Sunday, April 28, 2013

Kearl Oil Sands -- Canada

Bloomberg is reporting that Exxon Mobil is beginning production at Kearl Oil Sands:
Exxon Mobil Corp., the world’s largest company by market value, began production at its Kearl oil sands project in Alberta, which is projected to produce 4.6 billion barrels of recoverable oil in the next 40 years. 
The project will produce 110,000 barrels per day later this year and that’s expected to double by late 2015, the company said in a statement. The Kearl site is 46 miles (75 km) northeast of Fort McMurray, Alberta, and is operated by Imperial Oil Ltd., which is 70 percent owned by Exxon Mobil. 
Data points:
  • C$13 billion
  • will ship oil to Imperial / XOM refineries to offset low crude oil prices
  • Imperial is looking at rail to ship this oil due to pipeline constraints in western Canada
Coincidentally, in an article published at The Oil Drum the same day as the above story, it was noted that the Kearl Oil Sands is not affected by the Keystone XL: 
Canada is expected to reach a production total of 4 mbd by the end of the year, with the largest impact coming from the Kearl Oil Sands production anticipated to bring 110 kbd to market in the third quarter. (This is not dependent on the Keystone pipeline.) 
The (Calgary) Globe and Mail also has a nice article on the Kearls Oil Sands:
Even Imperial reported lower earnings in this first quarter compared to 2012, in part because of discounted prices for its Cold Lake bitumen. Imperial’s earnings in the first quarter of 2013 were $798-million, down 21 per cent or $217-million from the first quarter of 2012. The company said the lower earnings “were primarily attributable to the impacts of lower liquids realizations of $270-million, higher refinery and Syncrude maintenance effects of $165-million and higher Kearl production readiness expenditures.”
One analyst said the Kearl mining project will be a less important factor in pricing and the differential than the opening of Enbridge’s Flanagan South expansion, which is slated to come on stream in 2014. The pipeline link will help to get heavy oil to markets on the U.S. Gulf Coast.

So, how are the pipeline opponents doing? They seem to be winning the verbal debate. The key words in that preceding sentence: "seem" and "verbal."

The Calgary Herald is reporting
“Psst. Big Oil. We’re winning …”
Psst, NIMBY environmentalists: yes, sort of, but no, not really.
The above quote was tweeted by Vancouver green activist Tzeporah Berman this week after B.C. NDP Leader Adrian Dix said he will oppose expansion of the Trans Mountain pipeline, and follows a series of recent “wins” for foes of new oil pipelines in North America.
From lengthy delays in reviews for Keystone XL and Northern Gateway to the negative publicity over crude oil pipeline ruptures from Alberta to Arkansas, the opposition appears to be winning the battle for media headlines this spring.
Gloating, however, might be premature.
Berman isn’t simply some yahoo on Twitter. She has legitimate credentials as a former co-director of the climate unit at Greenpeace International and a founder of ForestEthics, but she is overstating the impact of pipeline protests.
Actually she is a yahoo. These NIMBY activists are one-trick ponies. 

Two trends:
a) Big Oil is winning
b) more rail in the short- to medium-term
There are two arenas: a) the political arena; b) the investing arena

Political arena:
I don't care who wins on the pipeline story: activists or realists. I have no control over it and it will be what it will be (Kennedy: worry about the things one can change; don't worry about the things one can't change, or something to that effect)
Investing arena:
  • it looks like manufacturers are going to be busy making rail tank cars for quite some time
  • companies with rights of way already in place have a nice head start
Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you've read here. 

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