Colossal fossil ExxonMobil has dropped virtually all its tar sands/oil sands holdings from its list of recoverable assets, and its Canadian subsidiary Imperial Oil followed suit by cutting a billion barrels of bitumen from its inventory, in what Bloomberg News calls a “sweeping revision of worldwide reserves to depths never before seen in the company’s modern history”.

Exxon reduced its estimate of recoverable reserves to 15.2 billion barrels world-wide as of December 31, Bloomberg reports—still a massive quantity, but far last than the 22.44 billion barrels it reported just a year ago. In the tar sands/oil sands, “the company’s reserves of the dense, heavy crude extracted from Western Canada’s sandy bogs dropped by 98%,” the news agency adds.

On the same day, The Canadian Press writes, Imperial cut its estimate of its “proved plus probable bitumen reserves” to 4.46 billion barrels, down from 5.45 billion a year earlier.

The two companies previously announced write-offs of up to US$20 billion for Exxon and C$1.2 billion for Imperial.

“Proved” or “proven” reserves have a specific meaning in fossil industry financing—in contrast to the total resource a company has discovered, proven reserves “refer to the quantity of natural resources a company reasonably expects to extract from a given formation,” Investopedia explains. To fit the definition, the resource must have “a 90% or greater likelihood of being present and economically viable for extraction in current conditions.”

It’s largely the deteriorating economic conditions the industry faces that led to Exxon’s and Imperial’s epic write-down this week.

“The pandemic-driven price crash that rocked global energy markets was the main driver of Exxon’s reserve downgrade, along with internal budget cuts that took out a significant portion of its U.S. shale assets,” Bloomberg says. “The oilsands have historically been among the company’s higher-cost operations, making them more vulnerable to removal when oil prices foundered.”

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

What Norway’s Big Divestment Decision Means for Fracking, Tar Sands and Global Oil Exploration

March 19, 2019

What Norway’s Big Divestment Decision Means for Fracking, Tar Sands and Global Oil Exploration

Norway’s sovereign wealth fund — a state-owned investment fund worth approximately a trillion dollars — recently announced it was divesting from oil and gas exploration companies around the world. Not surprisingly, many oil and gas stocks declined following the announcement.

While this is good news for the climate, this was simply a smart business decision. Norway’s sovereign wealth fund, known as the Government Pension Fund Global (GPFG), primarily exists due to Norwegian oil production. And the fund will continue to be a major investor in companies like Exxon.

It appears it’s just cutting its losses on money-losing endeavors like fracking in America, tar sands oil production in Canada, and frontier exploration by UK companies in Africa and South-East Asia.

“The government is proposing to exclude companies classified as exploration and production (E&P) companies within the energy sector from the [fund] to reduce the aggregate oil price risk in the Norwegian economy,” the Finance Ministry explained in a statement announcing the move.

Dumping Losing Assets

What that translates to in America is essentially a divestment from the shale oil and gas producers like EOG Resources, Apache, Continental, Diamondback, and Chesapeake. Apparently, the fund managers are tired of losing money on fracked oil and gas.

The move certainly comes at a bad time for the American fracking industry. Their previously endless supply of loans from Wall Street has also started to dry up, leading to budget cuts, layoffs, and reduced oil production.

In Canada, among the companies targeted for divestment is Canadian Natural Resources, LTD — an Alberta tar sands oil producer. The Canadian tar sands oil industry has been losing money for several years and several major oil companies have sold tar sands assets, including Devon Energy’s recent announcement it was getting out of the tar sands production business.

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

Another Oil Train Crashes as Alberta Government Gets Into Oil-by-Rail Business

February 26, 2019

Another Oil Train Crashes as Alberta Government Gets Into Oil-by-Rail Business

Oil train derailment and spill in Manitoba

The government of Alberta, Canada, the heart of tar sands country, recently announced plans to get into the oil-by-rail business. Attempting to work around a lack of pipelines, the provincial government intends to spend $3.7 billion to lease 4,400 oil tank cars and locomotives to export more Canadian tar sands oil to the U.S. The announcement came just days after the latest oil train derailment and spill in Manitoba, Canada.

Alberta Premier Rachel Notley addressed concerns about safety regarding the oil trains.

“We are treating the safety of these rail cars as though they are traveling through our own backyards,” Notley said. “The cars we will be using will be the safest cars on the tracks. They include the safest technology and meet the highest standards including all recent changes to safety standards.”

New regulations enacted after the 2013 oil train disaster killed 47 in Lac-Mégantic, Quebec, require oil and rail companies to use newer rail cars to move oil. And while these new tank cars — known as DOT-117 and 117Rs — are more robust than the older tank cars involved in the deadly incident, they aren’t immune to the forces of a train derailment.

In the past year, two Canadian oil trains consisting of these “safest” tank cars have derailed and resulted in large oil spills. In June 2018, a train from Canada derailed and spilled 230,000 gallons of oil into floodwaters in Iowa.

The most recent oil train crash, which occurred on a ranch in Manitoba on February 16, involved 37 derailed tank cars. No details have been released on the amount of oil spilled, but aerial photos show streams of dark black oil leaking from the damaged tank cars.

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

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

November 17, 2018

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…

Why Canadian Tar Sands Oil May Be Doomed

October 26, 2018

Why Canadian Tar Sands Oil May Be Doomed

Fort McMurray, Alberta, Canada, tar sands oil operations

Producers are forced to keep cranking out product and selling it at a loss to cover the massive costs required to start one of these sprawling unconventional oil operations, a point made painfully clear when Alberta wildfires in 2016 forced some tar sands operators to shut down.

“I do think they’ll start up quickly once the danger from the fire is gone because there is a lot of motivation to do that,” Jackie Forrest, an energy economist for Arc Financial Corp, told The Globe and Mail. “They have a lot of fixed costs so they’re going to be motivated to get some revenue to pay for those costs that aren’t going away.”

In the face of such challenging economics, what are Canadian tar sands producers doing? Tapping more oil than ever.

In June 2018 Canada set a new record for exporting oil to the U.S., hitting well over three million barrels per day. This record coincided with another one for oil exported by rail from Canada to the U.S. The U.S. is currently the only major market for Canadian crude, with 99 percent of its exports going to either U.S. refineries or ports for export.

Source: U.S. Energy Information Administration

America Is Maxing out on Canadian Crude

American refineries certainly enjoy buying Canadian crude at such low prices. How low are the prices? As the Financial Post reported in mid-October, Western Canadian Select (WCS) was $19 a barrel — approximately $50 a barrel cheaper than a barrel of the American oil standard known as Western Texas Intermediate (WTI).

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

Derailed Oil Train Spills 230,000 Gallons of Tar Sands in Flooded Iowa River

June 26, 2018

Derailed Oil Train Spills 230,000 Gallons of Tar Sands in Flooded Iowa River

On June 22, a train carrying Canadian crude oil derailed in northwestern Iowa, releasing an estimated 230,000 gallons of oil into a flooded river. As a result of the derailment, over 30 rail tank cars ended up in the water, with 14 cars confirmed to have leaked oil.

To put the size of this spill in perspective, an Enbridge pipeline that leaked in Michigan in July 2010 released roughly 1,000,000 gallons of tar sands oil into the Kalamazoo River. Cleanup for this spill, one of the largest inland oil spills on record, took years and more than $1 billion.

Like the Kalamazoo River spill, the train that derailed in Iowa was carrying tar sands oil from Alberta, Canada.

This crash, near Doon, Iowa, also is the first one involving the new, safer DOT-117R tank cars that promised to make oil safer to transport by rail. The accident reveals that these tank cars are not foolproof, considering the nearly quarter million gallons of oil released from them into an Iowa river.

View image on Twitter

Workers have contained nearly half of the crude #oil spilled near Rock River in northwest #Iowa over the weekend following a freight train derailment on Friday: http://ow.ly/zPVy30kEj6S

9:15 AM – Jun 25, 2018

Oil Trains Likely to Spill Into Rivers and Lakes

The reality of rail transport is that train tracks generally follow rivers across North America. As a result, many oil train derailments also mean oil spills into rivers and other bodies of water.

The 2015 report “Runaway Risks” by the environmental nonprofit Center for Biological Diversity found that “within just a quarter-mile of existing and planned oil-train routes there are 3,600 stream miles and 73,468 square miles of lakes, reservoirs and wetlands, including iconic waterbodies such as the Puget Sound, Lake Michigan, Lake Erie, and the Columbia, Hudson and Mississippi rivers.”

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

Canada’s Pipeline Challenges Will Force More Tar Sands Oil to Move by Rail

March 19, 2018

Canada’s Pipeline Challenges Will Force More Tar Sands Oil to Move by Rail

The Motley Fool has been advising investors on “How to Profit From the Re-Emergence of Canada’s Crude-by-Rail Strategy.” But what makes transporting Canadian crude oil by rail attractive to investors?

According to the Motley Fool, the reason is “… right now, there is so much excess oil being pumped out of Canada’s oil sands that the pipelines simply don’t have the capacity to handle it all.”

The International Energy Agency recently reached the same conclusion in its Oil 2018 market report.

“Crude by rail exports are likely to enjoy a renaissance, growing from their current 150,000 bpd [barrels per day] to an implied 250,000 bpd on average in 2018 and to 390,000 bpd in 2019. At their peak in 2019, rail exports of crude oil could be as high as 590,000 bpd — though this calculation assumes producers do not resort to crude storage in peak months,” the International Energy Agency said, as reported by the Financial Post.

To put that in perspective, however, the industry was moving 1.3 million barrels per day at the peak of the U.S. oil-by-rail boom in 2014.

Graph of American crude-by-rail volumes. Credit: U.S Energy Information Administration

And Canada has plenty of capacity to load oil on more trains, which means if a producer is willing to pay the premium to move oil by rail, it can find a customer to do it. The infrastructure is in place to load approximately 1.2 million barrels per day.

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

Canada’s Oil Crisis Continues To Worsen

February 20, 2018

Canada’s Oil Crisis Continues To Worsen

Canadian oil producers can’t get a break. First it was the pipelines — there are not enough of them to carry the crude from Alberta’s oil sands to export markets. This pipeline capacity problem has been forcing producers to pay higher rates for railway transportation, which has naturally hurt their margins in no small way. Now, there is a shortage of rail cars as well.

The situation is going from bad to worse for Canadian producers who can’t seem to catch a break. Canadian railway operators are fighting harsh winter weather and finding it hard to supply enough cars to move both crude oil from Alberta and grain from the Prairies.

The harsh weather is just the latest factor, however. Before that, there was the 45-percent surge in demand for rail cars from the oil industry, Bloomberg reports, citing Canadian National Railway. The surge happened in the third quarter of last year, and Canadian National’s chief executive Ghislain Houle says that it took the company “a little bit by surprise.” This surprise has led to “pinch points” on the railway operator’s network, further aggravating an already bad situation.

As a result, crude oil remains in Alberta and prices fall further because Alberta is where the local crude is priced, Bloomberg’s Jen Skerritt and Robert Tuttle note. In fact, Canadian crude is currently trading at the biggest discount to West Texas Intermediate in four years, at $30.60 per barrel. The blow is particularly severe as it comes amid improving oil prices elsewhere driven by the stock market recovery.

The light at the end of the tunnel is barely a glimmer. Despite federal government support for the Trans Mountain pipeline expansion project, it is still facing obstacles that may result in it never seeing the light of day.

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

Is This New Tar Sands Technology a Game Changer for Exporting Canada’s Bitumen?

February 18, 2018

Is This New Tar Sands Technology a Game Changer for Exporting Canada’s Bitumen?

A new technology has the potential to transform the transportation of tars sands oil. Right now, the already thick and slow-flowing oil, known as bitumen, has to be diluted with a super-light petroleum product, usually natural gas condensate, in order for it to flow through a pipeline or into a rail tank car.

However, scientists at the University of Calgary’s Schulich School of Engineering inadvertently found a way to make tar sands oil even more viscous, turning it into “self-sealing pellets” that could potentially simplify its transport.

“We’ve taken heavy oil, or bitumen, either one, and we’ve discovered a process to convert them rapidly and reproducibly into pellets,” Ian Gates, the professor leading the research, told CBC News in September 2017.

Based on the initial description of this product, it appears that it could alleviate many of the risks involved with moving tar sands oil by rail. The research teams says this product floats in water, does not pose a fire and explosion risk like the diluted bitumen currently moved in rail tank cars, and would eliminate air quality issues related to the volatile components of diluted bitumen.

If true, this technology would appear to reduce potential risks to people and the environment, in comparision with moving diluted bitumen by rail or in pipelines.

Gates also suggests that the solidified bitumen can be moved in the type of open rail cars used for coal. That would be welcome news to railroads, which have been losing business transporting coal as demand has dwindled. Gates did not respond to multiple requests for comment on this article.

Canadian National Working to Commercialize Similar Technology

Meanwhile, similar research and development has been happening not within the Canadian oil industry, but instead, a Canadian railroad, which has patented another method of solidifying tar sands for transport.

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

Will Canada’s Latest Boom in Tar Sands Oil Mean Another Boom for Oil-by-Rail?

December 22, 2017

Will Canada’s Latest Boom in Tar Sands Oil Mean Another Boom for Oil-by-Rail?

Oil by rail accident, with tank cars burning, near Gogama, Canada in 2015

Nothing seems able to derail the rise in Canadian tar sands oil production. Low prices, canceled pipelines, climate realities, a major oil company announcing it will no longer develop heavy oils, divestment, and now even refusals to insure tar sands pipelines have all certainly slowed production, but it is still poised for significant growth over the next several years.

In March an analyst for GMP FirstEnergy commented, “It’s hard to imagine a scenario where oilsands production would go down.”

But with pipelines to U.S. refineries and ports running at or near capacity from Canada, it’s hard to imagine all that heavy Canadian oil going anywhere without the help of the rail industry.

“The oilsands are witnessing unprecedented growth that we now peg at roughly 250,000 barrels per day in 2017 and 315,000 bpd in 2018, before downshifting to roughly 180,000 bpd in 2019,” says a new report from analyst Greg Pardy of RBCDominion Securities.

However, much like shale oil in the U.S., increased production doesn’t necessarily mean increased profits. The Wall Street Journal recently reported that since 2007 investors have spent approximately a quarter trillion dollars more on shale production than those investments have generated.

Clearly the oil industry will keep pumping as much oil as they can even while losing large sums of money. And just like in the U.S., Canadian oil producers are facing significant economic challenges, which have caused some companies to get out of the business.

As a result of these challenges, forecasts for future tar sands production have fallen significantly. In 2013 the forecast for 2030 production was 6.7 million barrels per day. That has been revised down to 5.1 million barrels per day. While that is a sizable drop in expected future production, the industry will still be growing in the near future, and most of that oil will be exported to America.

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

We are all Albertans now

May 16, 2016

We are all Albertans now

It would be easy–too easy–to point to the wildfires which have devastated huge areas of northern Alberta near Fort McMurray, the hub of tar sands mining in Canada, and say that Albertans are reaping what they have sown. Yes, it’s true that climate change is coming to one of the very areas which is contributing disproportionately to climate change and with catastrophic results.

The source of the current catastrophe is that the boreal forest which surrounds the tar sands has been turned into a tinderbox because of increasingly warm, dry weather that used to be uncharacteristic of this area of Alberta. But, what is happening in Alberta was predicted decades ago to be one of the consequences of unchecked global warming.

Having said all that, we should remember that the warming we are experiencing today is actually the result of greenhouse gases dumped into the atmosphere as of 40 years ago or so. (The analysis cited gives a range of 25 to 50 years, a lag related to what is called the thermal inertia of the oceans.) If this is the case, what Albertans are experiencing today has almost nothing to do with the climate effects of tar sands exploitation since there was very little production from Alberta’s tar sands that long ago.

What this means, of course, is that there will be much worse to come even if today we were to reduce to zero all greenhouse gas emissions and other factors which are raising worldwide temperature.

The problems we are already seeing such as increased flooding in some places; increased drought in others; sea-level rise that is already swallowing islands; the rapid change in climate zones (which affects what we can grow in those zones); and myriad effects on plants and animals around the globe as their habitat shifts or disappears–all of these are just the beginning.

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

“They Spent It All On Hookers, Blow And Fancy Toys” – Hedge Fund Manager Predicts Lower Oil For Longer, Quantitative Easing For The People, And A Gold Bull Market

March 7, 2016

“They Spent It All On Hookers, Blow And Fancy Toys” – Hedge Fund Manager Predicts Lower Oil For Longer, Quantitative Easing For The People, And A Gold Bull Market

In 2011, as gold prices rocketed to $1900 and oil was trading above $120 a barrel, there were few analysts who saw anything but further gains. But Marin Katusa of Katusa Research had a different opinion. At a major commodity conference Katusa, to boos and jeers from the audience, held strong to his analysis that an imminent deflationary collapse in commodity prices was on the horizon. And collapse they did.

According to Katusa, who is closely involved in the Canadian resource sector, most people simply assumed the good times would go on forever… because it was different this time. But like any uninhibited party fueled by unlimited cash, the hangover was sure to follow.

There’s no doubt you had massive high paying jobs. In Canada, the province that benefited the most is Alberta… In the last twelve months they’ve had 70,000 layoffs of jobs paying over a hundred grand a year.

…when I’d go to these oil towns you’d sit down at the casinos with them and these guys were all about the hookers and blow… they were all about their toys… big fancy trucks… snow mobiles… and they’re in the field for two weeks and they make $20,000 and blow it all at the casinos.

You knew it couldn’t last.

As Katusa notes in his latest interview with Future Money Trends, though the crash has been brutal for the sector, it’s not over yet and it’s going lower for longer.

They [OPEC] can survive at $20 oil…

For two years everyone’s been saying, “OPEC’s going to cut back.”

They reality here is, why would OPEC cut production? That would only prop up the Russians and the shale sector.

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

Once Unstoppable, Tar Sands Now Battered from All Sides

February 1, 2016

Once Unstoppable, Tar Sands Now Battered from All Sides

Canada’s tar sands industry is in crisis as oil prices plummet, pipeline projects are killed, and new governments in Alberta and Ottawa vow less reliance on this highly polluting energy source. Is this the beginning of the end for the tar sands juggernaut?

In the summer of 2014, when oil was selling for $114 per barrel, Alberta’s tar sands industry was still confidently standing by earlier predictions that it would nearly triple production by 2035. Companies such as Suncor, Statoil, Syncrude, Royal Dutch Shell, and Imperial Oil Ltd. were investing hundreds of billions of dollars in new projects to mine the thick, highly polluting bitumen.

Eyeing this oil boom, Canadian Prime Minister Stephen Harper said he was certain that the Keystone XL pipeline — “a no-brainer” in his words — would be built, with or without President Barack Obama’s approval. Keystone, which would carry tar sands crude from Alberta to refineries along the Gulf of Mexico, was critical if bitumen from new tar sands projects was going to find a way to market.

What a difference 18 months makes. The price of oil today has plummeted to around $30 a barrel, well below the break-even point for tar sands producers, and the value of the Canadian dollar has fallen sharply. President Obama killed the Keystone XL project in November, and staunch

The industry is suddenly weathering a perfect storm that analysts say has significantly altered its prospects.

opposition has so far halted efforts to build pipelines that would carry tar sands crude to Canada’s Pacific and Atlantic coasts.

Equally as ominous for the tar sands industry are political developments in Alberta and Canada. In May, Alberta voters ousted the conservative premier and elected a left-of-center government. The new premier, Rachel Notley, is committed to doing something meaningful about climate change and reviewing oil and gas royalty payments to the province, which are among the lowest in the world.

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

“Canadians Should Be Concerned” As Energy Sector Job Losses Spike To 100,000 This Year

December 22, 2015

“Canadians Should Be Concerned” As Energy Sector Job Losses Spike To 100,000 This Year

It’s grim up north… and getting grimmer. Amid soaring suicide rates, Canada’s once-booming oil patch is rapidly accelerating its downward trajectory. “Canadians should be concerned in times like these,” warned Tim McMillan, president and chief executive of the Canadian Association of Petroleum Producers, noting that the oil and gas sector will see 100,000 job losses by the end of this year. Even if oil prices rise early and fast next year, Financial Post reports, it may take a while for Canadian oilsands to rebound as the industry has mothballed a number of long-term projects.

Over the past year, we have extensively chronicled the tragic story of Alberta – Canada’s once booming oilpatch – disintegrate slowly at first, then very fast, into an economic and financial wasteland:

And, in one of the latest articles of this sad series describing the Alberta “bloodbath”, we said that the worst casualty of Canada’s recession has been the local commercial real estate market, where office vacancies are about to surpass the aftermath of the (first) great financial crisis.

But, it turns out the biggest casualty of Canada’s recession, which unless oil rebounds strongly soon will follow Brazil into an all out depression, are people themselves. As CBC reports the suicide rate in Alberta has increased dramatically in the wake of mounting job losses across the province.

Sadly, as The Financial Post reports, the situation looks set to get worse… as policy uncertainty has exacerbated the pain of low prices…

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

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