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A new soap opera, As The Pipeline Turns, has suddenly turned into Canada’s can’t-miss business drama.
Will Kinder Morgan walk away from the $7.4-billion Trans Mountain pipeline expansion?
Will Rachel Notley throttle back the flow of oil to B.C? Will Justin Trudeau invest in the project?
Stay tuned.
Meanwhile, other significant matters are unfolding in the world of Alberta business.
Here is a quick look at some of the other events that might have slipped past you since Canada’s pipeline show turned into prime-time programming.
Crude prices rally and a takeover in the oilpatch
There’s been no shortage of negative sentiment in the country’s energy industry this year, fuelled by weak natural gas prices, sluggish investor interest and diminished spending in the sector.
Yet, oil prices have been on their strongest tear in months, trading above US$69 a barrel at one point Thursday on the New York Mercantile Exchange, before closing at $68.40 on Friday.
In fact, West Texas Intermediate crude reached its highest point since November 2014, propelled upward by shrinking inventories and growing global demand, geopolitical concerns and reports OPEC kingpin Saudi Arabia wants to nudge prices above $80 a barrel.
“Looks like OPEC is at it again,” U.S. President Donald Trump tweeted Friday, insisting oil prices are “artificially very high.”
“The bulls are definitely in control of the narrative right now,” says Scotiabank commodities analyst Rory Johnston, who expects oil to average $65 a barrel this year.
“The Canadian producer is in a much better position today than they were a year and particularly two years ago.”
Even the nasty price differential between WTI and Western Canadian Select has been shrinking in recent weeks, falling from an average of almost US$25 a barrel in February to $18.53 on Friday.
Pipeline capacity issues remain a thorn in the side of Alberta petroleum producers, but stronger prices this spring will generate higher cash flow levels for companies.
“We’ve had a little bit of a double benefit, in the sense the benchmark oil prices have been going higher and the light-heavy spreads have contracted,” says analyst Martin King of GMP FirstEnergy.
“Prices have definitely helped this week, but I think the broader international investment community is sitting on their hands before getting excited about Canadian energy.”
The oilpatch also saw some takeover action last week after a drought.
According to Bloomberg, mergers and acquisitions activity in the Canadian oilpatch has plunged to just US$5.2 billion in 2018 from $34 billion during the same period last year.
But Calgary-based Vermilion Energy Corp. has agreed to buy Spartan Energy Corp. in a deal valued at $1.4 billion.
Analyst Patrick O’Rourke of AltaCorp Capital says the takeover isn’t necessarily a precursor to increased M&A activity, calling it a unique combination.
The relative strength of Vermilion, along with Spartan’s team looking to combine its Saskatchewan assets with a strong player, brought the sides together.
“Vermilion got an excellent deal,” O’Rourke says. “Resources are very cheap right now and companies will look to upgrade their resources where they can.”
Turning Gas City into Grass City?
Medicine Hat is widely known for its abundant reserves of natural gas, earning it the moniker Gas City.
But the southeast Alberta community is quickly becoming the poster child for economic diversification in the province.
Aurora Cannabis Inc. announced last week it intends to build a $130-million greenhouse production facility in Alberta after acquiring 29 hectares of land in Medicine Hat.
The high-tech growing complex will be 50 per cent larger than the company’s huge operation now under construction near Edmonton International Airport.
The southern Alberta greenhouse will be as big as 21 football fields, at a whopping 1.2 million square feet, and capable of producing more than 150,000 kilograms per year.
That will make it the largest capacity cannabis production facility in the world.
The operation will supply the medicinal and international markets, as well as the recreational Canadian marijuana market when Ottawa legalizes weed later this summer.
For Medicine Hat, it’s a huge score and will create 450 full-time jobs.
It also comes on the heels of the city becoming home to about 50 new technology jobs after Hut 8 Mining Corp. announced last month it will spend $100 million to build bitcoin mining facilities in Medicine Hat, tapping into the city’s supply of cheap, gas-power electricity.
“I’m a big believer in oil and gas,” says Mayor Ted Clugston. “But these are great new industries that are not in any way related to oil and gas, other than the cheap price of gas….
“This is the new economy.”
For Edmonton-based Aurora, the lure of setting up shop in the sunniest area of Canada, along with some city hall incentives, made the investment irresistible.
Aurora chief corporate officer Cam Battley says the company intends to start construction as soon as possible and should be finished in the second half of 2019.
He says the deal is another indicator of the economic potential of the sector to flourish in the province.
“We can be a leading industry in Alberta,” says Battley.
“We think the cannabis, ancillary and related industries associated with it could be a major engine for investment, economic development and employment growth in the province.”
New CEO makes mark at Calgary Chamber
Sandip Lalli took over the helm of the Calgary Chamber of Commerce this month and immediately jumped into the deep end.
As NAFTA talks move forward, she hosted U.S. Ambassador Kelly Craft at a breakfast event.
She also weighed in on the city’s controversial Olympic bid, calling on council to “finish the job they started” as civic leaders pondered whether to try to host the Games.
Lalli, who took over from longtime chamber head Adam Legge, has had a diverse career working across several industries.
After attending high school in Edmonton, she became a chartered professional accountant and moved to Calgary in 1997, before travelling the world for work.
Lalli was hired by agrifood giant Cargill Inc. and rose through the ranks, becoming the company’s North American chief financial officer based in Minneapolis.
She later served as an operational risk adviser for Cargill in Singapore.
In 2015, Lalli became CEO of Keystone Excavating, a residential and commercial construction firm. Keystone made headlines last year, deciding to close down after experiencing a dramatic drop-off in construction activity.
At the time, she criticized governments for their go-slow approach to moving forward on planned capital spending, while they increased the cost of doing business in Alberta.
“It taught me about resiliency,” she says of the experience.
Having wrestled first-hand with the downturn, Lalli says it’s wrong to think the city’s economy has fully recovered. Instead, the business community is recalibrating.
Key issues such as advocating for the Trans Mountain pipeline and pushing governments on policy are some of the immediate concerns facing the 127-year-old group.
But what’s the biggest challenge for the chamber today?
“To get that narrative right,” she says.
“Get the word back into the marketplace, in the national and global marketplace, that Calgary has worked its way through (the downturn), it’s ready … and we can get some business growth.”
Chris Varcoe is a Calgary Herald columnist.
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