The Weekly Brief: North American Integration

January 16, 2017 edition— North American E&P will rise 27%; US and Canada vie for exports; and Trump insists on the Wall.




Last Week in a Minute or Less


Renewables & Electricity. The US and Mexico agreed on electric cooperation; Wyoming wants 50% of the federal fees on wind projects; and renewable energy will help Canada’s First Nations and mining industry.


Natural Gas & Liquid Fuels. US natural gas export will keep rising; Canada and the US will compete to be the biggest exporters; and AltaGas will build a West Coast export terminal.


Oil & Gas Upstream. North American E&P spending will rise 27% in 2017 and the NEB resumes the Energy East pipeline review.


Money & Power. Canada and US energy policies are headed in different directions; oil prices dropped; and Trump asks Congress to pay for the Wall.


Déjà vu all over again. Last week’s readers were particularly interested in Trudeau’s first conversation with Trump (English); Trump’s effect on the Canadian economy (English); and Petronas’s Canadian LNG plan (English).



Keeping Track of Trump


Obama wants Trump to maintain support for clean energy. President Barack Obama presented economic arguments to convince Trump to support clean energy (English). Obama assured that economic growth and fighting climate change are not mutually exclusive, trusting “the economic benefits of a low-carbon future” in the United States.


Canada and US energy policies diverge as anxiety grows. The integration achieved between both countries’ oil and gas markets could be shaken by opposing energy policies (English). Canada increased its taxes and restricted oil and gas activity to achieve climate change goals, while Trump is expected to liberalize it and fight environmental commitments.


Toyota announces investment in the US. The Japanese company announced it will invest US$10bn in the US over the next five years just after Trump threatened the auto industry with a border tax (English) (English). Toyota was planning to build a new factory in Mexico to produce Corolla cars in 2019 (English).


Trump expects Congress to pay for the Wall and bill Mexico later. President-elect Donald Trump’s team plan to convince Congress to pay for the Wall and ask Mexico for a refund (English). Trump tweeted the cost of the Wall “will be paid back by Mexico later”. Oddly enough, Mexico denied it (English).



Macro Trends


North American E&P spending will rise 27% in 2017. North American exploration and production spending will increase in 2017 by 27%, after a 38% reduction in 2016 (English). Barclays estimates that the US rig count will end the year at 850-875 rigs, with an average of 730.


The OECD expects Mexico to grow in 2017. OECD chief José Ángel Gurria foresees higher growth for Mexico this year, countering consensus views that Donald Trump’s protectionist policies will dampen growth (English).  The peso depreciation will boost exports, taking the economy over the 2.2 percent growth rate of 2016 and improving more in 2018.


North American gasoline prices are full of contrasts. In 2016, US gasoline prices were the lowest since 2004, averaging 2.14 dollars per gallon (English). Meanwhile, in Mexico, citizens continue protesting the rise in gasoline prices with 250 arrests, 79 shops sacked, and three supplying terminals remaining blocked (Spanish).


Oil prices suffer as US output grows. Oil prices dropped by 4% over worries about Iraqi crude exports reaching 3.51 million barrels per day in December and growing US output (English). This could affect OPEC’s historic efforts to increase oil prices.



Cross-Border Flows


US natural gas export will keep rising. In its Annual Energy Outlook 2017, the US Energy Information Administration projects 4% annual growth in natural gas production, allowing the US to become a net exporter by 2026 (English) (English). Gas prices will rise from 2020 through 2030 to stabilize at $5/MMBtu in 2030-2040.


Canada and the US will fight for the exports throne. According to the US Energy Information Administration, the United States will become a net energy exporter in 2050 (English). Canada could lose its best client with no alternative market for export until it further develops its pipelines.


The US and Mexico signed rules for electric cooperation. Both nations signed a list of 11 guidelines to cooperate in the regular exchange of electricity to face vulnerabilities (Spanish). The US Department of Energy noted that the electric systems of both nations are highly interconnected and it is necessary to strengthen security measures.


Mexico’s auto production and exports rose in December. The auto industry association, AMIA, reported that Mexico’s auto production increased 8.8% in December 2016, reaching 242,495 vehicles that month and 3,465,615 units in 2016. Exports rose 4.8% to 216,645 units in December, totaling 2,768,268 in the year (English).



Infrastructure & Investment


AltaGas ready to start its West Coast Canada LPG export terminal. The Canadian firm will start the construction of its propane export terminal in British Columbia (English). The new terminal could export 1.2 million mt/year of propane to Asia.


Renewable energy to the rescue of both First Nations and industry. Renewable energy could help First Nations and miners as an alternative source of power generation to avoid diesel unreliability (English). An example is the clean energy partnership between AurCrest, a mining company, and three First Nations.


Wyoming wants a piece of the federal fees pie. Wyoming lawmakers demand a share of wind and solar projects’ federal fees (English). Lawmakers including State Sen. Ogden Driskill will present Congress with legislation to grant to states 50% of any fee for renewable energy projects on federal land.


NEB resumes the Energy East pipeline review. The National Energy Board named three new members to a panel which will resume the review of the 4,500-km Energy East pipeline (English). The former panel resigned in 2016 after Peter Watson and Lyne Mercier were accused of a potential conflict of interest.



Old School Social


Events in the world beyond your screen – go see and be seen!


The Mexico Infrastructure Projects Forum is January 18-19 in Monterrey, Nuevo Leon.


The Solar Summit: Mexico is January 27-28 at Intercontinental Presidente, Mexico City.


The 13th Annual State of the Energy Industry Forum is January 31 at the National Press Club

Ballroom, Washington D.C.



Lateral Thinking


Small earthquakes shake the US-Mexico border. Over 250 small earthquakes along the California-Mexico border worried residents in both countries. Scientists monitored the swarm of earthquakes for the possibility that a magnitude 5 earthquake might happen in the Brawley Seismic Zone which connects the San Andreas and Imperial faults (English).



Quote of the Week


“El amor es la locura más lúcida que tiene el hombre.”


“Love is the most lucid madness that men have.”


– Andrés Henestrosa (1906-2008), Mexican writer and politician



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