Glimpses of Fort Calgary, 1914 & all that!

The Oilholic paid a visit to Fort Calgary in between meetings; not far from Downtown Calgary (towards the east end of the city). There is no better place to soak in the city’s rich heritage. Founded in 1875, the then North West Mounted Police (NWMP) built this outpost at the convergence point of Bow and Elbow Rivers. In all fairness, say local historians, they laid the foundations of the modern city of Calgary.

For oilholics the world over, the 'crude' bits are very crucial and merit a detailed look. First gas and (as was often the case with hydrocarbon prospecting) then oil was found in May, 1914, just south of Calgary. After the first discovery, there was a long wait of some 33 years before the next meaningful discovery was made.

The rest, as they say, is all history and I am reading up on it thanks to some wonderful books obtained from stores recommended by Rusty Miller, Ogilvy Renault LLP’s managing partner here. He also spared time from his busy schedule to give me some valuable insight on intricacies of the energy business in this part of the world.

Uploaded above are some 'crude' snaps from the Fort, captioned as appropriate. If you happen to be in town – please do visit. For some strange reason, and locals scratch their heads too, this wonderful place does not receive any Federal funding! Even provincial support needs to be applied for and is not a given thing by any means according to an official. Local energy companies have been good though and long may that continue.

Finally, a few crude words on the price and differentials between both benchmarks – WTI & Brent. This weekend, using the Brent forward month (May) futures contract as a benchmark – the crude price is at its highest since August 2008. With the May contract at US$117.36 per barrel, that is an annualised price appreciation of nearly 24% and by my estimation – a week-over-week appreciation of nearly 2.4% plus. Price differential between Brent and WTI also averaged US$10 and shows no sign of narrowing!

The Libyan situation also shows no signs of a resolution. Both in Alberta and Texas – the overwhelming sentiment is that Libya is fast resembling a stand-off and that adds to the upside bias reflected in the risk premium. It seems that for the short term, the market will have to make do without Libyan crude.

Problem is if it becomes a medium term supply concern. Surely, a high price should please Texans and Albertans – but "only to a point" notes one. That tipping point could hurt both the global economy and the profit margins of those in the business.

© Gaurav Sharma 2011. Photos: (Top) Fort Calgary, (Clockwise) Signage charting the first discovery of oil on the exterior of the fort, Turner Valley & Leduc crudes on display, Model of an old Gas station (Click on images to enlarge) © Gaurav Sharma, March 2011

Remembering Eddie Junior

Just heard via the BBC World Service in Canada about the sad and untimely death of hauling and trucking legend Eddie Stobart who passed away yesterday of heart complications. At 56 years young, Eddie had achieved iconic status in the UK.

Oilholic believes if any Brit is asked to name a haulage company – there’s 9:1 chance that man, woman or child would say Eddie Stobart; that unmistakable name flashing at us from a green background off the side of a truck zipping past.

For 30 years, Eddie helped to build his dad – Edward senior’s company into the UK largest independent haulage company, retiring from his post at the helm in 2004. By this time, the firm had achieved iconic status – so much so that it had sparked a booming accessories and kids’ model toy trade. I confess to being a proud owner of a miniature Eddie Stobart truck which I refuse to let go at any price.

In a statement issued by the Stobart Group, it said: "With great sadness and regret that Stobart Group shares the news that Edward Stobart, 56, son of Eddie Stobart, passed away at 8.10am this morning [Thursday, March 31st, 2011] at University Hospital Coventry, after heart problems yesterday. Our thoughts are with Edward's wife Mandy, his children and family at this difficult time."

Rest in peace Eddie, you will be missed Sir.

© Gaurav Sharma 2011. Photo: Eddie Stobart truck © Stobart Group, UK

Goodbye Houston; first thoughts from Calgary

Instability or risk premium is not being reflected in the US Mid West as much as it is in Europe in light of the Libyan situation. Following accidents in San Bruno, CA and Michigan, MI – pipeline safety legislation is likely to be added to the pile of regulatory activity related to the energy business which followed BP’s Gulf of Mexico fiasco. In fact, a bill on pipeline safety is already making its way through the US senate.

There is also common conjecture that retirement of coal-fired power plants may assist in shifting established gas flow patterns (& prices). However, the Oilholic feels while this is likely to happen at some point, it will not happen in a meaningful way any time soon. Mid West’s problem is akin to that of Australia’s when it comes to power generation – a traditional dependence on coal which is hard to tackle. Gas prices, in any case, are likely to remain low as there are abundant supplies and storage levels are solid.

Given that the US overtook Russia as the leading gas producer courtesy of shale gas, it is not bravado to assume that it could meaningfully export to Europe or that US-bound LNG could well be diverted to Europe.

Moving on to refining, some local analysts are following the “things can only get better” logic for North American refiners – who they feel are well positioned to demonstrate a recovery (or some form of stabilisation) of their margins after six troubled quarters to end-2010. The speed of the economic recovery will have a big say in the state of affairs.

After leaving Houston, the Oilholic has now arrived in its sister Canadian city of Calgary – quite a switch from a sweltering 30 C on a Texan morning to about -4 C on an Albertan evening. While both cities do not share their climate – they do share the same sense of frustration about the delays associated with the expansion project of the Keystone pipeline.

It seems Alberta and Texas are quite keen on the expansion – it’s just that everyone in between is the problem. The politics associated with this pipeline, as with other projects of its ilk is deeply complicated. However, this one involves cross-border politics, some of which has turned ugly especially in relation to the “cleanness” of Canadian oil.

And by the way its “oil sands” not “tar sands” stupid, say the locals! I’ll have more from Calgary shortly when I soak in and refine the local commentators’ viewpoints.

© Gaurav Sharma 2011. Photo: Calgary Tower, Alberta, Canada © Gaurav Sharma, March 2011

BP's still going ‘Beyond Petroleum’ in Houston

It is difficult to say whether Texans in general and Houstonians in particular are more irritated or more disappointed with BP. Perhaps the answer is a combination of both, but anti-British the Texans are not. Many here feel let down by the company, a sentiment which had already been on the rise following the Texas City refinery blast in March 2005. News that the company is now trying to sell the asset does not assuage that feeling here.

Many opine that when things were going horribly wrong in the Gulf of Mexico, BP could have done better, sought more cooperation from the government and not insisted it can handle things on its own. Some also blame their government of complacency for not intervening sooner and forcing BP’s hand.

Nearly a year on, while a sense of disappointment has not subsided, no one here seriously believes BP has turned its back on a lucrative American market – a withdrawal from refining and marketing ends of the business is more likely. I think it is a dead certainty from a strategic standpoint.

Now this ties in nicely to the company’s "Beyond Petroleum" campaign from a few years back. There was a fair bit of scepticism about it in England and elsewhere. However, it seems the company continues to go beyond petroleum in Houston. In 2006, BP said it would set up its alternative energy business in Houston on top of an existing solar business in Frederick, Maryland.

Five years hence and despite all what has happened, it is still going or rather has been kept going based on the 33rd floor of this city’s iconic Bank of America Center building on 700 Louisiana Street (see left). Asked about its prospects, the company did not return the Oilholics’ call. However, I visited the iconic building anyway courtesy of other occupants, especially Mayer Brown LLP, for which I am grateful.

The next 12 months are crucial for BP. Americans are a largely forgiving bunch, but as Texans say forgiving is one thing, forgetting is another matter! And many have pointed out their disgust at Transocean and Halliburton too. Unfortunately for BP – the 'crude' muck stops with them.

© Gaurav Sharma 2011. Photo: Bank of America Center, Houston, Texas, USA © Gaurav Sharma, March 2011

There’s Something about the Chronicle

The largest daily newspaper in Texas – is still the Houston Chronicle, but while its reach extends well beyond the city, its character is uniquely Houstonian. It is that and that alone, makes the paper Oilholics approved.

The content or better still – the coverage is much attuned to crude developments local, global or should we say glocal. You might say that in a town with deep historic ties with the oil & gas business that should not come as a surprise. However, it is how the coverage is slanted and present which I love reading both online and well nothing beats a paper copy when you can get a hold of it.

So on this visit to Houston, I see The Chronicle split as front section, city & state, sports, business (my favourite), the ‘Lone Star’ and classifieds and on Mar 26th there were four ‘crude’ stories. One mute point - the Hearst Corporation has owned it since 1987 and according to local sources it employs over 2000 people including 300 fellow scribes.

The publication will celebrate its 110th anniversary in October this year, and seeped in its rich history is the fact that Jesse Holman Jones, a local politician, US Secretary of Commerce during World War II and President Hoover’s stalwart for reconstruction and development owned/published the publication from 1926-56.

The late Jesse H. Jones' life is celebrated and commemorated in several monuments (and parks) in the city, but The Chronicle’s connection with the great man is a unique component of his legacy to his city & his country. While retaining the title of publisher until his death in 1956, Jones passed on the ownership to a trust in 1937.

Sources suggest it has over 70 million page views in the internet age and amen to that! I had the pleasure of walking past its modern downtown headquarters earlier and couldn’t but help clicking the imposing building.

© Gaurav Sharma 2011. Photo 1: Houston Chronicle, Front Page, Mar 26, 2011, Image - Gaurav Sharma © Houston Chronicle, 2011. Photo 2: Photo: Headquarters, Houston Chronicle, Houston, Texas, USA © Gaurav Sharma, March 2011