With oil grabbing the bulk of attention as OPEC wrestles with supply cuts and the U.S. pushes ahead with shale oil growth, less attention seems to be given to the dramatic changes taking place north of the border in Canada.
The past recent months have seen no fewer than three global oil producers draw-down or selloff oil assets especially in Alberta, the nation’s leading oil producer. Though oil’s depressed values are often cited as reason, given the lack of pipeline conduits to the US and to tide waters pipeline, its’ heavy oil sells at a $10 to $15 a barrel discount to the West Texas Intermediate (WTI) crude benchmark. To be sure higher wages and harsher temperatures weigh on the economics of Canadian heavy oil, but corrections to the global markets, a lack of global investment in replacement wells and continued growth in Asian markets hold the prospect of higher values in the years ahead.
But along with a stunning increase in gas prices in Canada with the shift to summer-grade gasoline last week, news emerged on Tuesday and Wednesday of two events that represents a reset of the players in Canada’s concentrated gasoline industry.
News that independent supplier Parkland Fuels had offered to purchase the retail outlets of Chevron in British Colombia and acquire Chevron’s Canadian refinery in Vancouver (Burnaby) B.C came as surprise that no one saw coming. Re-established in 2009, Parkland Fuels of Red Deer has been quickly establishing itself as the new kid on the block, acquiring and displacing the the old regime of the 3 national integrated petroleum companies; Esso, Shell and Petro Canada (Suncor), as Canada’s largest fuel retailer. Indeed Parkland’s rapid rise comes on the heels of its purchase from CST of all Ultramar stations in Easternn Canada, a good number of gas stations from Esso in the West and Ontario’s largest semi independent gas retailer, Pioneer Fuels.
The context for this can be traced to the retrenching of the finances of the major oil companies who are retreating to their core profitable undertakings in the US, especially on the refinery side of their operations. Low returns for oil production and despite Canada’s average retail pump price of $1.13 a liter ($ 4.25 a gallon), low retail margins, saw a major big box store Loblaws also sell its 213 gas stations to Brookfield Partners. This sale too is significant given that it was Loblaws who introduced the concept of selling gasoline as a loss leader 20 years ago, a full decade before Costco began the same strategy in Canada.
The sudden changes in the retail and midstream activities and players in Canada is a portent for the evolving nature of the petroleum industry as a whole throughout much of North America. Get ready for some big and interesting developments coming to your nearby and favorite gas station and convenience store.