P47. Pick Points

Half-a-dozen or so stories of interest:

Up in Canada Suncor expects to produce around 300,000 bd of crude from its operations in Alberta. But all is not well in those operations. The rise and then fall in petroleum prices has had a significant impact on the oil sands industry.

Companies financing oil sands projects out of cash flow have been relatively unscathed, besides suffering substantially lower stock prices and having to delay projects due to lower revenue. Companies financing oil sands projects on credit are up for sale at bargain basement prices. The most likely buyers of those credit-short companies are supermajors and sovereign wealth funds.

The Canadian and Albertan governments have lost substantial tax revenue because of rapidly rising project costs eating into corporate profits. Relatively more upgrader projects being delayed or cancelled compared to mining and in-situ projects contributes to less value-added in Canada and a lower tax base for those governments.

The article goes on to discuss the significant costs of a cap and trade rule for the oil sands, and the potential serious consequences to the industry if it chooses to ignore that coming freight train. The report anticipates a cost of $80 a ton for carbon from operations on the scale of the oil sands.

In order to help the industry the Alberta Government is slashing royalty rates. The Alberta Government has also set aside $2 billion for work on carbon capture and storage for the oil sands and coal. There are however some doubts that the effort will result in any significant benefit. The current article in National Geographic has stimulated debate on the issue. But it has also brought a note that, if America does not want oil sand crude, (or makes it difficult to buy through CCS legislation) then China is ready to move in and take the oil instead. In Australia, meanwhile, a company has suspended its work on underground sequestration due to the plunging prices of permits (the problem that Europe also has).

While wandering around the various websites looking for comment on the demonstration at the Capitol Power Plant yesterday (which was a lot less dramatic that the organizers had intended I suspect, and a lot less well attended, I came on a couple of other folk that had been watching the video feed. One of them was OpenMarket who quoted a couple of interesting reports about some of the downside of moving from coal to other renewable fuels. The Reports were: M. Harvey Brenner, Ph.D., “Health Benefits of Low-Cost Energy: An Econometric Case Study,” AWMA Environmental Manager, November 2005, and Adam Z. Rose, Ph.D., and Dan Wei, “Economic Impacts of Coal Utilization and Displacement in the Continental U.S., 2015” (Penn State University, supported by a grant from CEED, July 2006). These looked at the conditions that would occur with different coal future production levels. The results were along the lines of

An econometric model was applied to a hypothetical regulatory case study, whereby U.S. coal was replaced by alternative higher-cost fuels such as natural gas for the purpose of electricity generation. The model was used to estimate the premature mortality associated with increased unemployment and reduced personal income. The adverse impacts on household income and unemployment due to the substitution of higher-cost energy sources were estimated to result in 195,000 additional premature deaths annually.

Somehow I doubt if we will hear much of those findings.

Pemex is sticking to its target of 756,000 bd from Cantarell this year, even though apparently their own figures are showing production is dropping at 7% pa. They are having some success with the Tsimin-1 exploratory well that came in with 4,400 bd of oil, while the Cali-1 well in the Burgos project is producing at 9 mcf/d.

Russia is signing energy deals with Spain that include renewable energy collaboration. This might bring the Spanish oil company Repsol into working on the Yamal fields. Given that investors have been lukewarm to the latest news of Gazprom profits this agreement, and the promise of some Shtokman gas for Spain supplied as LNG starting in 2014, may be helpful, since it may bring in Spanish investors.

And a quick note on the coal situation in Bangladesh. Apparently the Chinese company that has been working on the Barapukuria coal mine has told the authorities that if the mine does not start this week, they would pull out. The operation is tied up in compensation claims.

More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum.