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Canadian Oil Sands Per Barrel At $4.47, Now Cheaper Than 12-Pack Coke, $5.08

Canadian Oil Sands Per Barrel At $4.47, Now Cheaper Than 12-Pack Coke, $5.08

The collapse of global oil demand has impacted the price of Canadian Oil Sands to such a degree, the price of a barrel is now cheaper than a 12-pack of Coke purchased at Walmart. According to oilprice.com, the current price of a barrel of Western Canadian Select (oil sands) is $4.47 versus a 12-pack of Coke at Walmart for $5.08.

What a deal… ah?  Now, let’s do a simple comparison of the ENERGY CONTENT in a barrel of Canadian Oil Sands vs. a 12-pack of Coke.  A barrel of oil equivalent contains 1.4 billion calories of energy.  A typical 12 oz Coke can contains 140 calories.  If we multiply it by 12, we have 1,680 calories in a 12-pack of Coke.

Doing some simple math:

Barrel Of Oil Equivalent (1,400,000,000 calories) / 12-Pack Coke (1,680 calories) =  833,333.

Thus, a barrel of Canadian Oil Sands, which contains 833,333 times the energy calories than a 12-pack of Coke, is now worth $4.47 compared to $5.08 for the 12-pack of Coke.  Again… what a deal, ah??

I just wanted to post this simple comparison to show how much the Global Oil Industry is being gutted.  If OPEC, Russia, and the United States do not come up with “MEANINGFUL CUTS,” then we could see Western Canadian Select trading for $1 a barrel or less.

As for RESTARTING the U.S. and Global Economy after an extended shutdown, I have my doubts, as so does Gail Tverberg at her blog, OurFiniteWorld.com.  Check out her most recent article; Economies won’t be able to recover after shutdowns.

COMING NEW VIDEO: I am finishing putting together the charts for my next video on why the GOLD & SILVER PRICES will explode due to the collapse of the Global Financial Ponzi Scheme.

TAR SANDS OPERATIONS GO FROM BAD TO WORSE: Now Losing Billions A Month

TAR SANDS OPERATIONS GO FROM BAD TO WORSE: Now Losing Billions A Month

The situation at Canada’s Alberta Tar Sands Operations has gone from bad to worse as the super-low oil price is now costing the industry billions of dollars each month.  Unbelievably, the price for the Western Canadian Select heavy oil fell to a gut-wrenching $14.65 yesterday down from a high of $58 in May.  Tar sands oil is now selling at an amazing $40 discount to U.S. West Texas Oil which is trading at $56.

The main reasons for the falling price of Alberta tar sands are due to Canadian pipelines full to capacity as well as midwest U.S. refineries shut down for seasonal maintenance.  Furthermore, the announcement by a U.S. Federal Judge to block the construction of the Keystone XL Pipeline on November 9th, didn’t help.

According to data from the Natural Resources Canada, the Alberta Tar Sands Operations were producing 2.7 million barrels per day (mbd) of oil in 2017.  I would imagine production this year is likely to reach close to 3 mbd.  The largest tar sands producer in Alberta is Suncor.  Suncor produced a record 476,000 barrels per day of tar sands in the third quarter of 2018.

Now, Suncor reported a handsome $1.4 billion profit in Q3 2018 on $8.3 billion in revenues.  However, that profit was based on much higher Western Canadian Select (WCS) oil price which was trading over an average of $35 for the quarter.  Unfortunately, the average price of WCS so far in the fourth quarter is $20.75.  And, if the price of WCS stays at the current low price, the tar sands operators will be receiving less than $20 a barrel.

In the article, Capacity shortages costing Canadian producers $100M/day, it stated:

“Heavy-oil producers are getting 40 percent of what they normally would be paid if we had access to markets,” said Grant Fagerheim, CEO of Calgary-based Whitecap Resources, which produces about 60,000 barrels per day.

…click on the above link to read the rest of the article…

Disaster Hits Canada’s Oil Sands

Disaster Hits Canada’s Oil Sands

Transmountain pipeline

Kinder Morgan said it would halt nearly all work on a pipeline project that is crucial to the entire Canadian oil sands industry, representing a huge blow to Alberta’s efforts to move oil to market.

Kinder Morgan’s Trans Mountain Expansion is the largest, and one of the very few, pipeline projects that has a chance of reaching completion. Alberta’s oil sands producers have been desperate for new outlets to take their oil out of the country, and the decade-plus Keystone XL saga is the perfect illustration of the industry’s woes.

Keystone XL is still facing an uncertain future, and with several other major oil pipeline projects already shelved, there has been extra emphasis on the successful outcome of the Trans Mountain Expansion. That is exactly why Canada’s federal government, including Prime Minister Justin Trudeau, has gone to bat for the project.

But, despite federal approval, Trans Mountain still faces a variety of obstacles that have bedeviled the project for some time. It appears that opposition from First Nations, environmental groups, local communities affected by the route, and the provincial government in British Columbia have forced Kinder Morgan to throw in the towel, at least for now.

Kinder Morgan said on Sunday that it suspended most work on the $5.8 billion Trans Mountain Expansion.

Environmental groups hailed the announcement. “The writing is on the wall, and even Kinder Morgan can read it. Investors should note that the opposition to this project is strong, deep and gets bigger by the day,” said Mike Hudema, climate campaigner with Greenpeace Canada, according to Reuters.

…click on the above link to read the rest of the article…

Is This The Beginning Of An Oil Sands Revival?

Is This The Beginning Of An Oil Sands Revival?

pipelines

New life was breathed into the Canadian oil sands with a decision by foreign-owned Harvest Operations Corp to commission its BlackGold project south of Fort McMurray.

The Calgary-based arm of South Korean state-owned Korea National Oil Corp announced on Dec. 21 it will start the 10,000 barrels of oil per day (bopd) steam-assisted gravity drainage (SAGD) operation, construction at which was halted in 2015 due to low oil prices.

In a press release on SEDAR, Harvest said that major work at the site has already started, with the aim of commissioning wells and starting steam injection in Q2 2018. Production is slated for the third quarter.

It cites “the stabilization of crude oil pricing and the improved operational and financial performance of Harvest’s conventional business as factors in its decision to move forward with BlackGold.”

The start-up has been helped through a refinancing of $1.36 billion of maturing debt, plus the raising last month of an additional quarter-million in financing, the company said.

Global News notes the project was built for around $900 million and was “considered mechanically complete” when it was shelved in the spring of 2015 when WTI oil prices were around $50 a barrel, half as much as a year earlier.

WTI on Thursday closed at $59.84, for a percentage gain of 0.34%. Related: 2018: The Year Of The Oil Bulls

The Canadian oil sands have seen an exodus of foreign investment since the oil price collapse of 2014 and US shale plays gathered momentum. The divestments have included Royal Dutch Shell, Marathon Oil, Statoil and ConocoPhillips.

Yesterday AXA SA, the third-largest insurer in the world, said that it will divest about $822 million from the main oil sands producers and associated pipelines, and will stop further investments in these businesses. The move could affect companies such as TransCanada, Enbridge and Kinder Morgan.

But as foreign companies have pulled out money, Canadian firms have made multi-billion-dollar deals to expand their holdings. According to energy consultancy Wood Mackenzie, Canadian ownership of oil sands production now sits at over 80%, reported the Calgary Herald.

Canadian Oil Prices Plunge To $30

Canadian Oil Prices Plunge To $30

Barrel

Oil from Canada’s oil sands is now selling at a $27-per-barrel discount relative to WTI, the sharpest difference in more than four years.

Western Canada Select (WCS), a benchmark for oil from Alberta’s oil sands, has plunged in December, falling to just $30 per barrel at the end of this past week. WCS typically trades at a discount to WTI, reflecting the differences in quality from lighter forms of oil, as well as the extra transportation costs to move oil hundreds of miles out of Alberta.

But a discount is usually something like $10 per barrel, not more than $25. A price deterioration of this magnitude has not been seen in years.

(Click to enlarge)

There are several reasons why the WCS price has deteriorated. First, the spill and shutdown of TransCanada’s Keystone pipeline in November slowed the flow of oil from Canada to the U.S. as the company was forced to make repairs. That led to a minor spike in WTI as supply tightened a bit in the U.S., but upstream in Canada it put downward pressure on WCS amid a glut of supply. Canadian oil was diverted into storage as the pipeline underwent repairs, and the backup pushed prices down.

Second, railroad companies have been unable to accommodate the oil industry on such short notice. “It’s hard for the railroads to change their operating plan really quickly,” Steve Owens, rail analyst at IHS Markit, told Bloomberg. “There are equipment constraints and crew constraints.”

Rail companies have apparently been tied up trying to ship delayed grain cargoes and have not been able to accept oil shipments. To make matters worse, Canadian National Railway Co. is suffering from a backlog after three train derailments in the past two months slowed the typical volume of grain moving on the railways, according to Ag Transport Coalition.

…click on the above link to read the rest of the article…

In Spite Of Oil Price Slump, Canadian Oil Output To Increase

In Spite Of Oil Price Slump, Canadian Oil Output To Increase

It was yet another depressing headline congruent with the rest of the bad news bombarding the battered Canadian oilpatch for 15 months. On February 22 Postmedia (National Post, Calgary Herald, Edmonton Journal) carried the headline, “Canadian oil production growth could come to ‘complete standstill,’ IEA warns.”

It was based on the Medium-Term Oil Market report released by the International Energy Agency (IEA) on February 21 looking at global crude supply and demand for the next five years through the end of 2021. Based in Paris, the IEA is made up of 29 member countries which fund its research and reports into global energy markets.

The problem is that the headline is not true. At least not for the next three years, which is an eternity for the many exploration and production (E&P) and oilfield services (OFS) companies trying to figure out how to finish 2016 on the right side of the grass. Thanks to oilsands and east coast offshore projects still under construction, Canadian oil output is going to rise by 100,000 barrels per day (b/d) this year, 285,000 b/d in 2017 and 200,000 b/d in 2018, a total of 585,000 b/d. This is more oil than OPEC members Ecuador and Libya averaged in the fourth quarter of 2015.The two big projects which will move the needle on Canadian output the most are Suncor Fort Hills and Hebron, along with several others.

What the IEA actually wrote – which the headline writers apparently missed – was, “We are likely to see continued capacity increases (in Canada in) the near term, with growth slowing considerably, if not coming to a complete standstill, after the projects under construction are completed.” Which is 2019, unless the developers of these projects pull the plug.

…click on the above link to read the rest of the article…

Oil Price And Its Effect On Production

Oil Price And Its Effect On Production

Also, JODI, for some reason, does not count all of Canada’s oil sands production. So for Canada I use Canada’s National Energy Board numbers instead.

The JODI C+C numbers, for Non-OPEC, will average about 2.4 million barrels per day less than the EIA. This is largely due to some countries not reporting to JODI. But these countries only have small changes in their overall production so would have little effect on any of my charts or calculations.

JODI World C+C

According to JODI, world crude oil production peaked, so far, in July and has declined by 339,000 barrels per day.

JODI Non-OPEC

The recent price collapse has had a greater effect on Non-OPEC production than OPEC production. Non-OPEC production peaked, so far, in December 2014 and in December 2015 stood at 650,000 bpd below that peak.

JODI Russia

No discussion of Non-OPEC production would be complete without Russia, Non-OPEC’s largest producer. I would never claim, just by looking at the chart, that Russia is peaking, or has peaked. But there have been reports coming out of Russia for over two years now that Russia is peaking. Some of those reports like this one Global and Russian Energy Outlook to 2040 have been reported on this blog. I think the charts lend strong credence to those reports.

…click on the above link to read the rest of the article…

For Canadian Oil Sands It’s Adapt Or Die

For Canadian Oil Sands It’s Adapt Or Die

That low oil prices are squeezing out oil sands producers is not breaking news. But in spite of a grim oil price outlook, production out of Calgary has continued to grow, defying both expectations and logic. The implications are serious, not just for the future of Canada’s energy industry and economy, but also North American energy relations.

In June 2015, the Canadian Association of Petroleum Producers (CAPP) revised down its 2030 production forecast to 5.3 million barrels per day (mbd). A year earlier the group predicted Canada would be able to produce 6.4 mbd by 2030. This is compared to the 3.7 mbd produced in 2014. Most experts agree that capital intensive oil sands projects are marginal – if not loss-making – in the $45 – $60 range. Yet production continues apace.

Of course, the nature of capital intensive operations such as the oil sands is that they are also prohibitively expensive to shut down. Producers are left in limbo, praying that prices will rise.

The implications for Canada should not be understated. Of the nation’s estimated 339 billion barrels of potential oil resources, oil sands account for around 90 percent. The Canadian dollar is at a decade low, which softens the blow for exporters in the short term but the long-term economic consequences are less rosy.

Related: Is This The End Of The LNG Story?

Projects are being delayed, and many experts wonder if the current oil sands model has a future. Peter Tertzakian of ARC Financial told Alberta Oil Magazine that the era of oil sands mega projects was over.

In Alberta, an estimated one in 16 jobs is tied to the energy sector. According to the National Energy Board, crude oil and bitumen brought in $70 billion for Canada in 2014. Perhaps, as Tertzakian noted, new projects will simply adapt, becoming more nimble, flexible, and focused on value rather than quantity.

 

…click on the above link to read the rest of the article…

Global Economic Fears Cast Long Dark Shadow On Oil Price Rebound

Global Economic Fears Cast Long Dark Shadow On Oil Price Rebound

After bouncing around, oil prices finished off the week with just a bit less volatility than when it started the week. WTI stayed at around $46 per barrel as of midday on September 4, with Brent holding at $50 per barrel.

Aside from supply and demand fundamentals in the oil markets, central bank policymaking is another major factor determining the trajectory of oil prices. The European Central Bank hinted that it might consider more monetary stimulus to help the stagnant European economy. Oil prices rose on the news. The markets, however, are waiting on a much more significant announcement from the Federal Reserve this month on whether or not the central bank will raise interest rates. This summer’s market turmoil – the Greek debt crisis and the meltdown in the Chinese stock markets – has dimmed the prospect of a rate increase.

Moreover, the global economic unease may begin to reach American shores. On September 4, the U.S. government released data for the month of August, revealing that the U.S. economy added only 173,000 jobs, a mediocre performance that missed expectations. Although an economic slowdown is no doubt a negative for oil prices, the news could provide enough justification for the Fed to hold off on raising interest rates. A delay in a rate hike could push up WTI and Brent.

Related: Why Did Oil Prices Just Jump By 27 Percent In 3 Days?

Although a slew of Canadian oil sands projects have been cancelled due to incredibly low oil prices, several large projects were already underway before the downturn. With the costs of cancellation too high, these projects continue to move forward. When they come online – several of which are expected by 2017 – they could add another 500,000 barrels per day in production, potentially exacerbating the glut of supplies not just in terms of global supply, but more specifically in terms of the flow of oil from Canada. Canadian oil already trades at a discount to WTI, now at around $15 per barrel.

…click on the above link to read the rest of the article…

 

 

 

It Just Doesn’t Matter

It Just Doesn’t Matter

When an avalanche is about to descend upon you, does it really matter which snowflake was the penultimate cause?

While it’s interesting (in a mental masturbation kind of way) to debate the genesis of a pending market collapse, environmental chaos, or energy cliff, in the end, it really doesn’t matter–unless, of course, we are able to curtail the impending crises by correctly identifying the variable(s) involved and mitigating the consequences, but the likelihood of that outcome is looking increasingly unlikely as systems are prone to overshoot and collapse.

One of the ‘insights’ I’ve had over the past several months as I read the competing narratives that are floating about the globe and attempting to ‘explain’ why the dilemmas we are facing are happening is that we really don’t understand complex systems and the way they behave, so we are bound to cling to simple explanations that support our personal biases and reduce the cognitive dissonance that results when our belief system is challenged.

A large part of the problem, I believe, in discerning which variable(s) play(s) the most impactful role in creating a crisis is the tendency for various interest groups to spin the ‘facts’ to support their particular narrative.

For example, whether the cause of the oil/commodity price collapse is the role of central banks in manipulating the economic system, the limits to growth, overproduction (by Saudi Arabia? US shale? Canadian oil sands?), and/or economic contraction (global? Europe? China? emerging markets?), the result is a loss of thousands of jobs, domestic unrest, and increasing geopolitical tension as nations try to counter the deflationary collapse that appears to be resulting. Many Western politicians and journalists are pointing the finger at the production levels of the Middle East, particularly Saudi Arabia, and their ‘refusal’ to cut production, but data from the past decade shows that supply has increased significantly because of US shale and Canadian oil sands extraction rather than that of Saudi/ME. It strikes me that this ‘spin’ is simply a means of avoiding looking in the mirror and deflecting attention–blaming ‘others’ for our woes is a common means of reducing cognitive dissonance, focusing citizen outrage away from their ‘leaders’, and justifying particular actions/decisions.

In the end, however, the ’cause’ is not that important to the families crushed by a sudden loss of income. And that brings me to the conclusion of this little diatribe: being prepared for whatever comes our way is the only thing that might really matter. Whether at an individual, family, or local community level–I don’t believe it’s possible or prudent to worry much beyond these–being resilient and resourceful in the coming months/years is what is going to make a difference as to how ‘successful’ one can deal with the coming dilemmas.

Best of luck to everyone. I think we’re going to need it.

Steve


In the 1979 comedy, Meatballs, actor Bill Murray provides a ‘motivational’ speech to his fellow summer camp counsellors and campers who are getting soundly beaten in a ‘friendly’ competition by a neighbouring camp: https://www.youtube.com/watch?v=6UZvIZAHjlY. In the end, the speech is seen not as motivational but as a message that, in the bigger picture, the competition really doesn’t matter–(SPOILER ALERT) all the good-looking girls are going to go out with the other camp’s counsellors anyways because they have all the money!

100,000 Layoffs and Counting: Is this the New Normal?

100,000 Layoffs and Counting: Is this the New Normal?

This time a year ago, the oil industry’s biggest problem was finding a way to deal with the “retirement tsunami” about to crash down on it as older oilfield workers hung up their cork boots to enjoy freedom-55. Now, with oil prices still in the doldrums, many of those same workers are lucky to be hanging onto their jobs, while others have been booted from the payroll as an ugly wave of layoffs takes hold.

One of the worst-affected areas is the Canadian oil sands, where a higher per-barrel cost of production than conventional sources has oil companies scrambling to cut capital expenditures and in several cases, put long-term projects on ice.

On Thursday one of the region’s big players, Husky Energy, announced that about 1,000 construction workers employed by a contractor at its Sunrise oilsands project, would be issued pink slips. The bad news for the workers came a day after Husky said that it had started to produce from the $3.2 billion, steam-assisted gravity drainage (SAGD) Sunrise operation, which it co-owns with BP.

Related: Oil Limits Could Undermine Our Entire Economic System

The layoffs by Husky followed Suncor’s decision in January to cut 1,000 employees and Royal Dutch’s Shell’s announcement that it will shed close to 10 percent of the workforce at its Albian sands project – around 300 workers.

The Canadian Association of Oilwell Drilling Contractors, which closely tracks drilling activity, said in February that up to 23,000 jobs could be lost as the number of rigs fall. Since the price started dropping last September, about 13,000 positions in the Alberta natural resources sector, mostly oil and gas, have been eliminated, according to Statistics Canada.

 

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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