MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, FEBRUARY 20, 1998 (3)
FEATURE STORY
Oil Firms Dismiss Libyan Threat
The Financial Post
Canadian oil and gas producers and service firms are keeping their heads down and hoping their Libyan contracts do not become casualties if Canada participates in military action against Iraq. Libyan leader Moammar Gadhafi threatened this week to cancel contracts held by Canadian firms if a U.S.-led coalition, of which Canada is a member, launches an air strike against Iraq because of its refusal to let United Nations arms inspectors visitvarious sites.
Several Canadian producers and service firms are active in the North African country. Most officials said their interests are too minor to cause a negative impact.
Red Sea Oil Corp., whose shares jumped 33% on Jan. 19 after it reported an oil gusher in Libya, is watching the situation closely, but isn't worried.
"It's a statement that was made, but we don't feel it will result in any impact on our contract," said Sophia Shane, manager of corporate development.
The Vancouver-based junior, which trades on the Alberta Stock Exchange, plans to spend US$15 million this year drilling two appraisal wells and collecting seismic data on its 9,800 square kilometre concession. The firm intends to begin commercial production of its En Naga North oilfield by the end of the year.
Red Sea is counting on Libya as a company-making play. "We do expect to be awarded one or two more blocks this year," Shane said.
PanCanadian Petroleum Ltd. expects to spend about US$5 million this year in Libya as part of three-year, US$17-million commitment signed last May. The money will go toward seismic programs for its concession in the prolific Sirte Basin, home to almost all projects with Canadian content.
Political uncertainty is part of doing business, said Paul Ellis, PanCanadian's international group vice-president. "One has to weather these storms from time to time, especially in a place like Libya."
Chieftain International Inc. and Numac Energy Inc. are participating in a joint venture in Libya, forecast this year to net Chieftain about 500 barrels a day of oil and Numac around 300 b/d.
"While we don't like to hear these things and hope they don't come to pass, it really wouldn't have much of an impact on us," said Stewart McGregor, Numac's chairman and CEO.
Libya also plays a limited role in Alpine Oil Services Corp.'s operations. President and CEO Rod Hauser estimated the country accounts for less than 5% of his business. "To be honest, I don't think it's a big deal," he said from his Bahamas office.
Alpine has been active in Libya for more than a decade and has always been treated fairly, Hauser said.
FEATURE STORY
Domestic Natural Gas Demand Forecast To 2010
Canadian demand for natural gas will rise by 30 percent over the next 13 years, predicts the Canadian Gas Association in its latest demand forecast.
By 2010, 90.6 billion cubic metres (3.2 trillion cubic feet) of natural gas will be consumed in Canada, up from 69.7 billion cubic metres (2.5 Tcf) in 1997.
Volume growth will be greatest in Canada's industrial sector, driven in large part by the increased use of natural gas in power generation. A 41-percent increase in natural gas demand is forecast in the industrial sector over the next 13 years. By 2010, this sector will consume 54.4 billion cubic metres of natural gas (1.92 Tcf), representing 62.4 percent of Canadian demand.
By comparison, commercial demand will jump 17.6 percent to 15.7 billion cubic metres (555 billion cubic feet), while demand in the residential sector will increase 14.2 percent to 17.1 billion cubic metres (603 Bcf). Impacting on the commercial market will be institutional cutbacks and the increased popularity of small and in-home businesses. An increase in energy conservation programs will also have an impact on growth in both the commercial and residential markets.
FEATURE STORY
Natural gas sales still far outpaced wholesale electricity sales by marketers in the U.S. in 1997, according to numbers compiled by Gas Daily and Megawatt Daily.
While top-ranking Enron Corp. [NYSE:ENE - news] topped energy marketers in both gas and power, no marketer made the top 20 in energy sales that also did not make the top 20 in natural gas sales. Enron toppled NGC/Electric Clearinghouse, which has been Enron's chief rival in natural gas sales.
''Because the competitive gas market is years more mature than the competitive power market, gas sales volumes are far greater than power sales volumes on a Btu basis,'' said Randy Rischard, editor of Megawatt Daily. ''Most of the gas sold in the United States is sold via gas marketers, while power marketers still account for only a small percentage of the nation's power sales.''
Energy is measured in British thermal units (Btu), based on heat value. It takes an average of 10 thousand cubic feet of natural gas (10 million Btu) to produce one thousand watts of power for one hour (MWh). U.S. natural gas prices ranged between $1.69 and $2.33 per thousand cubic feet in major producing basins in yesterday's (Thursday's) spot market, while power prices ranged between $9.50 and $28.00 per MWh.
''It now takes at least 5 billion cubic feet (cf) per day of gas sales to make it into the exclusive top 10 mega-marketer rankings,'' said Mark Hand, editor of Gas Daily. ''Only five marketers -- NGC-Chevron, Enron, Coral, Amoco and PanEnergy-Mobil (now Duke Energy) sold the same level of gas in 1996. And looking back to 1993, there was only one company -- Enron -- with average marketed volumes above the 5 billion cf level.''
Aquila Energy, an affiliate of Utilicorp United, made one of the biggest jumps in the survey, leaping from number 10 in 1996 to number five in 1997 on natural gas volumes of 6.7 billion cf per day.
And despite warmer-than-normal weather, very few gas marketers saw a downturn in 1997.
In terms of growth, power sales are the big story. While natural gas volumes sold by the top 10 natural gas marketers -- excluding number-three- ranked PG&E Energy, which entered the top gas rankings by virtue of several acquisitions in 1997 -- rose by 17.7%, power sales in 1997 by the same 10 companies jumped 340%, and will continue growing exponentially as more states restructure their electric industries.
The top 10 energy marketers in 1997 were Enron (1), NGC-Chevron/Electric Clearinghouse (2), PG&E Energy (3), El Paso Energy (4), Aquila Energy (5), Coral Energy (6), Duke Energy (7), Engage Energy (8), Amoco (9), and TransCanada Energy (10). Koch Energy, which ranked in the top 10 in 1996, declined to report its natural gas sales for 1997.
Gas Daily and Megawatt Daily, based in Arlington, Va., are the leading daily newsletters reporting on the natural gas and electric industries. Both publish spot price indexes of their respective markets, which are used as benchmarks in pricing energy transactions.
Suncor Energy Predicts Population Growth With Project Millennium
Fort McMurray Today
Fort McMurray's population could grow to 38,100 within three years if Suncor Energy's $2.2-billion Project Millennium expansion gets the green light.
And if other "development scenarios" proceed -- including Syncrude Canada's expansions, new mines from Shell Canada and Mobil Oil and in-situ projects of Gulf Canada, Petro-Canada and Japan Canada Oil Sands -- by 2001 McMurray's population may jump to 46,000.
Those numbers were unveiled Thursday during an Suncor open house at the Oil Sands Discovery Centre to give the public an opportunity to view its own expansion plans.
Suncor hopes to double production to 210,000 barrels per day by 2002.
The last census held in McMurray was in 1996 and recorded the city's population at 34,060. A consultant's population model pegs the city's 1997 population at 37,000.
Suncor spokeswoman Linda Ball said some people have questioned the population figures and projections Suncor has come up with. "We believe we have done a good job in assessing things like vacancy rates and looking at hotel utilization, the use of emergency services and so on in coming up with a population we feel is realistic," said Ball.
By 2006, the Millennium-only population model forecasts 38,100 residents, but if all the other oilsands projects go ahead, the population could swell to 49,500.
If all the region's development goes, the same model predicts McMurray would have 48,400 residents in 2020. If Suncor's expansion only proceeds, that population will be approximately 39,000 in 2020.
The population forecasts have been complied from a $100,000 study conducted by Edmonton-based Nichols Applied Management, hired by Suncor and the other oilsands players in the region. The data is being complied and used by industry and municipal government's committee called the Regional Infrastructure Working Group.
Ball cautioned the 50 or so people attending the first presentation session that the population forecasts are simply forecasts. It's impossible to predict exact numbers, she said. "Service providers don't want to over prepare and they don't want to under prepare nor do we want them to do either one of those things," Ball said.
The computerized population model doesn't take into account the construction workforce needed for Suncor's expansion or other development scenarios. Ball said Suncor expects to house its construction crews by building new workcamps at the oilsands plant.
The same population model predicts McMurray will need an additional 3,600 housing units to accommodate the increased population. Approximately 1,000 units will be needed for just Suncor's expansion.
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