Electric cars, oil price rebounds and Grande Prairie: What one energy expert will be watching in 2017
Executive director of ARC Energy Research Institute sees brighter year ahead
Oil prices are likely to stabilize and possibly rise in 2017, while electric cars could change the game, according to the executive director of the ARC Energy Research Institute.
Speaking to the Calgary Eyeopener, Peter Tertzakian said he expects OPEC will stick to its promise of production cuts and that prices should rise by the end of the year. He's also optimistic about returns from the Montney formation — a 130,000 square-kilometre area in northeastern B.C. and northwestern Alberta.
"The players are going to be coming from the western side of Alberta, the ones that have innovated and are exploring and developing areas in and around the Grande Prairie and south area, where we see a lot of promise in terms of oil and gas production," said Tertzakian.
The U.S. as competitor
One thing he finds so appealing about the Montney — and why he thinks that's where rebound money will go first — is the cost of operating in the area. That will make it "very economic competing against the United States," a country that has gone from consumer to competitor, Tertzakian said.
He said the incoming U.S. administration is a wildcard in terms of its policies and the impacts it will have on Canada.
"It's a call to be more efficient and to make sure we don't lose the discipline our producers have instilled over the course of the last few years," he said.
Of course, it's not all good news emerging from Tertzakian's crystal ball.
Prices, protest and...
With a rebound comes some increased price pressures, particularly in the hard-hit oilfield services sector, he said.
"They've been operating at or below their cash flow break even," Tertzakian said. "So if they're going to respond to the producers who develop the new areas at higher prices, they will necessarily have to raise their prices. So I think you're going to see some modest inflation coming back into the business over the course of '17."
He also cautions that Standing Rock, the big pipeline protests in the Dakotas, could stand up and walk to other parts of the continent.
Perhaps the biggest challenge to the oil and gas industry could come from electric vehicles, and not necessarily the hyped Tesla Model 3.
"The one that I'm watching is the Chevy Bolt, that's at a lower price point and GM has a lot of experience with electric cars," said Tertzakian.
"It's going to be coming to Canada in bigger quantities, I think, in '17. But the place to watch, of course, is the United States and beyond," he continued.
"I don't think we can be in denial in the oil business about the potential of electric cars and the Chevy Bolt is going to be a litmus test. We'll see how the adoption numbers go, the sales numbers, and if the sales numbers exceed expectations then I think we can't be in denial about some of the changes that are coming."