Alberta trying to get out of the oil-by-rail business - Canadanewsmedia
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Alberta trying to get out of the oil-by-rail business

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The Alberta government is trying to offload its lease of 4,400 rail cars to ship crude oil to U.S. refineries.

Attempting to make good on a spring election promise, the government announced Thursday morning it has engaged CIBC Capital Markets to “help oversee the divestment of the crude-by-rail program and its transition to the private sector.”

The contracts, which government has not released, include the costs of loading and unloading oil into railcars and its shipping, purchase and sale, Energy Minister Sonya Savage said at the legislature on Thursday.

“The commercial sector would never have signed those contracts,” Savage said. “Nobody signs a contract where you know that each and every barrel of oil that moves through the system is going to be moved at a loss.”

The negotiations are confidential and could involve breaking up the deals among several buyers, Savage said. Can the government make a deal without losing money? Savage didn’t know, but said they’re trying. She hopes to have an arrangement worked out by fall. Parties are interested, she said.

With several oil pipeline projects stalled, private companies were already investing in oil-by-rail when the former NDP government inked the contracts last February, Savage said.

The $3.7-billion oil-by-rail deal between the Alberta government and Canadian Pacific and Canadian National railways was to ship as much as 120,000 barrels per day out of the province.

The NDP predicted the three-year deal would net the province $2.2 billion in royalties, taxes and sales. However, the United Conservative Party government forecasts a $1.5-billion loss on the deal.

Rail cars were supposed to be available starting next month to begin shipping 20,000 barrels a day, with capacity growing during the next year.

The move was meant to move Alberta oil to market in the medium term as hurdles plague pipeline projects, such as the Trans Mountain expansion, Keystone XL and Enbridge’s Line 3.

Selling off railcar capacity may make increase the efficiency of getting oil out of Alberta, since producers can work directly with shippers and reduce bureaucracy, said Mike Walls, a Colorado-based senior crude oil analyst with Genscape.

“I think it’s the right move, in that private industry was already ramping up rail at the end of 2018,” he said.

Regardless of who runs the cars, Explorers and Producers Association of Canada president Tristan Goodman said he’s happy to see rail capacity increase. Rail is the only way to grow the industry in the short term, he said.

Oil curtailment easing

Also Thursday, the government said it would ease oil production limits in August.

In January, the former NDP government cut oil production by 8.7 per cent to deal with a glut of product in storage.

In November 2018, Western Canada Select was selling at a painful $45-a-barrel discount compared to West Texas Intermediate, which was costly to the provincial treasury. Cutting production was supposed to help narrow the price differential, and it did, dipping to $7.35 in January.

On Wednesday, the price differential was $12.35.

The government will raise production limits in August to 3.74 million barrels a day, which is an increase of 25,000 bpd from the July limit, said a government news release. The production limits started in January at 3.56 million bpd, and governments have gradually eased them throughout the year.

This lift, though small, also pleased Goodman. He said it shows government is serious about moving away from curtailment, but cautiously enough to prevent another oil glut. More leeway to produce more barrels means more oil industry jobs, he said.

Genscape saw oil storage drawdowns of about 2.6 million barrels in Western Canada in May, when some oilsands operations were offline for maintenance, Walls said. August tends to be one of the largest months for oil production, and government was likely mindful of this, he said.

The government has to balance storage capacity with the risk that holding back too much oil will narrow the price differential too much, he said. If the price gap is too small, it’s uneconomical to ship Canadian oil to the U.S., he said.

The new August production limit will affect 29 of more than 300 Alberta producers.

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US$1 billion in 67 seconds and other numbers to know

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Singles’ Day in the world’s most populous country has become a mammoth marketing event for China’s e-commerce businesses that have turned it into the world’s biggest online shopping extravaganza.

Singles’ Day, which originated on university campuses in Nanjing, China in the 1990s, became an annual shopping bonanza after Alibaba, China’s biggest e-commerce retailer, made it into an event a decade ago.

This year’s sales surpassed last year’s record, with two of the country’s largest online retailers reporting combined sales of more than US$63 billion, even before final numbers were reported. The eye-popping figures make Black Friday and Cyber Monday in the U.S. seem somewhat anemic and humdrum by comparison. Alibaba posted live updates on its website and on Twitter, but for the very keen, the company also provided a real-time sales counter.

Singles’ Day by the numbers:

1. Singles’ Day takes place on November 11, because the number one and the date, 11/11, looks like a single person.

2. Alibaba said sales by merchants on its platforms totalled 268.44 billion yuan (US$38.38 billion) by midnight local time, handily surpassing last year’s total of US$30.8 billion.

3. Alibaba said the number of delivery orders exceeded 1.042 billion in 18 hours and 31 minutes; surpassing the 2018 total.

4. Alibaba said sales exceeded US$1 billion just 1 minute and 7 seconds after midnight on November 11, and surpassed US$10 billion after 29 minutes and 45 seconds.

5. In the U.S. in 2018, Black Friday brought in US$6.2 billion last year, and US$7.9 billion on Cyber Monday, according to Adobe Analytics.

6. Alibaba rival, JD.com, reported sales of 179.4 billion yuan ($25.6 billion) by mid-afternoon, according to The Associated Press.

7. More than 200,000 brands from over 200 countries and regions were expected to participate in this year’s event; only 27 brands participated in 2009.

8. A once-informal day, a countdown gala leading up to Singles’ Day that included a performance from Taylor Swift was broadcast on nearly 30 online streaming platforms and TV channels.

9. Online shopping makes up 19.5 per cent of Chinese consumer spending, compared with about 11 per cent for American consumers, according to The Associated Press.

10. Alipay said it set a record on Singles’ Day in 2017 for most payment transactions, processing 256,000 payment transactions per second, just 5 minutes into Singles’ Day; 1.48 billion transactions were ultimately processed over the course of 24 hours.

11. China’s State Post Bureau is expected to handle 2.8 billion packages from Nov 11 to 18, according to state-run press agency Xinhua.

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OpenText snaps up cloud security firm Carbonite in $1.42 billion deal

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OpenText, the Waterloo-based enterprise cloud information management company, announced Monday that they have reached a deal worth US$1.42-billion to acquire Carbonite, Inc, a Boston company that does cloud data protection and endpoint management.

OpenText chief executive Mark Barrenechea said that part of the reason why he likes Carbonite is because it gives an opportunity to sell to 300,000 small businesses and 7 million individual professionals.

“This acquisition will further strengthen OpenText as a leader in cloud platforms, complete end-point security and protection, and will open a new route to connect with customers, through Carbonite’s marquee SMB/prosumer channel and products,” Barrenechea said in a news release.

The deal of US$23 per share for the Boston-based Carbonite is a 25 per cent premium to the close of trading Friday. OpenText will pay $800 million in cash with the total transaction including debt valued at US$1.42 billion.

OpenText shares were up 2.3 per cent and Carbonite were up 24 per cent in morning trading.

Historically, Opentext has focused most of its efforts on the largest enterprise clients.

Speaking to investment analysts, Barrenechea said it will likely take around 18 months to fully integrate the company into OpenText.

The company has a long history of growing through acquisition; OpenText spent nearly US$3 billion between 2013 and the beginning of 2017, including the US$1.62 billion acquisition of Dell EMC, the company’s enterprise content management division.

As of September 30, Carbonite had $405 million in trailing twelve-month revenue.

• Email: jmcleod@nationalpost.com | Twitter:

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Keystone pipeline restarted after breach in North Dakota

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The owner of the Keystone pipeline says the line has returned to service after a breach that leaked an estimated 1.4 million litres of oil in northeastern North Dakota late last month.

TC Energy Corporation says the move follows the approval of its repair and restart plan by the U.S. Pipeline and Hazardous Materials Safety Administration, which ordered the line shut until the Canadian company completed corrective action.

The company says it will operate the pipeline at a reduced pressure with a gradual increase in the volume of crude oil moving through the system.

The line, which began operating in 2011, is designed to carry crude oil from Alberta across Saskatchewan and Manitoba, and through North Dakota, South Dakota, Nebraska, Kansas and Missouri on the way to refineries in Patoka, Ill. and Cushing, Okla.

The spill affected about 2,090 square meters of land near Edinburg, N.D.

TC Energy says it continues to work closely with the U.S. Pipeline and Hazardous Materials Safety Administration and the North Dakota Department of Environmental Quality as it investigates the cause of the breach.

“We appreciate the cooperation and support from local officials, emergency response personnel and commissioners in Walsh County, as well as the landowner who has granted permission to access land for assessment, repair and clean-up activities,” TC Energy said in a statement on Sunday.

“We also want to recognize the continued efforts of our crews, contractors and businesses in the community for their around-the-clock support, which has allowed us to respond quickly and safely to this event.”

The company adds it is communicating plans to its customers and will continue working closely with them as it begins to return to normal operating conditions.

It said on its website that it has observed no significant impacts to the environment.

The pipeline spill and shutdown come as the company seeks to build the US$8-billion Keystone XL pipeline that would carry oilsands oil from Alberta to refineries in Texas.

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