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Friday, November 2, 2012

Suddenly, Canada's Oil Fields Not A Sure Thing -- WSJ; Jones Act Waived

Link here to WSJ.
Amid rising costs, gyrating prices and a burst of supply competition down south, Canadian oil companies are rethinking investment in one of North America's earliest and fastest-growing "unconventional" oil frontiers—Alberta's oil sands.
On Thursday, executives at Suncor Energy Inc., Canada's largest oil sands producer by output, said they were reviewing three multibillion-dollar mining and upgrading projects that it and its partners have been considering, and that they would delay a final decision about going ahead with any of them. The move will help Suncor slash capital spending this year by 11%, the company said. 
The slowdown so far is limited, affecting only the industry's most expensive segment, which mines and upgrades bitumen into a low-sulphur, synthetic crude. Still, it underscores the extent to which today's booming North American energy-production growth remains at the mercy of market forces, which often reward higher output with lower prices. That dynamic can sap fresh investment incentives, especially in the case of the capital-intensive energy industry.
I've always said the Canadian oil sands were the canaries in the coal mine. Killing the Keystone XL didn't help (the Canadians), but it's been a godsend for the Bakken crude-by-rail industry. 

On another note, the Jones Act was temporarily waived.
The Obama administration said it waived the requirement that only U.S. flagged ships carry goods between U.S. ports, an effort aimed at easing fuel shortages in the Northeast caused by superstorm Sandy.
“The administration’s highest priority is ensuring the health and safety of those impacted by Hurricane Sandy and this waiver will remove a potential obstacle to bringing additional fuel to the storm-damaged region,” Homeland Security Secretary Janet Napolitano said today in a statement. The waiver expires Nov. 13, she said.
New York Governor Andrew Cuomo said today he spoke with Napolitano about waiving the so-called Jones Act to speed deliveries of fuel to communities hammered by the storm. “The gasoline situation should get better,” Cuomo said at a news conference. 
Yesterday I mentioned that there was a gasoline problem, and was told THE problem was electricity, and "everyone" has said there's plenty of fuel -- but without electricity, they can't access it. My hunch: in about three days when the electricity issue is resolved, folks are going to see how much diesel is used by trucks in the recovery effort throughout the northeast. I think we will see some new fuel records set in the northeast over the next six weeks.

And despite "no" electricity, CLEAN Energy was able to get 49 CNG fueling stations up and running
Clean Energy Fuels Corp. today reported that 49 fueling stations in the seven states affected by Hurricane Sandy are operating and providing CNG (compressed natural gas) fuel to a wide range of fleets and individuals. The fleets provide needed emergency, transit and refuse services in New York, New Jersey, Massachusetts, Maryland, Connecticut, Rhode Island and Pennsylvania.
Municipalities and other organizations that are fueling at Clean Energy CNG stations include Atlantic County Utilities Authority, Atlantic City Jitney Association, which is providing emergency evacuation services, NY/NJ Port Authority, South Jersey Gas, Long Island Bus/Transit Authority, New York City Sanitation (DSNY), New York City MTA and numerous others throughout the region.

4 comments:

  1. I beg to differ. When the Nebraska legislature and governor killed the keystone xl, they did transcanada a big favor. Same with the Texas landowners who are furious with transcanada for employing eminent domain to keep from paying market prices for easements. Hard for ne to name an operation that is more inept than transcanada . The "killing" of the keystone xl (whomever did it) saved transcanada billions in losses from an ill considered business strategy.

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    1. The White House denied the permit for Keystone XL:

      http://articles.latimes.com/2012/jan/18/news/la-pn-obama-administration-to-reject-keystone-xl-pipeline-20120118

      Killing the Keystone XL was the best thing that ever happened for the crude-by-rail industry.

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    2. Warren Buffett, Obama's crony capitalist is doing very will with the crude by rail option. BNSF keeps those unit oil trains moving out of the Bakken, bringing in silica sand for fracturing and will casings for new wells.

      As long as he is top dog he is smiling all the way to the bank. I wonder if he will settle his despite with the IRS and pay up the over $1 Billion they say he owes?

      I think things will change after the election and the first of the year. Keystone XL will most likely be approved and then we will see what it will be used for. May be it will carry more light sweet crude from the Bakken and less Canadian oil sand crude. They have to get the pipeline takeaway capacity up if North Dakota is going to reach a peek of 2 million plus a day in production as some say will happen.

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    3. Yes, I think a lot of folks who have followed the oil and gas industry and Warren Buffett are seeing a different side to his investing.

      I don't know who said it, but someone pointed out that if the government picks up more of the disaster responsibility along the coast, it will help his insurance business. I had not thought of that. Very interesting how some of these dots connect.

      By the way, for me, I no longer get excited one way or the other what North Dakota is ultimately able to produce on a daily basis. I have seen the potential of the Bakken, and now it's in the hands of the politicians and the bean counters in the oil companies headquarters.

      The oil companies will want to manage their assets and aren't worried about setting records in production if the economics don't make sense. They will develop the Bakken from a business point of view; there's a bit more exploring to do, and more delineation of the field, but most leases are now held by production, and they can develop the basin strategically.

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