ONE | CHANGE IN FOREIGN INVESTMENT

The Canadian government’s Revised Guidelines for Investments by State-Owned Enterprises, released in late 2012, confirm that state-owned enterprises (SOEs) may acquire a Canadian oil sands business—but only under exceptional circumstances.

In response to the changes, acquisitions of oil sands interests by foreign SOEs have slowed significantly. The trend is expected to continue in 2014, which will also see an increase in alternative investment structures such as joint ventures, where SOEs invest in Canada’s natural resources without acquiring oil sands interests. SOEs are also expected to shift their focus to investment and acquisition opportunities in Canada's natural gas industry.

TWO | LIQUEFIED NATURAL GAS

The New Year will bring more investments in Canada's unconventional production sources and the development of liquefied natural gas (LNG) facilities to service alternate markets. Asia, in particular, continues to show growing demand for the product.

Multiple LNG facility projects remain under development in Canada, and 2013 saw a significant investment in land in Prince Rupert, British Columbia, by an Asian LNG company. There is a prevailing view that at least one LNG project will be moving forward in the near future. As these LNG facility projects proceed, 2014 will see more investors looking to become involved on the project side (such as development, construction and operation) of LNG facilities, as well as on the upstream side, by acquiring rights to natural gas resources. As in 2013, Asian investors are expected to continue to show interest in acquiring rights to the natural gas that is increasingly being used by that region as an energy source.

THREE | FOCUS ON FOREIGN MARKETS

In 2013, crude oil imports to the United States hit historic lows with the U.S. producing, for the first time since 1995, more crude oil domestically than it imported. The U.S. Energy Information Administration reported that the country is on track to meet all of its energy needs from domestic sources by 2035.

A recent study of Canada's unconventional petroleum resources, conducted by the National Energy Board (NEB), estimates that the Montney formation alone could meet the country's natural gas needs for the next 145 years. Combined with technological advances in extraction techniques and discoveries of significant quantities of shale gas in the U.S., North America is clearly awash with natural gas. The resulting decline in natural gas and crude oil prices domestically can no longer be attributed to cyclical market fluctuations, and commodity prices in North America will likely remain depressed for the foreseeable future. As a result, 2014 will see petroleum producers seeking ways to export their products to alternate, and more profitable, foreign markets.

FOUR | TRANSPORT

In 2013, there was a substantial increase in the amount of petroleum products transported by rail. We expect this growth to continue through 2014. There has also been a continued emphasis on pipeline development. The number of new pipeline and rail transportation projects should grow in 2014 as transportation companies continue to expand their networks and producers look to diversify their potential modes of transportation and product destinations.

The industry made important strides regarding pipeline development in 2013 with the announcement of the Energy East Pipeline project that will move 1.1 million barrels of oil from Alberta to the East Coast per day. Further, plans to reverse the Line 9 pipeline in order to move crude from the Alberta oil patch to Eastern Canada are currently awaiting approval from various governmental bodies. In 2013, the Alberta and B.C. governments also made some progress regarding the Enbridge Northern Gateway Pipeline project. That pipeline would move Alberta crude to the West Coast. However, this project still requires approval from the NEB in the coming year.

Aboriginal, environmental and other groups continue to protest the development of the Keystone XL Pipeline in the U.S., which has delayed the project and has left Canadian petroleum producers anxiously awaiting a final decision from the U.S. president on the matter in 2014.