The collapse in crude oil prices has sent shock waves throughout the global energy industry and Canada has been no exception. Sorting through all the impacts will take time, but what’s clear is that any earlier optimism surrounding supply growth in Canada has evaporated, including for propane supply to feed the new propane export terminals on British Columbia’s coastline. Edmonton propane prices fell 58% since the start of March to as low as 10.25 cents per gallon in U.S. dollars on March 23 — the lowest level since April 2016 — and settled yesterday at 13.13 cents per gallon, according to data from our friends at OPIS. A dampened supply outlook means future export expansion plans also are being reconsidered. Today, we explore what the sharp decline in propane prices could mean for the region’s supplies and future propane exports, including from Pembina Pipeline’s nearly completed export terminal in Prince Rupert, BC.
The past few weeks have seen many an energy outlook completely overturned. The effects of the huge downturn in crude oil prices have rapidly forced a large majority of producers in the U.S. and Canada to drastically reduce their spending plans for at least the first half of this year, and likely for all of 2020. Our examination of Canadian producers, both large and small, reveals more than C$6 billion ($4.1 billion) of capital spending reductions announced in just the past three weeks, with some producers still to release information on their capex plans. These spending reductions equate to a more than 30% cut versus previously announced capex plans for this year before prices came crashing down. The impacts may soon be seen in the number of drilled and completed crude oil and liquids-rich gas wells across Western Canada, although it may take some time for the supply impacts to be more fully realized. (See Déjà Vu for reasons as to why supply impacts can take time to materialize.) The capital spending cuts have not been confined to just producers, but also have quickly surfaced in the form of capital reductions by major Canadian energy infrastructure companies such as Pembina Pipelines, Inter Pipeline and Keyera Corp.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
To get some sense for what all these cuts might mean for Western Canada’s propane supply, we have to first assess where supplies are to date. In Part 1 of this series, we noted that propane supplies in the Western Canadian Sedimentary Basin (WCSB) materially rose at the beginning of 2016, as producers began to more aggressively focus on drilling liquids-rich wells in unconventional plays such as the Montney and the Duvernay. This led to a nearly 40% increase in propane production between the start of 2016 and the end of 2019, and, ultimately, an oversupply of propane and other NGLs, prompting the development of propane export terminals off the BC coast. AltaGas and Vopak’s Ridley Island Propane Export Terminal (RIPET) just outside of Prince Rupert, BC, was completed and began exporting propane in May 2019 (see Harbor Lights). Then, as we covered in Part 1, Pembina Pipelines in May 2017 undertook development of a propane export terminal for the Prince Rupert area; that project is now targeting completion and export operations early in the second half of this year.
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About the song
"When Love & Hate Collide" was written by Joe Elliott and Rick Savage of Def Leppard. Originally recorded in 1990 as a demo for possible inclusion on the group’s Adrenalize album, the finalized version appears as the ninth cut on the band's 1995 greatest hits album, Vault: Def Leppard Greatest Hits (1980-1995). The demo of the song contains the final recorded guitar solo of original guitarist Steve Clark, who died in 1991. When released as a single in October 1995, "When Love & Hate Collide" went to #58 on the Billboard Hot 100 Singles chart, #29 on the Mainstream Top 40 and #39 on the Adult Top 40 charts. The song was produced by Def Leppard and Pete Woodroffe. Personnel on the record were: Joe Elliott (lead and backing vocals), Steve Clark (guitars, backing vocals), Phil Collen (guitars, backing vocals), Vivian Campbell (guitars, backing vocals), Rick Savage (bass, backing vocals), Rick Allen (drums, backing vocals), Stevie Vann (backing vocals), Randy Kerber (piano) and Michael Kamen (string arrangements).
Vault: Def Leppard Greatest Hits (1980-1995) was the first greatest hits album by the band. Produced by Mutt Lange, Mike Shipley, Pete Woodroffe and Def Leppard, the LP was released in October 1995. "When Love & Hate Collide" was the only newly recorded song on the album, even though the band had originally made a demo of it in 1990. Vault went to #15 on the Billboard Top 200 Albums chart, and has been certified 5X Platinum by the Recording Industry Association of America.
Def Leppard is an English rock band formed in Sheffield, England, in 1977. Since 1991, the band has consisted of Joe Elliott, Rick Savage, Rick Allen, Phil Collen and Vivian Campbell. Former band members were Tony Kenning (1977-79), Pete Willis (1977-82) and Steve Clark (1978-91). Def Leppard has sold more than 100 million records worldwide. The band has released 11 studio albums, two live albums, four compilation albums, two EPs and 60 singles. They have won two American Music Awards and are members of the Rock and Roll Hall of Fame. Def Leppard still records and tours to this day, and will be on tour from May through October of this year.
