Layoffs in the Oil Patch 3

[Jason14h]

Originally Posted by puckedoff

Obviously there are some inter-related effects as a the 10.2% for Energy will drive an increase in jobs in Finance, Construction, etc. but I think it does Albertans a disservice to always call it the #1 industry to the rest of Canada. There is a certain arrogance or hubris that gets communicated when we say "Look we're the best" while complaining about equalization or politics.

Everyone knows the true number one industry in Canada is helping launder money out of Asia !

[Bill Bumface]

Originally Posted by Locke

We see 'Big Bad Oil Companies' as raping the land and selling toxic tar-like sludge. But in truth they are 'Energy Companies.'

They're in the business of selling energy. Who do we think is going to be the Vanguard into better and cleaner energy?

I think this is pretty naive. They are fossil fuel companies, and most of them have zero organizational expertise or experience in power generation. Even if they did, it's a very common pattern that innovation is driven by the new comers.

The most successful car companies were largely not born of the most successful horse carriage companies.

The most successful oil and gas companies were not born of the most successful coal companies.

The most successful TV streaming companies are not born of the most successful cable networks.

The bigger an organization, the more difficult it is to change course. It is far, far easier for an upstart solar/wind/fusion company to get off the ground than for an existing behemoth to change course. Fostering an environment that is conducive to those companies setting up shop is critical.

When we look at existing industries, there are lots out there that speculate nuclear power has a large role to play in our future. Canada used to be really, really good at that. I'd love to see something where the Provincial government woos some existing industries over with employee training grants where there are logical pathways to get the unemployed skillsets we have an abundance of here now contributing in a new industry.

[burn_this_city]

All major owners in the oilsands operate their own Cogeneration assets.

[Rutuu]

Originally Posted by bizkitgto

Care to elaborate more?

Canada is a first world country, with ample resources, functioning courts, freedom of movement, an educated work force, developed capital markets, excellent international relations, political stability, a sovereign currency, control over water/food supply/energy etc, etc. The opportunities offered in the country are more than enough for individuals to succeed, domestically and internationally.

Oil and gas is capital intensive as an industry, and the velocity of a dollar spent by the industry means it supports a number of other businesses. Banks, railways, property, and construction are all beneficiaries. A lack of pipelines curbs growth. If you're not hiring you're firing, especially when operational efficiencies and technological advances lead to less people being required to sustain production. Capex spend slows down, and all that money flowing through to other sectors slows as well.

Does everyone just give up though? No. The framework of success still exists. It's not destruction it's change. Some people fight to keep up, and others fight to keep things the same. Canada will persevere.

[RichieRich]

Originally Posted by burn_this_city

All major owners in the oilsands operate their own Cogeneration assets.

same for mid-stream. I've worked for both and can say that many of them have created internal specialist teams devoted to analyzing the BUSINESS MODELs of inside-the-fence Cogen/Power, selling to the grid, or a combination. This helps them address power needs, power security, steam as energy for other turbines, heat trace, etc... A huge challenge has been the rapidly changing regulations of AESO. For example... refusing to freeze specifications and then making a major change weeks before a big expensive Power facility was being commissioned thus resulting in said facility sitting dormant for many many months.

So the point of this is to also suggest you don't think of all oil/gas/energy producers as simple one-trick ponies now. Many of them have already diversified, are looking for additional opportunities, and devoting a lot of resources to doing this in a sustainable changing competitive business environment. Gotta remember, much of the existing wind and solar is in place because of subsidies... the O&G people need the technology to be viable without subsidy... and to have a reasonable ROI and payoff period.

[BagoPucks]

I really like and agree with the last few posts about the economy. I feel like it really does reflect how I "feel" about the economy. Can you perhaps pm or start a thread about the Canadian Economy deep dive? Would love to read some articles or sources you think can help improve the dive into canadian economy.

[blender]

There is some good discussion here by some people who are obviously experienced in the energy industry and have a good grip on the economics surrounding it.
That said, I think it is important to bear in mind the fact that whatever we think about Canada's energy industry historically is irrelevant. The world isn't changing; it has already changed.

It sucks for a lot of places without diversified economies and the fallout will be measured in human terms as usual. But wanting it to be the way it used to be and blaming politicians is a waste of time. Politicians don't care. If they did they wouldn't be closing the group home Molsoninbothhands' brother lives in and blaming other politicians for not building a pipeline...or whatever.

Canada will persevere. I saw the city I live in go from a one horse pulp mill town to a thriving education, tech and knowledge, tourism center in just over a decade and become one of the best places in the world to live while the historical local industry basically collapsed. There were plenty of doomsayers the whole time. We even said #### you to a proposed mine that was supposed to be our only economic hope because most of us thought it was too close to the city. Surprise, surprise. Economy seems to be continuing on just fine. I don't even think the political leadership here has been particularly good, but the people are good and hard working and respect each other and the institutions around us are all sound.

[nik-]

Sure, the world is changing, but global oil demand still goes up every year, so maybe it's not changed like you seem to think it is.

[blender]

Originally Posted by nik-

Sure, the world is changing, but global oil demand still goes up every year, so maybe it's not changed like you seem to think it is.

Demand isn't the issue. Just that our oil isn't cheap enough to produce. Do you want to subsidize an unprofitable industry or invest in more sustainable industries?
Do you think it is oil or bust for Canada?
Do you think we are in a down cycle on oil prices, and there will be a rebound coming up? Honest questions.

It's interesting to note that low oil prices suppress development of alternative energy technologies. Not as much impetus to spend money on alternative energy when cheap oil is at the ready. Some people who are anti-fossil fuels love to see oil in the tank but if you really want to see green technologies advancing you should be hoping for 100 a barrel oil.

[tkflames]

Originally Posted by nik-

Sure, the world is changing, but global oil demand still goes up every year, so maybe it's not changed like you seem to think it is.

Depends on who you believe.British Petroleum for one doesn't agree with you.
https://www.worldoil.com/news/2020/9...eaking-by-2030

Also, keep in mind that OPEC alone is curtailing 10M bpd.
https://www.google.com/amp/s/www.cnb...c-meeting.html

I am not saying Oil companies are going to shut down existing facilities...but in these conditions as a prudent investor with many global options, would you invest in a new large scale heavy oil extraction facility that will take a decade minimum to engineer, review and build with that forecast and global capacity?

[Rutuu]

Originally Posted by blender

There is some good discussion here by some people who are obviously experienced in the energy industry and have a good grip on the economics surrounding it.
That said, I think it is important to bear in mind the fact that whatever we think about Canada's energy industry historically is irrelevant. The world isn't changing; it has already changed.

It sucks for a lot of places without diversified economies and the fallout will be measured in human terms as usual. But wanting it to be the way it used to be and blaming politicians is a waste of time. Politicians don't care. If they did they wouldn't be closing the group home Molsoninbothhands' brother lives in and blaming other politicians for not building a pipeline...or whatever.

Canada will persevere. I saw the city I live in go from a one horse pulp mill town to a thriving education, tech and knowledge, tourism center in just over a decade and become one of the best places in the world to live while the historical local industry basically collapsed. There were plenty of doomsayers the whole time. We even said #### you to a proposed mine that was supposed to be our only economic hope because most of us thought it was too close to the city. Surprise, surprise. Economy seems to be continuing on just fine. I don't even think the political leadership here has been particularly good, but the people are good and hard working and respect each other and the institutions around us are all sound.

I love this post

[Rutuu]

Originally Posted by tkflames

Depends on who you believe.British Petroleum for one doesn't agree with you.
https://www.worldoil.com/news/2020/9...eaking-by-2030

Also, keep in mind that OPEC alone is curtailing 10M bpd.
https://www.google.com/amp/s/www.cnb...c-meeting.html

I am not saying Oil companies are going to shut down existing facilities...but in these conditions as a prudent investor with many global options, would you invest in a new large scale heavy oil extraction facility that will take a decade minimum to engineer, review and build with that forecast and global capacity?

Tell me what the the cashflows are for an O+G investment 10yrs out...or an office tower or retail asset. That's the problem those industries are facing for capital investment.

[Rutuu]

Originally Posted by BagoPucks

I really like and agree with the last few posts about the economy. I feel like it really does reflect how I "feel" about the economy. Can you perhaps pm or start a thread about the Canadian Economy deep dive? Would love to read some articles or sources you think can help improve the dive into canadian economy.

Not sure if serious. Also which thread?

If serious I'm game. I run a little Canada fund for my RRSP and a few family and friends, so I'm always looking for good Canadian stories (currency risk).

[Rutuu]

Also tkflames...not attacking you on the cashflow thing. My tone was a bit harsh. Totally not my intention. Genuinely asking the question for anyone with a good 10yr story for those asset classes.

[Leondros]

Originally Posted by tkflames

Depends on who you believe.British Petroleum for one doesn't agree with you.
https://www.worldoil.com/news/2020/9...eaking-by-2030

Also, keep in mind that OPEC alone is curtailing 10M bpd.
https://www.google.com/amp/s/www.cnb...c-meeting.html

I am not saying Oil companies are going to shut down existing facilities...but in these conditions as a prudent investor with many global options, would you invest in a new large scale heavy oil extraction facility that will take a decade minimum to engineer, review and build with that forecast and global capacity?

The issue is everyone is thinking the same thing - why invest right now. 2020 alone has lost $400B (20% of total) in investment in oil and gas activities. Since 2014 we have seen increased drops in investment and eventually this will catch up with the industry overall. When that happens, and natural declines start taking over there will be a supply issue. Even on a flat demand case (which I believe to be impossible) we need more capital which we are just not seeing. Prices will come back because of this supply constrain.

Not only that, but by 2030 its projected that the top 10 countries by GDP will be China, India, US, Indonesia, Turkey, Brazil, Egypt, Russia, Japan and Germany. Most of this growth will be done through fossil fuels despite what many may hope. China, India, and Indonesia will all have 3.3B of the 8.5B people in the world.

[tkflames]

Originally Posted by Leondros

The issue is everyone is thinking the same thing - why invest right now. 2020 alone has lost $400B (20% of total) in investment in oil and gas activities. Since 2014 we have seen increased drops in investment and eventually this will catch up with the industry overall. When that happens, and natural declines start taking over there will be a supply issue. Even on a flat demand case (which I believe to be impossible) we need more capital which we are just not seeing. Prices will come back because of this supply constrain.

Not only that, but by 2030 its projected that the top 10 countries by GDP will be China, India, US, Indonesia, Turkey, Brazil, Egypt, Russia, Japan and Germany. Most of this growth will be done through fossil fuels despite what many may hope. China, India, and Indonesia will all have 3.3B of the 8.5B people in the world.

Everything you say is correct anecdotally speaking. However, do you think that a company like BP which is bigger than most countries in the world and whose business it is to supply energy to the world would not model this? There will be new global O&G investment to supply oil for the next 100 years. The question is...given the current global glut and associated curtailment...does Alberta Oil still give you the best return on investment if you have access to places in the world where you can stick a pipe in the ground and have free flow? I dont know the answer...but I am not as confident as I was 5 years ago that the answer is yes.

[Leondros]

Originally Posted by tkflames

Everything you say is correct anecdotally speaking. However, do you think that a company like BP which is bigger than most countries in the world and whose business it is to supply energy to the world would not model this? There will be new global O&G investment to supply oil for the next 100 years. The question is...given the current global glut and associated curtailment...does Alberta Oil still give you the best return on investment if you have access to places in the world where you can stick a pipe in the ground and have free flow? I dont know the answer...but I am not as confident as I was 5 years ago that the answer is yes.

BP is one company, who is saying peak oil demand by 2030 - which I think is a stretch but for argument purposes I will accept. I think the more important point is however how demand behaves after peak - which I argue isn't going to be a drop off a cliff but a very slow decline due to the fact that all of these emerging economies are going to need fossil fuels to catapult them similar to the way Europe and North America catapulted themselves. There is simply no better alternative cost wise or consistency wise.

My point is there is still going to be a significant amount of production coming out of Canada and that isn't going to change. Prices will come back and when they do investment will come back as well. Do I think we are going to have a repeat of the boom days? Probably not. Do I think we are going to still have a strong industry for my life time? Yes. Am I concerned about consolidation and reduction of jobs overall? Yes, its inevitable and I don't think we ever fill the current office space we have in downtown Calgary.

As a side note, Alberta oil is not necessarily competing with a lot of the middle east oil. We mainly compete with the heavy guys like Venezuela and Mexico who have completely fallen off a cliff. This bodes well for Alberta WCS prices which could help make some smaller scale projects more economic.

[Tron_fdc]

I just love reading this guys' articles, and he sums it up so much better than I ever could.

https://achemistinlangley.net/2020/0...et-for-canada/

[Bill Bumface]

Originally Posted by RichieRich

same for mid-stream. I've worked for both and can say that many of them have created internal specialist teams devoted to analyzing the BUSINESS MODELs of inside-the-fence Cogen/Power, selling to the grid, or a combination. This helps them address power needs, power security, steam as energy for other turbines, heat trace, etc... A huge challenge has been the rapidly changing regulations of AESO. For example... refusing to freeze specifications and then making a major change weeks before a big expensive Power facility was being commissioned thus resulting in said facility sitting dormant for many many months.

So the point of this is to also suggest you don't think of all oil/gas/energy producers as simple one-trick ponies now. Many of them have already diversified, are looking for additional opportunities, and devoting a lot of resources to doing this in a sustainable changing competitive business environment. Gotta remember, much of the existing wind and solar is in place because of subsidies... the O&G people need the technology to be viable without subsidy... and to have a reasonable ROI and payoff period.

Yes, and GM makes electric cars. Kodak made digital cameras. Xerox made computers. Think of the big names in any innovative industry, they are so rarely behemoths that successfully made a massive transition.

[GGG]

GE makes everything