MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, MARCH 3, 1998 (2)
TOP STORY
Alliance Pipeline Blocked Until Mid-2000
The Financial Post
Calgary Bureau Chief Regulatory delays have pushed back the start of the proposed Alliance natural gas pipeline by up to 12 months - a blow to industry producers of as much as $3.5 billion in forgone revenue.
Proponents of the $3.7-billion project said yesterday they had no choice but to delay the project's start of operation to the second half of 2000, as regulatory approval is now not expected until the end of this year.
"We don't want to cling to unrealistic deadlines," Dennis Cornelson, president and chief executive officer of Alliance Pipelines Ltd., said yesterday.
While the delay of between six and 12 months is not a huge loss to Alliance, the big losers are Western Canadian producers, he said.
Lack of transportation capacity is costing the industry up to $3.5 billion a year, Alliance has estimated.
Approval from U.S. regulators is expected this summer.
Previous plans called for Alliance to be completed by the end of next year.
Expectations of additional pipeline capacity have been pushing up prices for natural gas - and the stocks of natural gas levered companies - in recent weeks.
Alliance plans to transport 1.3 billion cubic feet of Western Canadian natural gas daily to a hub in Chicago for distribution across North America.
Two other major expansions are scheduled for this fall: the Foothills/Northern border system is adding 700 mmcf/d of capacity, while TransCanada PipeLines Ltd. is adding an additional 400 mmcf/d. Current export capacity to the U.S. is more than eight bcf/d.
Alliance, a project born from producers' push for competition in an industry dominated by government regulated monopolies, has faced an uphill battle before regulators, particularly from established pipeliners.
The National Energy Board is now in its third month of hearings into the project.
One of Alliance's biggest opponents has been Nova Corp., the Calgary-based pipeline and petrochemicals company. Last year, the company vowed to do everything it could to stall Alliance.
Nova's opposition has softened since the company announced last month merger plans with Trans-Canada PipeLines.
But producers want Nova to back off completely.
They have threatened to oppose Nova's own merger plans with the federal Competition Bureau unless there's competition from Alliance.
"We're looking at that," said Greg Stringham, a spokesman for the Canadian Association of Petroleum Producers, which represents companies producing 95% of Canada's oil and gas.
Meanwhile, the delay is offering an opening to TCPL, a proponent of the Viking/Voyageur pipe, which is proposing to transport 1.4 bcf/d of natural gas to Chicago from Western Canada. The major difference with Alliance is that it would deliver gas along the way, while Alliance is a high pressure system with no delivery points in between.
TCPL spokesman Gary Davies said the delay may prompt some producers to rethink their shipping commitments to Alliance, and back Viking/Voyageur instead.
Gwyn Morgan, president and chief executive of Alberta Energy Company Ltd., said a six-month delay won't be a huge problem for the industry - as long as the Foothills and TCPL expansion scheduled to be completed in November is on time.
FEATURE STORY
Novagas Buys $30M Stake In Rival Solex Plant
The Financial Post
Nova Corp. said yesterday it has thrown out plans to build a gas processing plant in British Columbia and will take a 43.3% working interest in a nearby competing facility.
Nova subsidiary Novagas Canada Ltd. has reached a deal with Calgary based Solex Gas Liquids Ltd. to buy into the small company's liquids extraction plant for $30 million rather than build a plant in Taylor, B.C. With the agreement, Novagas will become the largest voting interest in the plant. Taylor Gas Liquids Fund, an income trust Solex administers, and PanCanadian Petroleum Ltd. will own the other 56.7%. PanCanadian currently purchases liquids from the plant. Novagas has also agreed to pay a share of expansion costs to boost processing capability to 750 million cubic feet a day of natural gas from 400 million cf/d.
Novagas had halted construction on its $50-million plant in what had become a lengthy tussle with Solex over the competing facilities. Novagas will transport its extracted liquids from the plant to its Redwater, Alta., processing and storage facility.
Kevin Jabusch, president of Solex and the income trust, said the deal is a win for all sides.
The plant is the sole asset of the income trust. It was built by Westcoast Energy Inc. for $65 million and purchased by Solex for $10.3 million in 1995, according to the income trust's prospectus.
With the expansion, expected to be completed by May, the plant will be the largest of its kind in B.C., with natural gas liquids capacity exceeding 17,000 barrels a day of propane, butane and condensate and 16,000 barrels a day of ethane.
FEATURE STORY
Crown Well Servicing and Petro Well Services Merger Fall Through
The Financial Post
A friendly merger between Petro Well Energy Services Inc. and privately owned Crown Well Servicing Ltd. has fallen through, the companies said yesterday.
Under the terms of the deal, Calgary-based Petro Well, which has a fleet of 12 rigs operating in Western Canada, was offering to exchange 9.5 million treasury shares for all outstanding shares of Crown, an Edmonton-based oil and gas servicing company.
One of the conditions was the successful completion of a secondary offering by Crown shareholders of 7.5 million Petro Well shares.
But Petro Well said yesterday Crown shareholders weren't able to get a satisfactory bid for the secondary offering.
However, the two companies said they are looking at making alternative arrangements to complete the deal.
The combined companies would have boasted a fleet of 23 service rigs, making it a significant operator in the West.
FEATURE STORY
Years Of Success
Calgary Sun
Barber Engineering and Controls Ltd. is 60 years old this year, but reaching its sixth decade doesn't mean a retirement party is planned anytime soon.
"We will hosting customer appreciation celebrations," says Darryl Edinga, Barber's general manager and co-owner with president Sam Mozell and director Eric Connelly.
But otherwise, it's business as usual for Barber, which means Edinga expects another very busy year. Barber's main market for its line of gas and crude oil measurement instruments, safety relief valves and steam traps is the oil and gas sector, which means Barber's products are in high demand.
"Anything where they are flowing product -- liquid, steam or gas," explains Edinga of his company's business focus. "We're in the control and measurement of the flow."
Through its subsidiary companies, Barber's been expanding its market reach to include non-oil and gas equipment and manufacturing of measurement equipment, while still maintaining its focus on the petroleum market.
"Sales for our subsidiary, North Star Flow Products Inc., which manufactures gas flow measurement equipment, have almost doubled over last year," says Edinga.
Through another subsidiary, Edmonton-based Besco Industrial Products, Barber is venturing away from the oil and gas sector. Besco sells small and large packaged water treatment systems for industrial, municipal or rural use, such as remote communities in northern Canada or construction camps.
Ten years on the Arthur Andersen Private 100 listing, which Edinga says have been very good years, means Barber and its subsidiaries are all doing well.
"Business overall is up 16% over last year," says Edinga. "We're doing things much more smartly -- we're using more automation."
Edinga says Barber is in the process of installing a new computer system with Internet access which will allow North Star to market its products online through a web home page.
"We hope to reach people who are looking for product information and availability," says Edinga.
FEATURE STORY
Shell Chemicals Gets Green Light For New Plant
Edmonton Sun
Shell Chemicals Canada Ltd. was given regulatory clearance yesterday to build a new petrochemical complex worth up to $400 million near Fort Saskatchewan.
The plant, to begin operation in 2000, is to produce up to 443,000 tonnes of ethylene glycols - a main ingredient in polyester and a raw material in resins and antifreeze.
"In its decision, the (Alberta Energy and Utilities) Board found Shell Chemicals plant to be an efficient use of Alberta's resources, with significant economic and employment benefits for both the municipality and the province," a release said.
The proposed facility was first announced in February 1997.
The one-year construction period - to start this spring - is expected to employ "hundreds" of tradesmen, Harry Blair, vice-president of business development has said.
Up to 20 permanent jobs will also be created at the facility, he added.
Mitsubishi Chemicals Corp. is a minority shareholder in the project, to be built near Shell's existing Scotford facility in Strathcona County.
The EUB release added that negotiations are proceeding to address the concerns of local residents about heavy industrial activity in the area.
FEATURE STORY
Oil Group Sues U.S. Interior Dept. Over Royalties
A group representing independent oil producers is suing the U.S. Interior Department over a new rule that changes the way royalties are paid on natural gas found on federal lands.
The lawsuit was filed in D.C. District Court on Monday by the Independent Petroleum Association of America.
''We believe the rule is illegal. It threatens future gas production because it will discourage drilling on federal lands,'' said IPAA chairman George Yates in a briefing with reporters on Tuesday.
Under the rule, which took effect Feb 1, Interior's Minerals Management Service no longer allows producers to deduct the full cost of transporting gas to the marketplace.
As a result, almost all marketing, storage and transfer fees are added to the wellhead price of natural gas, according to Yates.
''That drives up the cost of the gas and means producers end up paying an inflated royalty,'' Yates said. ''This is in direct conflict with the lease contract between producers and the federal government, which says that royalties are valued at the lease,'' he added.
Yates also criticized the ''duty-to-market'' provision of the rule, which says a producer has an obligation to market gas at no cost to the federal government.
''In our view, the 'duty-to-market' regulation leaves too much room for interpretation and leaves a producer vulnerable because an auditor years from now can second guess a producer's decision to sell gas for one price or another, at the well head or further downstream,' he said.
Yates added that the MMS rules goes against the agency's attempts to make the royalty collection system simpler and fairer. Officials at MMS could not immediately be reached for comment.
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