One Group’s Strategy to Derail Oil Pipelines, Raise Energy Prices

http://blog.heritage.org/2012/02/03/one-groups-strategy-to-derail-oil-pipelines-raise-energy-prices/

"Details of a large non-profit’s plans to combat the Keystone XL pipeline have surfaced, and offer some insight into the strategies and tactics of groups looking to combat the use of fossil fuels.

Canadian news channel Sun News uncovered of a PowerPoint presentation from the Rockefeller Brothers Fund detailing its work with other groups to derail the Keystone XL pipeline and other similar projects it deemed parts of “a globally significant threat.”

The presentation, written in 2008, describes the allocation of $7 million to environmental non-profits for tactics that include the use of the legislative and legal systems to delay or derail energy production in the United States and Canada, and to “raise the costs” of energy in both nations.'

 

I really dont think so.. what it will do is keep the Gulf refineries working, providing gasoline and jobs for Texans and the rest of the US.

Perhaps they mean that the depressed Midwest oil prices due to the oil glut (no pipeline capacity to deal with the boom) will impact gasoline buyers?.. but the oil has to get to a refinery before it can be made into gasoline.

 

Why produce more oil? Refineries are shutting down in the north/northeast and the US has set a new record for exporting of fuel this year.

 

from the article you posted, are these Federal or State taxes? :

"Over the past five years, exports from the US Gulf Coast have soared as refiners sitting in tax-free zones near Port Arthur, Texas, have shifted production away from gasoline and toward higher-margin diesel. Since 2007, overall US exports of diesel and other products have jumped 134 percent, the US Energy Information Administration reports. Of US exports, two-thirds is shipped abroad from Gulf Coast refineries – now more than 2 million barrels a day and up from just a quarter of today's level a decade ago."

 

Why not allow import of cheap Canadian tar so that those Gulf refineries can manufacture a value added product?.. if that product is exported it adds to the trade balance of the US, it could also be used for local consumption and reduce shortages. There is also the issue that those particular refineries depend on either Venezuelan or Canadian bitumen.. I can trust the Canadians to keep their end of the bargain.

 

I agree, Canada can be trusted, Venezuela can't. Personally, I don't buy gas from Citgo, as its owned by the Gov't of Venezuela.

 

TransCanada's problems with property rights conservatives is probably bigger than their problems with the environmentalists. TransCanada that was promising to (ab)use the legal system by seizing private land through eminent domain. As soon you hear that they were threatening widow women by telling them to sell their property so it wouldn't get seized in court, you could guess where some of the landowners on the plains would tell them to put their pipeline. From what I've read the conservative land owner position is that "if the State Department was worth a bucket of warm spit TransCanada would have been thrown out of the country for their tactics."

http://www.nytimes.com/2011/10/18/u...omain-fight-over-pipeline.html?pagewanted=all

http://www.kansascity.com/2012/02/22/3444230/texas-becomes-battlefield-in-keystone.html

They're probably gonna have to re-route some and learn how not to be bullies before they can do their project.

TransCanada and the Texas refineries are wealthy and powerful "conservatives", so it'll be interesting to see what they do to patch things up with land owning conservatives. The original post makes it sound like they hired the "conservative" Heritage Foundation to help out by distracting attention from their own bad behavior.

 

The Canadians are spending $7 billion to do this, they just want a little bit of help to spend it in the US...

 

It is a valid point.. the bitumen refineries in the Gulf may have to close or relocate if they cant get cheap enough tar. Eventually the US will prohibit the export of refined products and the refineries will have to go someplace else.

take a look at this PDF, it breaks down bitumen imports with maps:

http://www.coqa-inc.org/20091022_Buehler.pdf

Changing US Crude Oil Imports are Driving Refinery Upgrades

 

the beginning of the end?

http://www.greencarcongress.com/2012/04/tmpl-20120413.html

Kinder Morgan to proceed with $5B expansion of Trans Mountain pipeline from Alberta oilsands to west coast

13 April 2012 "Kinder Morgan Energy Partners, L.P. announced it will proceed with its proposed plans to expand the existing Trans Mountain pipeline system from the existing capacity of 300,000 bpd to 850,000 bpd.

The 1,150-km (714-mile) Trans Mountain pipeline system (TMPL) is the only pipeline system in North America that transports both crude oil from the oil sands and refined products to the west coast. TMPL moves product from Edmonton, Alberta, to marketing terminals and refineries in the central British Columbia region, the Greater Vancouver area and the Puget Sound area in Washington state, as well as to other markets such as California, the US Gulf Coast and overseas through the Westridge marine terminal located in Burnaby, British Columbia. Only crude oil and condensates are shipped into the United States."

 

The cost of new oil

http://www.smartplanet.com/blog/ene...of-new-oil-supply/468?tag=mantle_skin;content

When conventional oil hit its production plateau around 72 – 74 million barrels per day at the end of 2004, but demand kept growing, we turned to various unconventional liquid fuels to make up the difference, such as natural gas liquids, biofuels, and most recently, “tight oil” from shales like the Bakken Formation in the U.S.

The advent of tight oil in the U.S. has been hailed as the beginning of our incipient energy independence, although I have found no basis for such optimism in the data. In fact, this is the third or fourth time we have been treated to such cornucopian stories. A few years ago it was biofuels that would save us from peak oil, and before that it was natural gas liquids, deepwater oil, heavy oil, tar sands and coal-to-liquids. One need look back no farther than 2005 to find plenty of pollyannish projections in reports from the EIA and IEA, and in op-eds in the Wall Street Journal. None of those projections panned out.

The new floor

The new floor for oil prices is being set increasingly by the production cost of these unconventional liquids. A few decades ago, we could produce conventional oil profitably in the U.S. for under $15 a barrel. But those days are long gone for the U.S., and for most of the world (except a few old fields in places like Saudi Arabia). As every major oil company has admitted in the past few years, the age of easy and cheap oil has ended.

As the cheap oil from old mature fields is depleted, and we replace it with expensive new oil from unconventional sources, it forces the overall price of oil up. This is because oil prices are set at the margin, as are the prices of most commodities. The most expensive new barrel essentially sets the price for the lot.

Research by veteran petroleum economist Chris Skrebowski, along with analysts Steven Kopits and Robert Hirsch, details the new costs: $40 - $80 a barrel for a new barrel of production capacity in some OPEC countries; $70 - $90 a barrel for the Canadian tar sands and heavy oil from Venezuela’s Orinoco belt; and $70 - $80 a barrel for deepwater oil. Various sources suggest that a price of at least $80 is needed to sustain U.S. tight oil production.

Those are just the production costs, however. In order to pacify its population during the Arab Spring and pay for significant new infrastructure projects, Saudi Arabia has made enormous financial commitments in the past several years. The kingdom really needs $90 - $100 a barrel now to balance its budget. Other major exporters like Venezuela and Russia have similar budget-driven incentives to keep prices high.

Globally, Skrebowki estimates that it costs $80 - $110 to bring a new barrel of production capacity online. Research from IEA and others shows that the more marginal liquids like Arctic oil, gas-to-liquids, coal-to-liquids, and biofuels are toward the top end of that range.

My own research suggests that $85 is really the comfortable global minimum. That’s the price now needed to break even in the Canadian tar sands, and it also seems to be roughly the level at which banks and major exploration companies are willing to commit the billions of dollars it takes to develop new projects.

As production costs push ever closer to the retail price ceiling, profit margins fall. Consider Canada as an example. Oil production there will likely turn a mere 5 to 8 percent annual return on equity for the next several years, according to analysis by ARC Financial. Under $60 a barrel, they note, “the industry is broadly unprofitable” and would not be able to attract reinvestment. Similarly, University of Alberta energy economist Andrew Leach noted this week that the average operating profit margin of Canadian-owned oil and gas assets is now 7.7 percent, while foreign-owned assets offer only a 5.5 percent margin. A far cry from the heady, ultra-profitable years of 2003 – 2005.

So while the press, ever-anxious to assign blame for high oil prices, highlights the enormous profits that oil companies are making, the fact is that much of those profits owe to producing oil from wells drilled in a much cheaper era and selling it in the new high-priced era.

This will not remain the case for many more years.

The 2014 – 2015 tipping point

Unconventional oil is currently just 3 percent of global supply. The IEA projects that it will make up 6.5 percent of supply by 2020, and 10 percent by 2035. As it gradually replaces cheap oil conventional oil, its real production costs will continue to push oil prices up. Eventually, those costs will cross with the pain tolerance limit of consumers.

Skrebowski sees rising costs outrunning the ability of economies to adapt to higher oil prices by 2014, producing an “economically determined peak” in oil production. After that point, prices will remain economically destructive, and render sustained economic growth impossible. At the same time, it will make new oil production harder to finance.

This matches well with numerous analyses of oil supply that project a major tipping point around 2014 – 2015. At that point, as I have reminded readers repeatedly, we will likely begin down the back of Hubbert’s Curve and see net losses in global oil supply every year.

 

The real costs of oil:

http://www.ted.com/talks/garth_lenz_images_of_beauty_and_devastation.html

 

http://business.financialpost.com/2...nds-delayed-until-2013-source/?__lsa=3549d25f

EU vote on oil sands delayed until 2013

"HORSENS – The European Commission has decided to carry out a full study into the impact of proposed fuel quality laws on business and markets, delaying until next year any ruling on how to rank the polluting effect of oil from tar sands, an EU official said.

Ministers had been expected to vote on the regulations in June as part of EU efforts to reduce greenhouse gas emissions.

But the official, who spoke on condition of anonymity, said EU member states would not be asked to decide until early 2013 on the scheme, part of the EU’s Fuel Quality Directive, which would rank tar sands oil as more polluting than other fuels.

The fuel ranking plan has triggered intense lobbying from Cananda, one of the world’s largest tar-sands oil producers, as well as opposition from some EU member states whose oil firms are active in such unconventional crudes.

The impact assessment will analyse the consequences of the law on fuel suppliers and other stakeholders, the source said.

POLLUTING VALUES FOR FUELS

EU member states approved the Fuel Quality Directive in 2009, with the aim of cutting greenhouse gases from transport fuel production by 6 percent by 2020, as part of a wider set of green goals."

 

http://www.ft.com/intl/cms/s/0/41b71cbe-afee-11e1-ad0b-00144feabdc0.html

Canadian PM urges closer links to Asia

Stephen Harper, prime minister of Canada, has said Washington’s decision to delay construction of a controversial oil pipeline was the “wake-up call” that Canada needed to reduce its dependence on its neighbour and strengthen links with Asia.

In an interview with the Financial Times in London, Mr Harper said the postponement of the Keystone XL pipeline, which would cross the US and Canada, was a bad decision “for both of our countries”, but that he believed that the project will go ahead.

“Obviously we’re disappointed with the delay,” he said. “The president has told me that this is not a ‘No’. This is a process he believes needs to be completed over the next year and we’ll wait and see the outcome of that. At the same time, we’re not prepared as a country in future to be a captive supplier to the US..”

The 1,700-mile Keystone XL project was intended to make it easier to get oil from Alberta’s oil sands to the Gulf of Mexico’s refining facilities. The pipeline, which would have travelled through the sensitive Sandhills region of Nebraska, had come under fire from environmental groups and Democrats were concerned it could alienate some voters in an election year.

“Canada is a supplier almost exclusively to North America, to ourselves and to the Americans. Energy exports outside those markets are relatively small,” he said.

To reduce its reliance on the US, Mr Harper’s government has supported the construction of a pipeline from Alberta’s oil sands to the Pacific coast to enable fuel to reach Asian markets more quickly, despite opposition from environmental and first nations groups. It has also worked to alter regulatory procedures to speed up the environmental review process for such projects.

Chinese companies are investing heavily in Canada’s resources sector. China Investment Corp, the country’s sovereign wealth fund, has a 17 per cent stake in Teck Resources, one of Canada’s largest mining groups. Last year state-owned Cnooc acquired Opti Canada, a bankrupt Calgary-based oil sands producer for $2.1bn, including debt.

Despite worries about Canada’s energy independence, Mr Harper was adamant that the country’s review process ensured any investment was “commercially motivated” and in the national interest.

Mr Harper added that the country needed to diversify partly because developed markets such as the US are facing a long period of slow growth. “If we’re really to exploit the potential of Canada as an exporter we need to broaden our markets.”

He stressed, however, it was unlikely the US will ever be replaced as the country’s biggest trading partner. “I don’t think it’s a question of displacing the US. It’s just a question of diversification.”

 

http://www.ft.com/intl/cms/s/0/58587b32-0a2d-11e1-85ca-00144feabdc0.html

Opposition grows to $7bn tar sands scheme

The Keystone XL oil pipeline, seen as a racing certainty to go ahead just a few months ago, now faces heavy going.

A plan to bring diluted bitumen 1,700 miles from the tar sands of western Canada to refineries on the coast of Texas needs approval from the US federal government. Environmental campaigners are increasingly hopeful that the decision will at least be deferred until after the 2012 presidential election, forcing another year’s delay.

Canadian politicians and business leaders say they are optimistic that the $7bn pipeline will get the green light but have stepped up their campaign to underline the importance of the tar sands – or oil sands, as they are known to their supporters – for US energy supplies and the Canadian economy.

Industry executives and analysts believe that if Keystone XL is blocked, it will not stop the development of the oil sands’ reserves but could slow production by making it harder to get the oil to market.

The uncertainty has been weighing on shares in TransCanada, the company behind the project, which have been slipping for the past two weeks.

Bill McKibben, the environmentalist who is one of the leaders of the fight to stop Keystone XL, said there were indications that the campaign was gaining ground. “Three months ago, really nobody in this country knew about the Keystone XL pipeline, and now it has become the biggest environmental and even political flashpoint in the country,” he said. “The odds are still against us, because the oil industry has more money than God, but those odds are shortening.”

Approval seemed a formality in August after the environmental impact statement from the state department, which is responsible for deciding on the pipeline because it is an international project, concluded that there would be “no significant impacts to most resources” along the route.

However, environmental groups have made Keystone XL their highest-profile issue of the year, highlighting possible leaks and the greenhouse gases created by production in the tar sands, which are greater than for many other sources of crude oil. On Sunday, the pipeline’s opponents organised what they described as the largest demonstration at the White House since the Iraq war, with 12,000 protesters.

Campaigners were cheered on Monday when the state department’s internal watchdog said it would review the department’s handling of the environmental impact statement, which relied on a consultancy that also worked for TransCanada.

Danielle Droitsch of the Natural Resources Defense Council said: “This confirms there is a real concern about allegations of conflict of interest and bias in the preparation of the environmental impact statement. At a minimum, the president needs to start over with a new environmental assessment.”

The decision is made more difficult for the administration because of the badly needed jobs that would be created by building the pipeline and a rise in oil sands production, although estimates of the employment boost vary.

Stephen Harper, Canada’s prime minister, described Keystone XL last week as “a project that not only will create a vast number of jobs in both our countries but is essential to American energy security”. He added: “My view ... hasn’t changed; President Obama has to make a decision.”

Joe Oliver, Canada’s natural resources minister, has been making the case in the US and Europe, and warning that failure to build Keystone XL will accelerate Canada’s search for alternative markets in Asia. “If they [the Americans] don’t want our oil ... it is obvious we are going to export it elsewhere”, he told the country’s Globe and Mail newspaper last week.

 

US self sufficiency in oil just in time for the Romney administration..

http://www.theglobeandmail.com/repo...on-to-slow-down-cibc-predicts/article4485891/

Strained pipeline systems and a glut of North American crude will force Canadian oil sands companies to cut back on their ambitious expansion plans over the next several years, a major new report warns.

Based on a review of all major producing regions, the CIBC World Markets report says U.S. crude production should grow annually over the next five years by a stunning 900,000 barrels a day (per year).

That scenario would see the United States dramatically cut its dependency on imported crude, forcing Canadian producers to look for markets elsewhere, at the same time that Canadian gas exporters face shrinking U.S. appetite for their supplies due to booming shale gas supplies.

Companies will find it increasingly difficult to justify expansion of high-cost oil sands projects, especially when there is a wealth of more profitable, less capital-intensive investment opportunities across the continent, CIBC analysts said in the 276-page report released Friday.

In a conference call Friday, the report’s lead author, Andrew Potter, noted that firms like Suncor Energy Inc. and Canadian Natural Resources Ltd. have already started to pull back from their ambitious growth scenarios.

He said company expansion plans in aggregate would add 1.4 million barrels per day of production by the end of 2016, and another 2 million barrels by 2020. But he forecast that the longer-term growth will be roughly half of what is now now planned. That more conservative path would be still higher than the most recent outlook from the Canadian Association of Petroleum Producers, which sees an additional 900,000 barrels per day of production by 2016, and 700,000 more by 2020.

However, Mr. Potter said many oil sands projects can be competitive. “We still see lower cost SAGD opportunities … as being very competitive with tight oil in terms of rates of return,” he said, referring to an extraction method known as steam assisted, gravity drainage.

“It’s more about the mining side of the business and more mediocre SAGD leases that will be the first to fall.”

Overall, CIBC expects U.S. onshore production to grow by as much as 700,000 barrels per day each year over the next five years from fields like the Bakken in North Dakota, and the Permian and Eagle Ford in Texas. Throw in increased production from the Gulf of Mexico, from Canadian tight oil and from the oil sands, and North America stands to lead the world in growth of crude oil production for the next five years, at least.

However, Mr. Potter said the industry will have to raise massive amounts of capital – in debt, new equity and joint venture partnerships with foreign oil companies – to finance the vast expansion.

The key for Canadian oil sands producers is pipeline capacity.

Even if all the pipelines being planned were built, there would not be enough capacity to handle the growth that companies have laid out in their expansion plans. And Mr. Potter said there is “less than a 50-50 chance” that the two proposed pipelines through B.C. – Enbridge’s Inc.’s Northern Gateway and Kinder Morgan’s Trans Mountain expansion – will be completed.

Without those B.C. pipelines, Canadian producers will lose some $20-billion a year in cash flow due to less production and lower prices.