Energy projects like an LNG Canada export terminal and the Trans Mountain pipeline expansion may face short-term setbacks but the coronavirus pandemic and oil price crash shouldn’t threaten their long-term viability, economists say.
Andrew Leach, an energy economist at the University of Alberta, said the long-term forecast for both natural gas and oil remains steady, even as some companies scale back workforces to meet safety protocols.
“I think the consensus amongst most people is that there isn’t a big impact of what we’re seeing right now beyond the timeline of the pandemic and the recovery,” he said.
Global oil prices recently plunged amid oversupply concerns as storage tanks near capacity while refineries are reducing output as economic activity slows during the pandemic. The low prices have forced some producers to cut production in Canada’s oilpatch.
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Werner Antweiler, an energy economist at the University of British Columbia, said the oil industry is facing a “double whammy” of a global decrease in demand coupled with a Saudi Arabia-Russia price war. A recent agreement by OPEC and other countries to reduce production doesn’t go far enough to balance supply with falling demand, he said.
But pipelines face slightly different market forces than the producers who fill them. There may be increased pressure on pipelines as Canadian producers seek to get oil to markets at the best price possible, while the spectre of American protectionism could also increase the pressure to get Canadian oil to Asian refineries if U.S. ones becomes unavailable, Antweiler said.
1:45 Oil price crash prompts calls for green energy
Oil price crash prompts calls for green energy
Trans Mountain said in a statement that construction on the expansion project is progressing well at its terminals and along the right-of-way in B.C. and Alberta with COVID-19 safety measures in place.
Current oil prices don’t have a direct impact on the project, the company said. Its customers have made 15- and 20-year commitments for roughly 80 per cent of the capacity in the expanded pipeline. It’s still due to come into service in late 2022, the statement said.
The existing Trans Mountain pipeline operated at its maximum capacity for the first quarter of 2020, the company said.
LNG Canada has reduced its workforce to manage the risk of spreading COVID-19, director of corporate affairs Susannah Pierce said in a statement. But the company and its engineering procurement and construction contractor, JGC Fluor JV, continue to hit “critical construction milestones,” she said.
Antweiler said liquefied natural gas has a good long-term outlook because of the ongoing switch from coal to gas globally and the increase in demand for energy in Asia.
“These two things, they will continue once the economy returns to normal.”
In the case of Coastal GasLink, the 670-kilometre natural gas pipeline that would feed LNG Canada’s export terminal on the B.C. coast, the pandemic may never rival the disruption earlier this year by its opponents, Leach said.
Construction on most projects that are underway could be vulnerable to disruptions caused by outbreaks but otherwise appear to be continuing at status quo. Leach biked through a Trans Mountain construction zone in Edmonton on Thursday and it seemed unchanged, he said.
“It feels like it’s going full speed ahead,” he said.
A pipeline like Trans Mountain, which is regulated by the Canadian Energy Regulator, is not a commercial venture in the sense that it doesn’t take full merchant risk and has bounds on the tolls it can charge. It’s also largely able to pass any extra costs on to producers, Leach said.
“They can’t charge whatever the market will bear at any point of time and as a consequence of that they also have some protection for their capital investments,” Leach said.
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The wildcard project is Keystone XL for several reasons, including that it doesn’t have all its permits and is not materially under construction, he said.
“It’s relatively early in the process and the cross-border nature of it, the length of it, all these sorts of things make it more challenging in the current market. So that’s probably one of the projects that is most likely to be affected,” Leach said.
TC Energy, which owns the project, did not respond to a request for comment.
While some have mused that the oil price plunge signalled the beginning of the end for oil, Leach and Antweiler don’t buy it.
It would take broad public policy shifts or an energy technology revolution to stimulate a mass shift away from oil dependency. If anything, Leach said physical distancing habits could discourage drivers from making the switch to public transit, for example.
2:02 Nenshi says Calgary will be hardest hit city from pandemic
Nenshi says Calgary will be hardest hit city from pandemic
“I’d love to see the oil industry fade away more quickly than it will, but as an energy economist I still know we depend on oil for transportation,” Antweiler said.
He said he expects demand for oil to remain stable for the next few years and it will be up to countries around the world to curb demand through policy until cleaner options become more cost effective.
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“There will be potentially a reduction in demand for oil but it won’t be as fast as some hope,” he said.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
