving good (or indeed any) bids for its Cooper Basin assets.  We reflect on the strong competition between Santos and Beach Energy the last time (2006) a stake in this venture came on the market and note the vastly different animal spirits that now prevail.

Company news - FAR Ltd

FAR came out of yesterday's trading halt this morning with good news on the testing program for its SNE-2 well offshore Senegal.  Strong and sustained flow rates of high quality oil were reported.

FAR's share price has gone up 7% on this news.  In a bull market the response would likely have been an order of magnitude higher.

Quote of the day

The Donald dosen't have a monopoly on colourful quotes, as evidenced by the following from Poland's new Foreign Minister:

“As if the world, in a Marxist fashion, were destined to evolve only in one direction—towards a new mix of cultures and races, a world of vegetarians and bicyclists.” 

Governor Bill Walker's response today to rating agency announcements:

“The action taken by Standard & Poor’s to lower Alaska’s credit rating is concerning and premature given that the legislature has not had time to act on a long-term fiscal plan.  However, this further solidifies the need to address our state’s fiscal challenges in the immediate future. As noted in S&P’s release today, Alaska has significant financial assets that, if properly utilized, can help build fiscal stability for our state. I agree with S&P that the stakes are high for Alaska to enact a sustainable fiscal package, but it’s important to do what is right for our state’s future versus what may be politically appealing. As we approach the 2016 legislative session, I encourage every legislator and Alaskan to read the memos released by Standard & Poor’s and Moody’s in their entirety. I look forward to working with lawmakers to enact a complete fiscal package that protects the opportunities available to future generations of Alaskans.” 

Our October 25, 2015 editorial...


For Whom The Bell Tolls

TODAY, our readers can link to the Alaska Legislature's streaming videos of hearings dealing with the Alaska LNG project.
Be sure to go to church first and pray, "for whom the bell tolls."  Here's why.
The U.S. could count on Alaska for hundreds of thousands of new jobs and an infusion of hundreds of billions of dollars throughout the entire country's manufacturing, transportation, and service sectors.
But hostile federal regulatory activity, coupled with environmental activism, is keeping critical resources of a state 20% the size of America, effectively off limits.
The federal actions are exacerbated by a governor whose free market and oil industry investment policies are both hostile and irrational.
Today, our readers will see a plot unveiled by video before their eyes: as the governor tries to convince legislators to invest billions into an LNG project's equity at a time when 1) the state can't afford it, and 2) the majority of the world's LNG projects -- many, many of which seem more economically feasible -- are in the process of being abandoned or delayed.
The governor may be panicking, for to observers the state looks functionally broke as the perfect economic storm gains force and momentum within the 49th state:
  • Alaska's government operates with a $3-4 billion annual deficit and its leaders display pitifully little determination to restrain spending; and
  • its accessible savings accounts will be dry, unable to support deficit spending within a couple years; and
  • it has not been able to pay down a nearly $10 billion unfunded liability of its state and local government employee and teacher unfunded pension liability; and
  • its $50 billion+ Permanent Fund (PF) corpus cannot be tapped by the Legislature without a Constitutional amendment, which its PF Dividend-addicted citizens are loathe to give; and
  • its deficit situation grows worse as the nearly 3/4 empty Trans Alaska Pipeline System (TAPS) continues to lose oil throughput at a 5-6% annual rate; and
  • its state budget is 90% dependent on that dwindling TAPS throughput; and
  • its entire economy is over 1/3 dependent on TAPS economic activity, and
  • the credit rating agencies are beginning to downgrade the credit worthiness of the state, thus compounding its troubles as the cost of borrowed money increases.  (Yesterday, if you were watching the Legislative video, you heard financial advisers warning that borrowing money now would be at the most favorable time, before further rating downgrades occur...but that if the state had to borrow later to support failing Alaska LNG project equity commitments, the whole world would know its financial problem and lenders would require still higher risk premiums in return for their investments.)  
In economic terms, to be frank and realistic, one realizes during these hearings that Alaska is facing the specter of an "economic death spiral" if major, difficult decisions are not made very soon.

We would wonder how a state in such circumstances would waste even a weekend discussing the possibility of providing  a multi-billion dollar 'deficit investment' in an project when 1) payback is not likely to occur for a decade, and 2) the depletion of deficit supporting savings accounts and perhaps the termination of TAPS operations could occur within just a few years, and 3) completion risk of an LNG project in today's world environment is sky high.

Meanwhile, caught in the quagmire of these circumstances amid a perfect economic storm, the Alaska governor is pressuring the Legislature to pass a contingent natural gas reserves tax on the very companies he hopes will build an LNG project.

The federal hostility against Alaska is cutting off sources of new TAPS-replenishing, Arctic oil income and a hostile state administration cannot help but have the effect of further discouraging, if not alienating, investors.

New readers might ask of us: "For whom does the bell toll?"

Without some kind of a born again experience, Alaska, we fear that, indeed, the bell "tolls for thee".

Don't forget to tune in after church.  This will be interesting.

Read more here....

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