O’Leary promises $1M if Notley steps down

[fluffy]

It's interesting to watch, and confusing to say the least. At last count there were four operations upgrading to the synthetic crude grade on site in the oil sands region, Syncrude, Suncor, CNRL and Nexen. Suncor was building an new upgrader across the highway from their Suncor Base operation (search "Suncor Voyageur Upgrader) only to have it cancelled with a change of leadership in the company. After spending $3.5 billion on the project it was sold for parts. Stuff like that has me scratching my head.

[Hurtlander]

I understand that Alberta gets no royalties if oil is selling at under $40.00 per barrel, $1.00 per barrel when oil prices are between $40.00 and $50.00 per barrel and $5.00 per barrel when oil sells at over $50.00 per barrel.

That is second hand information though so please treat it accordingly.

Does anyone have first hand figures that they believe to be accurate ??

Here you go, the answer is clear as mud

http://www.cbc.ca/news/canada/calgary/a ... -1.3060281

[Donald G]

Good article Hurtlander but as you say clear as mud.

I think that the following paragraphs out of your article may, in very general terms, support the pricing system I was given. It would also identify why Alberta income from oil has fallen so drastically since oil fell below $50.00 per barrel.

And given that the price of Alberta oil very closely follows the value of the Canadian dollar ... and the dollar is falling ... it does not bode well for the Canadian economy.

The fact that Junior Trudeau said Canada has to get away from oil simply complicates the situation. Like he has with our NATO partners, who have not invited Canada to their latest ISIS strategy session, he is destroying out International reputation by saying what he is NOT going to do (NOT GOING TO USE OIL) rather than what we are going to do.

[oneh2obabe]

About Royalties
On behalf of Albertans, the government of Alberta is the owner of 81% of the mineral rights in the province, which includes oil and gas. When companies develop the resources, they must pay the province - that's called a royalty. As resource owner, the Alberta government sets the terms and conditions for development and the royalty rates.
http://www.energy.alberta.ca/About_Us/Royalty.asp

http://www.energy.alberta.ca/OilSands/p ... veRate.pdf
http://www.energy.alberta.ca/Org/pdfs/O ... as2010.pdf

[Donald G]

Good posts oneh2obabe ...

I like the simplified thread with the two graphs.

[fluffy]

The fact that Junior Trudeau said Canada has to get away from oil simply complicates the situation. Like he has with our NATO partners, who have not invited Canada to their latest ISIS strategy session, he is destroying out International reputation by saying what he is NOT going to do (NOT GOING TO USE OIL) rather than what we are going to do.

I suspect the Prime Minister may just be playing to the global criticism that has fallen on Canada with the previous governments total lack of action on greenhouse gas reduction while at the same time giving the appearance of writing the petroleum industry a blank cheque in regards to environmental concerns. I'm sure he is more than aware of the contribution that this industry has made to Canadian economy, and the turmoil that would result in stepping completely away from it. By taking on the appearance of a "green" Prime Minister he may gain some ground against opposition to the proposed improvements to oil transport within the country.

As far as the NATO meeting thing, we aren't exactly a major player in that game are we ?

[hobbyguy]

Static makes a good point: "We can not rely on just one economy."

The same can be said of our Canadian economy, we should not allow ourselves to be over-reliant on any one sector. What has been propping the economy over the past couple of years was two sectors: Bitumen and Real Estate. That is pretty narrow.

Hopefully we can learn from the oil price decline. The lessons are many.

One of them is that over promoting export bitumen/oil when prices are high drives the loonie way up, and hurts economic diversity. Hopefully we can get it right given the current opportunity. Switch the focus to primarily domestic use.

[fluffy]

I'm at a loss as to why we import so much crude with the supplies we have. Is WCS a seriously low grade product for refining into consumer level fuels? Or is it the capital cost of building the refineries ? Or maybe it's like logs in BC, the profit margin is higher if the value-added stages are done by someone down the line.

[Static]

I'm at a loss as to why we import so much crude with the supplies we have. Is WCS a seriously low grade product for refining into consumer level fuels? Or is it the capital cost of building the refineries ? Or maybe it's like logs in BC, the profit margin is higher if the value-added stages are done by someone down the line.

The majority of oil imports go the East because of lack of pipelines. Simple as that. Oil companies in Alberta are begging for more pipelines.

[fluffy]

That makes sense. Does Canada have the refinery capacity to meet its own needs ?

[hobbyguy]

It also is because WCS can not be refined by many refineries. An example is the refinery in Burnaby that is being forced to bring in crude oil by rail and truck (yes trucks!) because the NEB refused to give them priority in the pipeline, which was then switched over dilbit (WCS). (Any wonder BC gasoline prices are so high?)

Even in the US, the bulk of the refineries that can refine WCS are on the Texas gulf coast (conveniently located in "free trade zones" where environmental regulation is minimized), where they handle Venezuelan and Mexican heavy crudes. California has its own heavy crude and thus also has some capable refineries, which I believe is where the bulk of the current Kinder-Morgan exports from Burnaby go.

In essence, refineries that handle WCS bitumen must first upgrade it. That is what Syncrude does. Most refineries do not have upgraders, including the ones that are mothballed back east. Those refineries can, however, handle the synthetic crude that Syncrude and others put out, IF it is not reblended as an agent for shipping bitumen, which I believe has also happened and may still be happening.

It really isn't a business that makes a lot of sense to me, provided that other sources of supply are available. Vast quantities of natural gas are burned to produce SAGD bitumen and in the other processes. Them more energy has to be expended in shipping it (the higher viscosity requires higher pipeline pressures thus more pumping energy and stress on the pipeline) Then more energy has to be expended to upgrade that SAGD product. Then you have to deal with the petcoke. It is a marginal enough proposition in terms of energy in versus energy out that fluctuations in natural gas prices, minor changes in carbon taxes or regulatory environment can quickly make or break the business proposition.

All of that aside, obviously some folks brighter than me have made it work, until the collapse of extraordinarily high prices made it not work. Now it looks to me like upgrading in Alberta and shipping the higher value pure synthetic crude may be the only profitable route. Which, by the way, some economists have argued all along.

That, or prices suddenly rebound - a whole lot.

[Ka-El]

That makes sense. Does Canada have the refinery capacity to meet its own needs ?

My understanding is we don't. There are some groups wanting to invest in refineries, but sadly, they have not gotten the support from government (and with the current collapse of oil prices it would probably not be seen as a great investment, although the need for oil remains). It is easier, and more profitable, for multinationals to ship our crude product to their refineries, refine it and sell it back to us at a huge markup (and profit for them). I know Harper has given these multinationals the right to sue us if we try and change any environmental or safety laws that might interfere with their ability to profit from the extraction of our raw resources. I don't know if he also gave them the right to sue us if we try to refine more of it ourselves.

[Glacier]

Canada is a net exporter of refined product.

[Static]

Canada is a net exporter of refined product.

And we would be shipping a lot more if we had more pipelines

[Gone_Fishin]

I know Harper has given these multinationals the right to sue us if we try and change any environmental or safety laws that might interfere with their ability to profit from the extraction of our raw resources.

Are you referring to the TPP that Trudeau voted for?