To Infinity And Beyond! -- February 8, 2018

When folks finally get their Tesla Model 3, the model will already be about six years old. Whatever. From Bloomberg:

Tesla Inc. customers who waited in line in March 2016 to place deposits for the first Model 3s will have to be patient even longer after delivery dates for many reservation holders have slipped again.

Several would-be drivers said they received e-mails from the electric-car maker on Wednesday night -- after the company reported its fourth quarter earnings -- saying their expected delivery dates had been pushed back. Some Day 1 reservation holders are now seeing “late 2018” for the $35,000 Model 3 with the standard battery pack, while others who placed orders the following day have reported their date is now “early 2019.”

“As we work hard to meet demand, we wanted to let you know that your estimated delivery timing has been adjusted to a slightly later window,” the e-mail from Tesla said. “Thank you for your patience.”

The new date depends on when the reservation was placed and what model was ordered. Tesla is making the more expensive Model 3s with a long-range battery first. That’s a tough pill to swallow for cost-conscious drivers who ordered the cheapest version with hopes of qualifying for the full $7,500 federal tax credit. That credit begins to phase out once U.S. automakers hit 200,000 cars sold in the U.S., which Tesla is expected to reach sometime this year.

Chief Executive Officer Elon Musk said on the earnings call Wednesday that Tesla remains on track to meet its goal to build 5,000 Model 3 sedans a week by the end of June, a target that’s been delayed several times. Musk, also head of Space Exploration Technologies Corp., reassured Wall Street that “if we can send a Roadster to the asteroid belt, we can probably solve Model 3 production.” [Look, over there, a monkey.]

But consumers aren’t so sure. “My bad @Tesla Model 3 news finally came, friends. My estimate in MyTesla got updated and ... it’s not good if you’re wanting the standard battery or all-wheel drive. I’m in the latter camp,” Ryan McCaffrey, a Model 3 reservation holder, wrote on Twitter. “Very bummed out right now, as this has serious tax credit implications.”

I find it hard to believe that the make-or-break decision to buy a Tesla is the tax implication. Whatever. 

All That Talk About Replacement -- Peak Oil -- February 8, 2018

Many years ago when I was a bit more interested in this, I would read the annual reports to see how oil companies were doing in replacing production with new reserves. I've long lost the bubble on that so I have no idea whether this is "good, bad, or mediocre." That's fine.

From Oil & Gas Journal:

ExxonMobil Corp. has added 2.7 billion boe of proved oil and gas reserves in 2017, replacing 183% of production. ExxonMobil’s proved reserves totaled 21.2 billion boe at yearend 2017. Liquids represented 57% of the reserves, up from 53% in 2016. ExxonMobil’s reserves life at current production rates is 14 years.

Let's see what Google will find us, googling XOM historical annual reserves replacing production, just reading the short Google note at the top of each hit:

• 2017: 183%; 2.7 billion boe; 14 years
• 2016:  65%; 2.5 billion boe; 13 years -- a 19.3% reduction in its proved reserves in 2016, its steepest reduction ever, erasing almost 3.3 billion boe to end 2016 at under 20 billion boe. The supermajor only replaced 65% of its production in 2016;
• 2015: 67%; 1.0 billion boe;16 years; link here -- it was 1.9 billion boe, but NG was reduced by 834 million due to depressed prices; failed to replace production for first time in 22 years
• 2014: 104%; 1.5 billion boe; 16.9 years (historical high)
• 2013: 103%; 1.6 billion boe;
• 2012: 115%: 1.8 billion boe;
• 2011: 107%; 1.8 billion boe;
• 2010: 209%; 3.5 boe; -- 
• 2009: 133%; 2.0 billion boe;  

Based on that quick look, replacing production at a rate of 183% is very, very good.

By the way, the industry uses two different metrics:

• replacing production
• replacement ratio

But I'm not going to get into that now, except to say that "laymen" like me seem to prefer "production replacement" whereas the industry suggests that the "replacement ratio" is a better indicator of a company's reserve health. 

Note: here's another report from Quartz:

In an announcement today, Exxon said it had written down its proven oil reserves by a massive 19.3% (2016), a stinging reduction to what is a primary measure of any oil company’s value. As of the end of 2016, Exxon had 20 billion barrels in proven reserves, compared with 24.8 billion a year earlier. This includes the erasure of all 3.5 billion barrels of Exxon’s proven oil sands reserves at Canada’s Kearl field. Last year’s low oil prices made it uneconomical to drill at Kearl, which had been at the core of Exxon’s growth strategy.

In addition, for the second straight year, Exxon failed to replace all the reserves it pumped—in 2016, it replaced just 65% of its produced reserves. In 2015, it replaced just 67%. Prior to these years, Exxon had replaced at least 100% of its production every year since 1993.

Of course, the "peak oil" folks had some fun with XOM's 2016 report. I wonder what they had to say about XOM's most recent report -- a whopping 183% replacement.
 

ND State Oil And Gas Lease Auction -- February, 2018

Disclaimer: I went through the spreadsheet quickly and did not double-check the numbers. In most cases I counted the tracts once and most likely made mistakes in counting. There will likely be other factual and typographical errors. If this information is important to you, go to the source.

Billings:

• 16 tracts
• bonus: as high as $506; most in the $200 - $300 range
• NP Resources; Northern Energy Corportion
• largest tracts: 160 acres
• smallest tracts: 4.77 acres

Bottineau:

• 1 tract; BPH; $81/acre for 80 acres

Burke:

• 21 tracts
• Northern Energy; Diamond Resources 
• although some has high as $336/acre; most less than $160/acre
• most were 80 - 160 acres

Dunn

• 1 tract; Lynx Oil; 80 acres; $169/acre

McKenzie:

• 11 tracts
• NP Resources -- almost all of them; two tracts: Northern Energy
• almost all tracts were 160 acres; one tract - 6 acres
• the 6-acre tract went for $256/acre, but all the rest $200 and blelowp with one 160-acre tract that went for $445/acre

Mountrail

• two tracts
• Liberty Resources paid $890/acre for an 80-acre tract
• Bison Plains Energy paid $18,000 / acre for a 28.65-acre tract
• that tract was described as Mississippi River in NE4, 153-93-28, Banks oil field, tract completely under the river

Ward:

• three tracts; all BPH
• 20-; 40-; and, an 80-acre tract
• $2/acre; $2/acre; and, $4/acre

*******************

Back of the Enveope 

Looking at that Mountrail tract

• $18,000 * 28.65 acres = $500,000 (rounding)
• 500,000 bbls in first three years for a 1280-acre spaced well
• 28.65 / 1280 = 2.2%
• 0.022 * 500,000 =  11,000 bbls / in first three years

$500,000 / 11,000 bbls = $45 / bbl
 

The Road To Australia -- Free Wind Energy Where Electricity Costs $13,000 / MWH -- February 8, 2018

Updates

Later, 6:27 p.m. Central Time: shortly after reporting that electricity now costs $13,000 / MWh in South Australia, this note from a reader:

At 09:30, local time, the 5 eastern Australian states are consuming 25,000 megawatts of electricity. 

Wind and grid solar are producing 600 megawatts. 

Temperatures in Adelaide expected to exceed 100F, putting strain on grid supply.

The "NEM Dispatch Overview" tab on the Aussie AEMO site shows individual state production, consumption, and how much solar/wind is contributing ... along with the flow pattern amongst the states. 

Kinda fascinating seeing how 'close to the edge' the grid is, despite exceptionally high cost to provide their citizens, their industries, such a basic commodity like electricity. 

Original Post

 

Upset about your monthly utility bill? It could be worse. You could be living in South Australia -- the poster child for successful wind energy. Free wind energy is only costing them $13,000 / MWh (vs the "standard" / contract, $35 / MWH:

Thursday, February 8, 2018; As Of 5:13 P.M Central Time NDIC Has Not Posted The Daily Activity Report

The NDIC has not posted the daily activity report as of 5:51 p.m. Central Time. This happens rarely but usually on days when the Dow falls 1,000 points or more. 

Active rigs:

$60.42↓↓	2/8/2018	02/08/2017	02/08/2016	02/08/2015	02/08/2014
Active Rigs	58	37	42	136	192

Three new permits: pending

• Operator: EOG
• Field: Alger
• Comments: EOG has permits for a 3-well Ross pad in SWSW 4-156-92; it looks like these are the first Alger permits in calendar year 2018

No permits canceled.

No permits renewed.

No producing wells (DUCs) reported as completed.

Three new permits:
34564, EOG, Ross, Alger
34565, EOG, Ross, Alger
34566, EOG, ROss, Alger

What Not To Do As A Job Applicant -- February 8, 2018; New Powder River Basin Pipeline

From Rigzone: what not to do as a job applicant, via Twitter.

Link here.

**************************************

Meanwhile, Seriously

New pipeline from the Powder River Basin.

Tallgrass Energy Partners, Leawood, Kan., and Silver Creek Midstream LLC, Irving, Tex., will jointly develop a crude oil pipeline for Powder River basin production in Wyoming.

The 80-mile, 16-in. Iron Horse Pipeline will connect a gathering system and terminal in Converse County with a terminal Tallgrass is building at Guernsey in Platte County.

About half the pipeline will be new. The other half will be converted gas pipeline.

The pipeline will have initial capacity of 100,000 b/d of crude and can be expanded.

The pipeline per se does not interest me that much. What interests me is the fact that a basin we don't hear much about requires additional takeaway. The initial capacity, 100,00 bopd, is not trivial and can be expanded.

Note this SeekingAlpha article about nine months ago:

• Powder River Basin prices are nearing $17k/acre this year compared to prices less than $2k/acre only a year and a half ago
• 30-day Max IP rates have been steadily improving in Campbell and Converse counties
• Powder River Basin oil production poised to rebound in 2017, growing ~35,000b/d by the end of 2018

Converse County/Powder River Basin is tracked here. 

Kennedy Grandchildren Have Opportunity To See Snow In Chicago This Weekend -- February 8, 2018

Link here: North Dakota winter storm moving eastward; Chicago bracing for 20 inches of snow.

A total of up to 20 inches of snow could fall by the end of the weekend, a worst case scenario that could put this event on par with some of the biggest in history. Starting tonight, snow will start falling and intensify overnight, with 6 to 10 inches of snow on the ground at sunrise. 

It's hard to say, but this looks like winter storm Mateo, possibly Liam.  But I think Liam is already hammering the East Coast. [Update: yes, it's Mateo and 2,000 miles of snow -- here's the link.

These winter storms are coming more often than the summer hurricanes, it seems. Just saying.

An Incredible Set Of "Before" And "After" Photos Of The Bakken -- Vern Whitten -- February 8, 2018

Wow, what a treat! "Before" and "after" photos of "the Bakken" taken by Vern Whitten. A collection of 35 photographs. If you like these (and you will) please send a "thank you" to Vern Whitten:

Vern Whitten Photography
www.vernwhittenphotography.com
(701) 261-7658

Click on this link: http://www.vernwhittenphotography.net/bakpro.

At the link, click on the first photo and then move through the photos. Vern has great photos of Dickinson, Watford City, Williston, New Town, and Minot.

I love them all. But perhaps my favorite are those of New Town. That's really incredible how much was done in that under-populated -- but very, very busy -- area. And the high schools in several cities.

And this probably represents only a percent of what has transpired in the decade from 2012 to 2018. Vern says these photographs span a 6-year period.

**********************************

Texas High School Football Stadiums

Just for the fun of it, I was curious what aerial photos of Texas high school football stadiums look like. Here is a link to the "best" stadiums in the Dallas-Ft Worth (DFW) area.

The first one shown is the "new" $60-million stadium.

The second one is just a couple of miles down the road or so from where we live. From the link, regarding this stadium:

Southlake has seen a pretty good return on its investment. After the stadium's opening, the Dragons rattled off six state championship appearances, and came away with the trophy five times (they lost to Katy by one point in 2003). According to D Magazine, the stadium now holds more than 11,000 seats, and FC Dallas (professional soccer) used to play on its artificial turf.

Our oldest granddaughter's water polo team practices in the Southlake natatorium, a couple of miles to the west.

Our own Grapevine High School football stadium is undergoing a major $18-million renovation this year.

The district said work will be completed over the next two years using funds the district received through a $26 million Tax Increment Financing payout resulting from the 1996 TIF agreement with the City of Grapevine to bring Grapevine Mills Mall to the area, according to a Grapevine-Colleyville ISD news release.

That mall shows its age; I don't particularly care for it but its a huge destination for Texans across the state. It is located near two other destinations: the Gaylord Texan and Great Wolf Lodge, and more to come, including a new water park.

Natural Gas Inventory Data Posted -- February 8, 2018

Link here.

*******************************

This Will Keep The Riff-Raff Out

Huge "thank you" to Don for sending the photo. 

*******************************

LOL

From Catcher In The Rye, page 41, when Holden was talking about playing checkers with Jean Gallagher:

"You used to play what with her all the time?" [Holden's roommate, Stradlater]

"Checkers."

"Checkers, for Chrissake!"

"Yeah. She wouldn't move any of her kings. What she'd do, when she'd get a king, she wouldn't move it. She'd just leave it in the back row. She'd get them all lined up in the back row. Then she'd never use them. She just liked the way they looked when they were all in the back row."

****

My hunch is this will be exactly what Sophia does when she learns to play checkers with me. By the way, Sophia knows where all the chess pieces are placed on the board. Some names of the pieces:

• King: daddy
• Queen: mommy
• bishops: Arianna and Olivia, her two older sisters
• knights: horsies (of course)
• castles: 
• pawns: her sisters

From Apple Fan Boy #3, This Is Simply Fascinating: The Apple HomePod, Not Yet Available, Has Already Sold Out -- February 8, 2018

Link here:

Updates

February 9, 2018: after reading the reviews, I may have to change my mind and buy one. LOL.

Original Post

My thoughts on the HomePod, in an e-mail to a read, not ready for Prime Time:

There's a lot going on with Apple, Inc. The pundits are all focused on the future of the iPhone and concerned that Apple is not selling as many phones as predicted. Maybe, maybe not. I don't know. But if pundits are thinking that, surely the Apple folks are aware of the danger of becoming too dependent on any one product line, also.

Apple doesn't break out data for a lot of their products and/or services.

I don't subscribe to any music streaming device, so I have no idea how good those streaming services are and why they attract so much attention and so many folks (when there is so much free music). Years ago, it was Pandora. I don't hear much about Pandora any more. Now, I hear a lot about Spotify. It appears that Spotify is #1; apparently it has set the bar and has the most subscribers.

The other day it was reported that Apple Music will soon overtake Spotify. Again, I don't know, but just to come out of nowhere it seems, for Apple Music to now be in the position to overtake Spotify is remarkable.

The subscription price for Apple Music: $9.99 / month. This month. Next month. Every month.That's a huge on-going revenue stream for Apple. It would be interesting to know the margins on music streaming. My hunch: pretty good.

I was eager to go out and buy Apple's smart speaker, the HomePod. But now that I've read more about it, it appears the HomePod is something I am not interested in. I don't know much about it yet but apparently it will not play music streaming from other devices unless it is streaming Apple Music. We love our EU Boom and I thought the HomePod would be similar. Apparently entirely different.

A fair number of people (those commenting at MacRumors) were unaware of that, as I was, and are also upset. They say they, too, won't buy the HomePod if it can't do what other BlueTooth (wireless) speakers can do.

[It's a little confusing: the HomePod specs say that HomePod does have BlueTooth 5.0 like other wireless speakers but apparently that is only to "set up" the speaker. After that, it's a "computer" and uses wi-fi, not BlueTooth, to stream music and for all other "smart" mobile-device features. I could be wrong. I'll talk with the folks at the local Apple store later.]

They say Apple will lose a lot of HomePod sales for that reason (it's already sold out, see above), that is it not compatible with YouTube on my MacBook Air, for example.

The counter-argument, made by others, and with which I strongly agree, Apple is not concerned about losing HomePod sales to folks like me or to Android folks. What Apple is interested in is their own products, not Android products.

The number of folks using iPhones is simply astounding. From reliable sources:

In 2017, forecasters predict that around 223 million people in the U.S. will be using a smartphone, which accounts for around 83.8 percent of all mobile users . Of these 223 million smartphone users, over 90 million will own an iPhone.

• Rounding: 80% of Americans use smart phones (the rest of us use the old Samsung clamshell, apparently)
• close to half of those using smart phones in the US are using iPhones
• in round numbers, 200 million in the US use smart phones
• in round numbers, 100 million in the US use iPhones

In addition, the HomePod is optimized to work with the iPad. Although it appears that the percent of tablets that are iPads is dropping, somewhere between 45 and 50 percent of all tablets sold are iPads.

Apparently the quality of the sound coming from the HomePod is incredible. For an Apple product the price point is fine ($350) although it is about twice what other wireless speakers would cost -- but most of those other speakers (like our UE Boom) are not smart speakers.The HomePod is a computer, just different.

Bottom line: I am anticipating that Apple will see another huge bump in its revenue stream when folks start buying the HomePod and sign up for Apple Music.

Again, the pundits are focused on the iPhone. Everyone remembers what Steve Jobs and a gazillion other people have said about skating to where the puck will be. A one-time purchase of a $1,000-phone is fine, but getting folks to pay for music subscriptions after that, at $9.99/month is ... well, priceless.

It sort of reminds me of "Ma Bell" -- they never sold you one of their telephones. You paid an initial price to have it installed and then after that you rented it on a monthly basis. Apple is doing the same thing: an initial cost up front to get the iPhone, and then monthly subscription(s).

FWIW: Tale Of Two Countries -- CO2 Emissions -- February 8, 2018

US (link here):

Germany:

Germany hypocrisy (link here):

Germany has an aggressive plan to cut its greenhouse gas emissions 40 percent below 1990 levels by the year 2020. Last November, a leaked document from the country’s Environmental Ministry projected the country would miss the mark by 8 percent without additional action.

In other words, even with generous subsidies for renewable power, the Germans would have to implement some form of economy-restricting policy to curtail emissions. So much for the “go green and grow the economy” mantra.

The Environmental Ministry said the failure would be “a disaster for Germany’s international reputation as a climate leader.” One would think a stronger economy would be cause for celebration, not demonization.

Germany’s abandoned 2020 targets are the latest domino to fall in what is failed international climate policy. Many proponents of action argue that even though the Paris climate accord is nonbinding, with no repercussions when a country fails to comply with its nationally determined contributions, the agreement was an important first step.

Wind, solar taking over the world -- one percent every decade (link here), one roof at a time:

The above graphic fo 2040 assumes all countries "comply" with the Paris accords -- and already several have walked away or said they would miss their targets.

******************************

Notes to the Granddaughters

On my reading-to-do-today are too books:

• The Catcher in the Rye, JD Salinger, first c. 1945
• A New Literary History of Modern China, edited by David Der-Wei Wang, c. 2017

I've read the former perhaps three times, but every so often I feel the need to read it again, and every time I find something new. Today I'm reading it mostly to get a feel of how Salinger "put it together." If I recall correctly this is a book Salinger had conceived years earlier (before writing it) and "put it together" in his mind while serving in France during WWII. As I've noted before, it was the precursor to Diary of a Wimpy Kid.  I'll read a few pages today, mostly while waiting in the car when picking up the granddaughters from school later this afternoon. One could read the book in one sitting; it will take me a week or so.

The other book will last me a lifetime. It's not for the faint-hearted. But, wow, it's turning out to be a great book. The book is composed of 161 essays arranged chronologically to lay out the "genealogy" of modern Chinese literature. Absolutely fascinating. I've catalogued the 161 essays and now am reading them randomly, starting with those essays that might be most interesting for me. I am on my third or fourth essay. The essay I just completed has to do with the ritual of beheadings/decapitation in China and Japan. For those interested, the essay is "built around" the Musha Incident, and the Second Musha Incident.

Three modern authors are discussed: Wuhe, Lu Xun, and Shen Congwen. From the essay:
Wuhe ponders whether the Tayals (Taiwanese aborigines), the Japanese, and the Chinese are performing the roles of each other's predators and victims (with regard to "ritual beheadings"/massacres). Immediately, Tarantino's films came to mind -- especially the Kill Bill movies. I googled Tarantino beheadings Tayals and variations thereof but have not yet found what I'm hoping to find.

From wiki:

Han Chinese (also called Han) is an ethnic group from China. 92% of the Chinese population and more than 97% of the Taiwanese population are Han. Out of the entire human population in the world, 19% are Han Chinese. Han Chinese have the highest concentrations in the Eastern Provinces of China, particularly in the Hebei, Jiangsu, and Guangdong regions. The United States is home to the greatest number of overseas Han Chinese, exemplified in the group's prominence in New York City's Chinatown.

See map of China at this post.

The Energy And Market Page, T+18 -- February 18, 2018

South Australia spot price for electricity this afternoon (link here): $10,100 / MWh.

I don't know if folks have noticed but except for a few outliers (like XOM), oil companies are reporting record profits; are providing great guidance; and, are increasing dividends. See below.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship-related decisions based on anything you read here or think you may have read here.

The headlines:

• Pioneer Natural boosts dividend fourfold after profit surges: link here.
• Anadarko raises dividend fivefold, share buyback program: link here; and here.
• Statoil and three other top-ranked oil firms raising dividends: link here; and, here.
• Rio Tinto announces huge dividend: link here.
• Total shows growing confidence with pledge to boost dividend: link here.
• Suncor reports boost in fourth-quarter profit: link here.
• ExxonMobil beats upstream earnings estimates in Q4: link here.
• ConocoPhillips had a great quarter, but cautious optimism is warranted: link here.
• Even MDU Resources posts a profit: link here.

Other headlines of note:

• surging Chinese energy demand draws record crude imports in January; near-record for gas: link here.
• US natural gas output, demand seen rising to record highs in 2018: link here. 
• Ineos: Forties Pipeline is safe -- link here. 
• ExxonMobil announces Baytown ethane cracker milestone; mechanically "ready": link here.

And perhaps the most interesting headline of the week: oil world turns upside down as US sells oil in Middle East: link here.

Jobless claims: link here. Incredible report; unexpected plunge in first time unemployment claims; near 45-year low;

Buzz: I haven't watched television business news (or any television for that matter except TCM classic movies) since last Thursday (February 1, 2018), so I do not know what "the buzz" is. I won't check back in until the Dow goes back over 26,000, or maybe 27,000. I haven't decided. I assume the hot topics on CNBC throughout the morning hours: GE; cryptocurrency; Greece; Tesla; volatility.

****************************

China's Independent Refiners

Imports rise 20% year-over-year (January, 2018, vs January, 2017)

The source of the crude oil may be interesting, but what caught my attention was the absolutely increase (20%, year-over-year), and it appears the bulk of it is coming from Russia and Angola.

The Congo had the biggest increase on a percentage basis, but it was coming from a very low amount last year to a more significant amount this year. Angola, the #1 supplier, was also #2 in percentage increase. Russia? Pretty much stable

Jobless Claims Plunge; Near 45-Year Low -- Making America Great Again -- February 9, 2018

Unemployment claims, first time: link here. 

• consensus range: 230K to 235K
• consensus average: 235K
• actual: 221K
• beats forecast by whopping 14,000
• actual decline from previous week: 9,000
• headline: US jobless claims unexpectedly drop (no, they plunged); now, near a 45-year high
• labor force participation: modern record lows and yet we are told the job market is tightening
• correlation: unemployment claims and gasoline demand (we've talked about this before)

**********************************

Back To The Bakken

Active rigs:

$61.56↓	2/8/2018	02/08/2017	02/08/2016	02/08/2015	02/08/2014
Active Rigs	58	37	42	136	192

RBN Energy: rising Canadian production, takeaway constraints and WCS price discounts, part 3.

Producers in the Western Canadian Sedimentary Basin (WCSB) are in a bind. Crude oil output in the WCSB has risen by more than 50% over the past seven years to about 4 MMb/d and is expected to increase to 5 MMb/d by the mid-2020s.

But there has been only a modest expansion of refinery capacity within the region and pipeline capacity out of the WCSB, and lately takeaway constraints have had a devastating effect on the price relationship between benchmark Western Canadian Select (WCS) and West Texas Intermediate (WTI). What’s ahead for WCSB producers and WCS prices? Today, we continue our series on Western Canadian crude and bitumen markets, this time focusing on WCSB refinery capacity and existing pipelines out of the region.

Earlier we looked at the recent collapse in the price of WCS versus WTI and the 12-day shutdown of the Keystone Pipeline in November 2017, both of which put the spotlight on a major issue: Alberta production in particular is rising, pipeline takeaway capacity out of the province has not kept pace, and pipes are running so full that some owners have been forced to apportion access to them. We noted that while WCS had been selling at a steady $10/bbl discount to WTI earlier in 2017, the pricing differential collapsed later in the year to as much as $25/bbl. While the leak and subsequent shutdown of the Keystone Pipeline in November was the spark that ignited the most recent decline in WCS prices, the fundamentals behind the widening gap between WCS and WTI prices were already in place.

Later, we examined the historical and projected growing volume of crude oil produced in the WCSB. In that supply assessment, we noted that crude oil volumes in the region had grown from around 2.5 MMbbl/d in 2010 to roughly 4.0 MMbbl/d in 2014. Although the crash in WCS crude oil prices in 2014 slowed the pace of investment in new oil sands projects, production volumes in Western Canada are still projected to reach 5.0 MMbbl/d by 2025. Where will all this growing crude oil supply go?

Today, we’ll dive into the current local demand for crude oil in the WCSB and the existing crude oil pipeline takeaway capacity.