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None of Shell’s Arctic Ocean Oil Is Destined for Your Gas Tanks, Unless You’re in China

12:07 pm in Uncategorized by Phoenix Woman

Reading Edward Teller’s post on the trials and tribulations experienced by Shell Oil in its efforts to get at all that tasty delicious crude oil below the floor of the Arctic Ocean made me think of this fact: Unless you live in China, none of that oil is destined for your car’s gas tank.

One of the signs of Peak Oil is that the cheap-and-easy-to-exploit sources of cheap-and-easy-to-process petrol are all gone. The days when someone drilling a water well in his or her Texas or Pennsylvania (or Saudi, for that matter) backyard could hit a vast deposit of Extra Light Crude just waiting to be sucked up are long gone, and they’re not coming back. The majority of the oil that’s left is locked up in shale, underneath the bottom of the ocean, or (the most expensive stuff to extract and process) buried under the tundra in frozen tarry hunks that need to be mixed with natural gas just to be liquid enough to transport in a pipeline or a tanker car. And aside from what’s coming out of the Bakken and Texas, an increasing amount of it is not light enough to refine using relatively cheap conventional methods. (This is why Michele Bachmann, Sarah Palin and others are lying, deluded or both when they say that they can bring $2.00 a gallon gasoline back to the US under the “drill here, drill now, pay less” slogan. With the rising costs and complexity of oil extraction and processing, overall prices at the pump cannot go below $2.75 for any extended period if the oil companies are to turn a profit.)

The gluts of both natural gas and fracked petrol from the Bakken shale formation — which extends deep into Canada — mean that prices on the US market are far too low for any of the Arctic Ocean oil, once it’s accessed, to be currently profitable to sell on the US market. (By the way, that, more than anything, is what’s going to shut down the Keystone XL project — it costs too much just to hack the Athabascan tar out of the frozen ground and ship it to the gas-glutted US, and there are no ports on Canada’s Western shores that can handle supertankers to ship the stuff to China — and shipping it by supertanker is the cheapest way to get it to China. I expect that by the time the gas glut has dissipated in the US, the number of hybrid and straight-up electric vehicles (see also the video above, which shows the locations of electric vehicle charging stations in Saint Paul, Minnesota) will have hit a mass sufficient to send US oil demand, which has already leveled off over the past decade, on a consistently downward curve independent of whatever economic gyrations occur.)

Shell’s obviously hoping to get around the need for suitable Canadian ports by having the drilling done in the ocean and in a location nearer to Shell’s target Asian markets. But that’s going to be hard to do if incidents like the one Edward Teller describes (and again here) keep happening.

Keystone XL’s Window Of Profitability Closing

9:16 pm in Uncategorized by Phoenix Woman

In a recent edition of the Oil and Gas Investments Bulletin newsletter, I saw the following statement:

Canadian heavy oil actually traded under $50/barrel this week—less than half the price of Brent-priced international crude. It is by far the cheapest crude on the planet right now.

(The industry calls these discounts “differentials”—they would say “the WCS Select differential blew out to $37.50, even $38 today.” This translates into “The Canadian heavy oil benchmark price traded $38 below WTI today.”)

These low prices are from the big increases in oilsands production filling up the pipelines and the refineries in North America—despite the fact that more refineries are switching over their processes to handle more heavy crude.

In fact, fast growing oilsands production is also causing a discount for other Canadian oil producers as well.

Canadian heavy crude under $50 a barrel? The stuff costs around that much just to get it out of the ground. That’s not a profitable state of affairs for tar sands exploiters. In fact, an article from February 2012 in the Toronto Globe and Mail has this passage (bolding mine):
Read the rest of this entry →

Don’t Fall for the TransCanada Bluff

9:46 am in Energy by Phoenix Woman

I see this morning that folks are all atwitter over a Bloomberg article about how TransCanada may “bypass” US approval to get the Keystone XL built.

Um, no.

It’s all a big bluff, part of the “it’s inevitable so get out of the way you silly hippies” lie they’re pushing.

Read this graf from the Bloomberg story very closely:

TransCanada’s $7 billion Keystone XL proposal to bring crude from Canada’s oil sands to the Gulf was rejected yesterday by the Obama administration. The project required U.S. approval because it crossed the border with Canada. The company may seek that approval after it builds the segment from Montana to the Gulf, Pourbaix said.

They still need to cross the border, and to do that, they still need U.S. approval.

Why do they need to cross the border?

1) The First Nations tribes in Canada won’t let them cut through thousands of miles of boreal forest and wilderness to get to the British Columbian coast.

2) Even if the First Nations tribes acquiesced, there are no BC ports capable of handling supertankers (this despite intense efforts to build them) — and the tar sands are so expensive to extract and to move (they have to be thawed and them mixed with liquid natural gas just to get them to flow in the pipelines) that the only way they can turn a profit at current gas prices is if they’re sent to China in supertankers — hence the desire to pipe the crud to Houston, which obviously has both refineries and supertanker facilities.

As for “well we’ll just ship the Bakken oil to China, nyahh” (and bear in mind that the Bakken — in North Dakota — and the Canadian tar sands are two different things): They’re trying to strike while the iron (and China’s economy) is hot. The US market is no longer a burgeoning gas market. US gasoline consumption peaked in 2007 and dropped dramatically in 2008; gas usage has crept up somewhat since 2009, but as of this time last year it was still at 2004 levels, as the impact of hybrids and other fuel-efficient vehicles made itself felt in the US market. Furthermore, the Bakken oil isn’t going to last very long. That’s why the oil towns in North Dakota aren’t shelling out for new housing and infrastructure — they don’t want to be stuck with a bunch of empty buildings and deserted neighborhoods five years from now. (They’ve already been there and done that.)

In short: Exercise reading comprehension because they are trying to pull a fast one on you, the reader.

News Alert for Robert Samuelson: China’s Moving Off Coal and Oil a Lot Faster Than We Are

12:20 pm in Energy by Phoenix Woman

Even as the Tar Sands Action protests at the White House are continuing, the big dogs of the Washington Post — apparently feeling that since the Sulzbergers of the New York Times have taken an anti-Athabascan-Tar-Sands position, they must do the exact opposite — sends forth one of their useful idiots, Robert Samuelson, to try and make the Keystone XL protesters go away:

If Obama rejects the pipeline, he would — perversely — increase greenhouse gas emissions. Canada has made clear that it will proceed with oil sands development regardless of the American decision. If the United States doesn’t want the oil, China and other Asian countries do. Pipelines would be built to the West Coast. Transporting the oil by tanker to Asia would almost certainly create more emissions than moving it by pipeline to closer U.S. markets.

I have two words for that: “Bull” and “Shit”.

First off, it’s very, very expensive to extract oil from tar sands, especially the increasingly-costly Athabascan Tar Sands, so much so that exploiting the Athabascan sands is only economically worthwhile if the oil is pumped through a pipeline (which is itself only possible if the molasses-consistency “oil” is first diluted with lighter oils or even water), and only if oil goes and stays above $4 a gallon at the pump throughout the US, the Keystone XL pipeline’s target market. This is not exactly a safe assumption as $4-a-gallon gas curtails economic production sufficiently to cause a slackening of demand for oil; remember how the price of gas flirted with $4 a gallon in July of 2008, only to start dropping precipitously once the 2008 crash kicked into high gear? In short, taking away the pipeline takes away the developers’ ability to make a profit off of this boondoggle.

Second off, China is, if anything, trying to get the hell off of both coal and oil as fast as it can, because it’s been made crystal-clear what’s going to happen if it keeps kicking out carbon emissions at high rates. China is also determined to use more of its own oil rather than relying on imports; its known reserves of oil and natural gas have increased markedly in recent years. Read the rest of this entry →