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Alberta burned for billions in energy investment gambles – Sherwood Park News

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Alberta Premier Jason Kenney speaks at the official launch of the Canadian Energy Centre on Dec. 11, 2019. GAVIN YOUNG /Postmedia File

Like a child touching a hot stove, Alberta governments frequently feel the need to dabble with investing in the energy business, mesmerized by the heat — and the jobs — it throws off.

And, like clockwork, taxpayers are usually the ones who get burned.

“The track record is brutal,” former Alberta energy and finance minister Ted Morton said Tuesday.

“You take a lot more risk when you are gambling with other people’s money than with your own. And, let’s face it, for politicians — I don’t care what party — you are not playing with your own money.”

Two examples of this principle surfaced in the past week, and hold some lessons for the UCP government when it comes to its investment in the Keystone XL pipeline.

The latest cases are the province’s ballooning $2.1-billion loss from divesting the former government’s crude-by-rail contracts, and almost $2 billion in net losses at the Alberta Petroleum Marketing Commission (APMC), largely tied to its involvement with the Sturgeon refinery.

In a dismal fiscal update, the province revealed last week Alberta will lose more money than expected by unloading the former NDP government’s crude-by-rail agreements.Those contracts were designed to move up to 120,000 barrels per day of oil out of the province, beginning last year, while the UCP campaigned during the 2019 election to cancel them.

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Glimmer of hope for investment in Europe: EY survey – TheChronicleHerald.ca

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By Mark John

LONDON (Reuters) – Global executives see a smaller hit to their investment plans for Europe than they did earlier this year and are somewhat more upbeat about the continent’s future appeal, a questionnaire by professional services group EY found.

The survey, conducted in October before a series of COVID-19 vaccine trial breakthroughs, showed that 42% of executives now expect a decrease in their 2020 investment plans and 31% plan to delay them to 2021.

That compared with 66% who expected decreases and 23% who saw delays when asked the same question back in April. This time around, a small number – 10% – even saw an increase to their 2020 investments, something no one did in April.

While that still means a big overall hit to foreign direct investment after 2019’s record year, EY noted that 21% of those surveyed believed Europe would be more attractive for investment post-Covid compared to just 8% in April.

“It is promising that investors believe that over the next three years, Europe will become a much more attractive destination for investments than before pandemic,” EY Area Managing Partner Julie Teigland said.

The findings were based on interviews with 109 global executives across 14 industries in October.

Upbeat news from vaccine trials are starting to support economic sentiment. The monthly eurozone Purchase Managers Index (PMI) for November saw a rise in its “future output” component in November to its highest level since February.

Among the other takeaways from the EY survey, 63% expected faster roll-out of digital customer access to surveys in the next three years (versus 55% in April) but only 37% now saw a reversal of globalisation (versus 56%).

(Reporting by Mark John, editing by Ed Osmond)

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Digital Technologies have a strong return on investment, survey says – JWN

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Canada’s oil and gas industry says investing in digital oilfield technologies can generate a strong return on investment even in today’s difficult market, according to a survey of industry professionals conducted as part of the Daily Oil Bulletin’s 2020 Digital Oilfield Outlook Report.

The survey asked respondents to evaluate 11 key digital applications along three dimensions: return on investment, technology maturity, and the readiness for their organizations to adopt the technology. The applications represent how organizations use technology to deliver value.

At a time when many companies are in survival mode
as they attempt to hang on until the pandemic-inspired collapse in demand for their products abates, return on investment takes on particular significance.

Evaporating cash flows have left many companies in no condition to make any investments, let alone those that don’t virtually guarantee positive short-term returns. Many survey respondents said the sense of risk-taking on new technologies – with the attitude they could fail fast and move on – has withered.

However, there was widespread recognition and consensus across industry groups (producers, midstream, OFS) and levels (CEO to analyst) that digital technologies in general have high return on investment with all 11 technology use cases believed to represent a return on investment compared to or higher than other uses of capital in the organization. This bodes well for digital oilfield technologies vying against other investment opportunities in difficult times – an indication they will pay for themselves more quickly than other forms of investment.

The use cases felt to deliver the greatest return on investment – Production Asset Optimization, Automated Production Asset Operations and Predictive Maintenance – play into that narrative for their ability to reliably cut costs and deliver efficiencies. As quickly maturing technologies, they can be delivered for relatively affordable investment with low risk.

Also of note was that Fleet Management, Remote Asset Monitoring and Field Productivity are amongst the most mature and best known, and have return on investment that is closest to other comparable uses of capital. They may have already produced considerable gains in recent years and be perceived to have reached a level of saturation that is more difficult to improve on. Conversely, Biometric Monitoring, at the bottom of the list, maybe seen as one of the least mature use cases from an industrial perspective and therefore considered a high investment risk in difficult times.

Attitudes toward the return on investment have shifted in the five years since the Daily Oil Bulletin’s first survey was conducted. In comparison to the results of the 2015 survey (in which some applications were not polled), there is much more confidence in return on investment from optimizing field workforces, with “remote” applications having seen the biggest jump in perceived return on investment. Of the eight comparable use cases, those that climbed the most in rank over the past five years were Remote Asset Operations, Remote Asset Inspection and Remote Asset Monitoring.

While it is a sign of shrinking workforces in the midst of a major downturn in the industry, it could also be an early indication of more to come as companies are forced to deal with the secondary crisis of the pandemic and the physical distancing that entails for employees. Indeed, “remote” has become a watchword in all sectors of the economy as workers have been forced to adjust to the new COVID-19 reality. The ability to remotely operate, inspect and monitor assets simplifies the physical distancing aspect of these activities even as it trims costs.

For more information, the Daily Oil Bulletin’s 2020 Digital Oilfield Outlook Report, sponsored by Amazon Web Services and Rackspace Technology, is available for download here.

Note: In terms of ROI, a score of three represents a return on investment comparable to other uses of capital, four is higher than other uses of capital, and five is much higher.

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India Stymies Investment From Hong Kong Amid China Border Row – BNN

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(Bloomberg) — India is subjecting foreign investment proposals from Hong Kong at par with China as part of a new policy that makes approval mandatory for plans from countries that share a land border, a person with the knowledge of the matter said.

Nearly 140 investment proposals valued at over $1.75 billion, mostly from China and Hong Kong — China’s special administrative region — have been put on hold pending scrutiny, the person said asking not to be identified citing rules on speaking to the media.

Amid a border stand off with China, the Indian government tightened rules for foreign direct investment from all nations sharing a land border, making scrutiny mandatory for such investments — a restriction that was earlier applicable only to Pakistan and Bangladesh.

The delays may complicate deal-making and impact the flow of capital from private equity firms and hedge funds, which often include investors domiciled in China or Hong Kong. This may starve Indian companies of investment in the midst of the pandemic-induced economic contraction.

The curbs also apply when the beneficial owner of the proposed investment is situated in any of India’s neighbors. A government panel constituted to approve these proposals is yet to decide on the rules including on beneficial ownership.

The trade and industry ministry spokesman didn’t immediately answer a call made to his mobile phone.

READ MORE: China Gained Ground on India During Bloody Summer in Himalayas

Tensions between the two giant Asian economies have been escalating since May. Twenty Indian soldiers and an unknown number of Chinese troops were killed in clashes along the Himalayan frontier earlier this year.

The military crisis is the worst since the two sides fought a war in 1962. India responded by banning Chinese apps, tightening visa rules for Chinese nationals and imposing curbs on companies from nations sharing a land border from bidding for government contracts.

Earlier last month, Foreign Minister Subrahmanyam Jaishankar had told Bloomberg News that trade with China can’t carry on in business-as-usual mode as long as there are unresolved issues along the border — a disputed 3,488-kilometer (2,167-mile) stretch known as the Line of Actual Control.

©2020 Bloomberg L.P.

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