Listed below are ConstructConnect’s Hot Comme...Read more
Employment and revenues for architecture, engin...Read more
It’s no secret that construction can be very ...Read more
Much of the Canadian economy is dependent on commodity prices. They have a big impact on the foreign trade balance. And they are a key determinant of the mega project investments initiated by resource sector owners.
Due first to the recession, then to the subsequent slower-than-usual improvement in the world economy, most commodity prices have been flat for the past couple of years.
That gives rise to an important question for the construction industry. What’s the outlook for resource projects?
There are two major factors that are having an impact. The first is specific to the energy sector. The second is of a more general nature, having to do with firms from emerging nations trying to lock up their raw material supplies by buying stakes in resource-sector firms in Canada, Australia and elsewhere, such as Africa. (I’ll have more to say on this in future Economy at a Glances, but for today, let’s concentrate on the oil price effect.)
The oil price effect begins with three different benchmarks for crude oil.
The current price of Brent crude, which governs half of the oil traded world-wide, is about $20 U.S. per barrel higher than West Texas (WTI) Intermediate. WTI is the U.S. standard.
The Brent price originally derived from an offshore field in the North Sea. It governs oil sales in Europe and Japan and in most emerging nations, including China and India.
For Canada, a third benchmark has become critically important – the price for “Western Canadian Select” (WCS). The composition of WCS is different than for Brent and WTI. It’s mainly “heavy” oil, with some admixtures to make it flow more easily, whereas the other two are “lighter”.
Lighter crudes can be processed (i.e., refined) into gasoline more easily.
WCS needs an intermediate stage of refining – i.e., from “heavy” to “light” – to render it suitable for final stage processing. The intermediate stage is usually done in heavy oil upgraders. (Due to their high cost of construction, Western Canada has only a handful of upgraders).
There should be a price differential between the lighter crude varieties and WCS, but at this time, that separation has become much greater than normal. It’s having a major impact on the outlook for the Canadian oil industry.
The price of WCS is $40 U.S. per barrel lower than for WTI and $60 per barrel less than for Brent.
WTI is currently falling below the Brent price because the U.S. has a glut of supply. Hydraulic fracturing isn’t just opening up new supplies of natural gas. It’s also freeing up a great deal more oil.
The only way for U.S. producers to realize the Brent price is to ship oil to refineries on the coasts (Atlantic, Pacific or the Gulf of Mexico) that can sell to customers offshore, mainly in emerging nations.
Canadian producers are operating under an additional set of handicaps. They basically have customers in only one country other than at home, the U.S. And they have only limited access to coastal refineries.
Most WCS is piped to refineries or transportation hubs that are inland in the U.S. For example, TransCanada Corp.’s current U.S. pipeline ends at Cushing, Oklahoma. Due to the surfeit of product from American sources, the price offered at Cushing for Alberta crude carries a large discount.
This is negative for our national interests in several ways. Canadian producers are being paid far less than they should be. The U.S. energy sector is being subsidized by Canadian producers. And the government of Alberta’s financial coffers, due to lower than expected royalty payments, are suffering.
Also, weaker tax revenue for Alberta hurts the rest of the country through reduced transfer payments.
What’s the answer? We’re seeing corporate responses in the headlines every day.
Later this year, TransCanada will complete the southern portion of its XL pipeline – from Cushing to the Gulf Coast – and that will help.
There’s also a major push underway to proceed with the northern portion of the XL line. This needs approval from Washington because it crosses the border with Canada.
In the run-up to the Presidential election, Mr. Obama placed the northern portion of XL on hold to appease the environmental lobby within the Democratic Party. The potential threat to a sensitive aquifer in Nebraska was the excuse.
The company has since filed a revised route circling most of the sensitive region to the east. Legislators in Nebraska are now expected to endorse the project.
Better access to American markets is only part of the answer. We need more foreign customers, and for the most part, that means in Asia.
Hence the impetus behind Enbridge’s new Northern Gateway Pipeline to Prince Rupert, B.C., and Kinder Morgan’s TransMountain pipeline expansion to Burnaby. Both are in the midst of hearings.
There are also proposals to make better use of some existing pipelines. This might involve switching some underutilized lines from natural gas to oil. Or there might be some flow reversals. For example, rather than taking foreign oil from the Atlantic Coast and shipping it to refineries in Ontario and Quebec, it might make more sense to send Alberta crude all the way across country to find customers along the U.S. seaboard or in Europe.
There’s also another response that’s shaping investment dramatically in North America. The railroads have spotted the potential for their alternative delivery systems.
What are the positives for oil tanker-car delivery by rail?
The railroads already reach almost everywhere. This includes refinery capacity on the coasts, as well as in large urban centres where new pipelines would have little chance of finding public acceptance, never mind that their cost of building would be prohibitive.
The railroads can increase volumes in easy incremental stages, in most cases without environmental hearings. Oil spills from tanker cars are more common than from pipelines, but the damage is smaller and can be contained more easily.
Both the railroads and the oil companies are rapidly increasing their investments in storage tanks along railroad lines. Orders for tanker cars have increased to the point where delivery dates are now running two years into the future.
The oil market in North American is in considerable flux. While the industry is showing itself sensitive to environmental and native land claim issues, it’s also been quicker on its feet than many might have expected.
The industry’s executives are demonstrating commendable flexibility in seeking imaginative solutions.
|11/17/14||Top 10 largest construction project starts in the U.S. - October 2014|
|11/14/14||Non-residential Construction Starts Rose Gently in October|
|07/10/14||The Importance of Matching Volume to Contractor Capacity in JOC Procurement Strategy|
|07/10/14||Consider a Seed Project as Part of Your JOC Procurement Strategy|
|07/10/14||The Best Unit Price Book for Your Job Order Contract|
|07/02/14||ECONOMIC NUGGETS – July 1, 2014|
|10/23/14||Twenty major upcoming Water Treatment Plants and Manufacturing & Warehousing construction projects - U.S. - October 2014|
|10/23/14||Twenty major upcoming Alberta and British Columbia construction projects - Canada - October 2014|
|10/15/14||Trend lines of construction starts in Canada - September 2014|
|10/15/14||Top 10 largest construction project starts in Canada - September 2014|
|09/17/14||Twenty major upcoming midwest and northwest construction projects - U.S. - September 2014|
|09/17/14||Twenty major upcoming medical and educational construction projects - Canada - September 2014|
|09/17/14||Trend lines of construction starts in Canada - August 2014|
|09/17/14||Top 10 largest construction project starts in Canada - August 2014|
|08/15/14||Twenty major upcoming medical and educational construction projects - U.S. - August 2014|
|08/15/14||Twenty major upcoming industrial and water treatment construction projects - Canada - July 2014|
|08/15/14||Trend lines of construction starts in Canada - July 2014|
|08/15/14||Top 10 largest construction project starts in Canada - July 2014|
|07/24/14||Twenty major upcoming entertainment facility and stadium/arena construction projects - U.S. - July 2014|
|07/24/14||Twenty major upcoming Ontario and Quebec construction projects - Canada - July 2014|
|07/24/14||Trend lines of construction starts in Canada - June 2014|
|07/24/14||Top 10 largest construction project starts in Canada - June 2014|
|07/14/14||Top 10 largest construction project starts in the U.S. - June 2014|
|02/03/14||Infographic: Where Can You Use Project Leads in the Construction Process?|
|07/25/13||The Canadian Economy’s Two Great Blessings|
|02/15/13||Construction Economic Notes – February, 2013|
|09/18/12||Return on Your Green Home Improvement Investment|
|08/09/12||Green Building Solutions to Stormwater Runoff|
|08/07/12||An “Aha” Moment Solves Challenge of Cost Estimating Local Circus Roof|
|06/20/12||Ground-Source Heat Pump|
|05/14/12||Universal Design for Outdoor Living|
|04/23/12||What Is Universal Design?|
|03/14/12||Green Material Alternatives for Plumbing Fixtures|
|03/02/12||Budgeting & Financing Green Construction|
|02/22/12||Greening Your Firm|
|02/06/12||Roofs: energy efficiency strategies|
|01/18/12||Commercial Real Estate and Green Construction|
|12/14/11||Renewable Energy & Distributed Generation Technologies|
|10/04/11||Are Online Ads An Endangered Species?|
|09/27/11||Performance Bonds Guarantee Clients Receive Exceptional Service|
|09/15/11||Deconstruction for Green and Economic Benefit|
|09/01/11||4 Ways for Businesses to Create a Good First Impression on Twitter|
|08/11/11||Building Information Modeling (BIM) for Green Building|
|07/21/11||Green Alternatives for Concrete|
|07/12/11||Evaluating Products Over Their Life Cycle|
|06/30/11||Low-Cost Green Strategies|
|06/28/11||Bricks are from Venus, Clicks are from Mars|
|06/17/11||Zombie Avoidance Techniques for Building Product Manufacturers|
|06/08/11||Blogs & Websites: The 5 Signs of Website Wellness|
|06/06/11||Building Product Manufacturers & Green Products|
|06/01/11||Is Fear of Sharing Information Costing Your Company Sales?|
|05/26/11||What Are Green Products?|
|05/20/11||The Building Envelope|
|05/16/11||Blogging: Website Heal Thyself|
|05/03/11||Metals Compared to Wood for Sustainable Construction|
|04/12/11||Storm Water Collection & Infiltration|
|03/23/11||Commissioning the Green Building|
|02/23/11||Building Program for Green Design|
|01/21/11||Building Deconstruction Process|
|05/02/11||Why Building Product Manufacturers and Social Media Are a Marriage Made in Heaven|
|05/06/11||Building Product Manufacturers: How Understanding Architects Can Help Your Business|
|10/21/09||Distributors & Manufacturer Representatives|
|07/15/10||Estimating Doors: Tips from the Experts|
|07/06/10||How to Handle Construction Materials to Prevent Mold|
|06/21/10||How to Maximize the Benefits of Exterior Security Lighting|
|06/01/10||Regional Housing Construction Tracking and Forecast Information|
|05/28/10||How to Find Regional Construction Tracking and Forecast Information|
|05/24/10||Building Product Manufacturers|
|05/18/10||Practicing the Art of Sustainability - Why Atlanta's Current Building Codes Need Updating Now|
|02/23/10||Learning to use EE|
|01/11/10||Earn AIA CEU Credit Attending RCD Webcasts|
|07/17/09||Cost Estimators Winning Work With BIM|
|07/16/09||Becoming an Invited Bidder - More Tips|
|07/16/09||Becoming an Invited Bidder - Tips|
|07/16/09||Becoming an Invited Bidder|
|07/16/09||SmartBIM Object Modeling Guidelines for Revit|
|07/15/09||Interference Check and BIM|
|06/26/09||A Look at Contractor Failure: Part 2|
|06/19/09||Doug Thornton AIA, LEED A.P. of AERC, PLLC|
|06/18/09||A Look at Contractor Failure: Part 1|
|06/12/09||Owners and SmartBIM Objects – What You Need To Do|
|06/10/09||Dealing with the IRS|
|06/05/09||Getting Paid on Construction Contracts|
|06/02/09||BIM Coordination and Collaboration|
|05/28/09||Marketing Your Construction Firm on the Cheap|
|05/20/09||Little Habits with Big Payoffs for Contractors|
|05/07/09||AIA Show Recap as Seen by the SmartBIM Solutions Team|
|04/27/09||Business Case Study - Survey Of Spending Patterns In Educational Facilities|
|04/23/09||Taking Advantage of the Recession: Hiring the Right People|
|04/20/09||Cork as a Green Flooring Option|
|04/08/09||Owners - It's Time to Substantially Increase Your Architect's and Engineer's Fees|
|03/05/09||There's a Solution to Performing Time Consuming Quantity Take-Offs|
|02/20/09||SmartBIM Library is Half-Off for a Limited Time Only|
|02/09/09||You are Wasting Your Money|
|01/20/09||Obama: 'Dramatic Action' On Economy Needed|
|01/14/09||Use of BIM Jumps Dramatically Over Last 12 Months|
|12/10/08||Minimizing the Size of Family Files (Revit Objects)|
|11/11/08||Maximize Online Advertising Dollars|
|11/07/08||Architects and Engineers, WE NEED YOU|
|10/29/08||Why Do You Need SmartBIM Objects|
|10/28/08||Why Building Information Modeling?|
|10/29/08||10 Questions To Ask About BIM Objects|
|10/08/08||The Object Mess|
|10/07/08||Implementing BIM to Your Office|
|10/06/08||Meeting the Needs for Governmental BIM Compliance while Avoiding Current Liability Obstacles|
|09/15/08||The BIM Transformation is Manageable with the NEW SmartBIM Library v3|
|09/14/08||KOLBE Windows and Doors vs. Building Information Modeling|
|09/12/08||The Evolution of Building Information Modeling: BIM 1-2-3|
|08/11/08||BIM 101 Overview - From Hand Drawings, CAD and now BIM|
|08/12/08||Draper, Inc. on BIM Object Developments|
|07/08/08||IFD Library Partners work to establish standards for creators of BIM software|
|06/17/08||Parametric Revit Objects – Part I - Fundamentals|
|06/17/08||Window Glazing Coefficients|
|06/01/08||Frequently Asked Questions About Building Codes|
|06/05/08||Calling All Current and Prospective Revit Users - This Blog Is For You|
|05/06/08||System Requirements for SmartBIM Library|
|05/06/08||SmartBIM Library 2.0 Release Notes|
|05/05/08||Building Information Modeling Moves into AEC Mainstream, Adding Value to Project Delivery Process|
|04/08/08||Flooring: Cost Considerations|
|02/08/10||General Contractors & Trade Contractors|
|01/24/08||Building Element Models (BEM)|
|12/21/07||LEED Certification Primer|
|12/13/07||Building Integrated Photovoltaics (BIPV)|
|09/24/07||Mixed-mode Building Design Combines Old and New Ideas|
|10/15/07||Checklists Identify Potential Envelope Design Improvements|
|10/24/07||Greenroofs as High Performance Design|
|10/21/07||What Makes a Building Product Green|
|10/24/07||Lighting Considerations in Green Building|
|10/24/07||Water Conservation in Green Buildings|
|10/24/07||Rainwater Collection Systems|
|10/24/07||Efficient Cooling Methods for Green Buildings|
|10/24/07||Controlling Heat Transfer in Green Buildings|
|10/24/07||Limiting Heat Loss Through Windows|
|10/23/07||Formaldehyde Use in Building Construction|
|10/23/07||Using Plants to Improve Indoor Air Quality|
|10/19/07||Use of Windows, Skylights and Light Pipes in Daylighting|
|10/19/07||An Overview of Daylighting|
|10/19/07||An Overview of Solar Ventilation Air Heating|
|10/19/07||Types of Collectors for Solar Water Heating|
|10/19/07||An Overview of Solar Water Heating|
|10/19/07||Cooling Load Advoidance|
|10/19/07||Components of Passive Solar Heating Designs|
|10/19/07||An Overview of Passive Solar Heating|
|10/23/07||Improving Indoor Air Quality|
|10/19/07||An Overview of The LEED Rating System|
|10/19/07||Cost Considerations in Building Deconstruction|
|10/25/07||Roofing Considerations in Green Building|
|10/19/07||Green Site Selection and Development|
|10/24/07||Reducing Energy Use in Buildings|
|10/18/07||Integrating Solar Power Generation into Buildings using Thin Film PV|
|09/10/07||Compost Company Promotes Green Environment|
|03/31/06||Green Roof Sets An Example For Minneapolis Sustainable Design|