Saudi Arabia produces approximately one third of OPEC’s oil, approximately 9.7 million bpd. Some believe that the Saudis are agreeing to lower oil prices now to curb new investment and further increases in global supply, particularly from US shale formations and Canadian oil sands, thereby gaining higher revenue in the medium term.
Some of the highest production costs are in the Canadian oil sands. About 25% of Canadian oil sands projects would be in the red at $80 per barrel, the IEA says.
ROCKMAN wrote:I always find it interesting that folks who have no financial connection to the oil sands development argue it's not economic and yet folks with direct access to the data have invested many $billions in transporting production that "can't be sustained".
By our count, at the federal and provincial levels (Alberta, Saskatchewan and Newfoundland), more than 63 targeted programs have been identified as otherwise not available to other sectors or primarily directed at the oil sector. Of these 63, we were able to quantify the value of the subsidies for 46 programs totalling about $2.84 billion annually. The programs represent expenditures for individual programs either in the calendar year of 2008 or provincial or federal expenditures in the fiscal year 2008/09. Of this total, the majority of subsidies are from the federal government ($1.38 billion) and Alberta ($1.05 billion). The 17 programs that were not quantified are likely to be small compared to the total subsidy value
In order to take full advantage of Canada’s tar sands-driven energy boom, American refineries would need to make costly retrofits to century-old facilities designed for the light crude that once flowed plentifully from domestic oil wells––not heavy tar sands crude with a consistency like molasses.
Sen. Chuck Grassley (R-IA) gave the oil industry a kick in that direction when he introduced a tar sands refinery equipment tax break to the Energy Policy Act of 2005, a bill that funneled $85 billion worth of subsidies to the energy sector.
A report by The Pew Charitable Trust estimated that, between 2005 and 2009, this refinery equipment tax break alone cost the government $1.2 billion and increased emissions by more than two million metric tons of carbon.
Thanks to two members of Congress, we've learned that in 2011, the IRS ruled that tar sands oil — unlike regular crude oil — is not subject to a tax that's imposed on the oil industry to pay for the Oil Spill Liability Trust Fund. This 8 cent per barrel excise tax on crude oil received at US refineries or on petroleum products imported into the United States is the largest source of revenue for the fund.
The International Monetary Fund estimates that energy subsidies in Canada top an incredible $34 billion each year in direct support to producers and uncollected tax on externalized costs.
What Bleaney does want to say specifically is that, in CAPP’s view, the Canadian oil and gas industry is treated no differently than any other industry by government. It operates, essentially, under the same fiscal regime as mining, manufacturing, forestry and other industries. . . The critics see things differently and try to specify the value of subsidies given by governments annually in the form of tax breaks, royalty reductions, direct subsidies and other support to the Canadian petroleum industry. That’s not an easy thing for anyone to estimate these days since Statistics Canada stopped compiling numbers on federal subsidy distributions back in 2009.
ralfy wrote:My guess is that investments will continue because of significant levels of credit available.
Canada’s oil sands — and the 167 billion barrels of reserves — prompted an unprecedented expansion over the last decade. But the roughly $155 billion spending spree left the industry with unusually high production costs. . . .
The (spending) cuts, though, won’t necessarily translate into lower production. Oil sands production is expected to increase by 25 percent, to 4.8 million barrels a day, according to January estimates by the Canadian Association of Petroleum Producers, partly because of new projects moving into production. The enormous projects are just too difficult to switch off, and the companies must keep pumping crude to cover the sizable debt on their multibillion-dollar investments. They also don’t want to cede market share to producers in other countries. . . .“It really makes no economic sense to bring down production at this point because most of the costs are sunk,” said Stewart Glickman
That cost structure may give oil sands producers an advantage over frackers in the U.S., who operate on a much shorter time horizon. Fracked wells in the U.S. tend to produce most of their oil within about 18 months or so. That means that to maintain production and rates of return, frackers need to keep reinvesting in projects with fairly short lifespans, whereas an oil sands project, once up and running, can continue to chug along, even in the face of lower prices, since its costs are spread out over a decade or more rather than over a couple years. That should keep overall oil sands production from falling and help insulate oil sands producers from lower prices, at least for now.
New analysis from Oil Change International has found that over 1.6 million barrels per day of planned expansion in tar sands production is currently delayed or ‘on-hold’ as industry struggles to identify a profitable path forward for 39 projects.
“The case for the tar sands is crumbling,” said Hannah McKinnon, Senior Campaigner on Private Finance at Oil Change International. “The tar sands are bad for the climate, the environment, impacted communities, and now the sector itself is struggling to justify many new projects.”
The analysis – based on industry data and Rystad Energy UCube – concludes that for every 1,000 barrels per day of tar sands production capacity approved or under construction, there are over 500 bpd that are delayed or on hold. These projects represent over 1.61 million bpd of proposed production capacity.
“This report is some good news for the climate, but the battle is far from over. Every day of delay for tar sands projects is a good day for our future, but this is an industry determined to dig it up,” said Lorne Stockman, Research Director at Oil Change International. “But while the industry puts its head down and tries to charge ahead, people around the continent are rising up to defend our communities and climate, and their efforts are clearly paying dividends.”
Key findings from the briefing include:
Currently, 39 proposed tar sands projects are delayed or ‘on-hold’.
For every 1,000 barrels per day (bpd) of tar sands production capacity approved or under construction, there are over 500 bpd that are delayed or ‘on- hold’.
Delayed or ‘on-hold’ projects represent over 1.61 million barrels per day of proposed tar sands production capacity.
Delayed or ‘on-hold’ projects contain nearly 13 billion barrels of total resources, which would amount to 7.8 billion metric tons of CO2 if extracted and burned. The emissions are equivalent to 40 years of emissions from 51 average U.S. coal-fired power plants.
An additional 550,000 bpd of production capacity (40,000 bpd currently operating) is owned by companies that have filed for bankruptcy.
The briefing can be found here: http://priceofoil.org/content/uploads/2 ... FINAL+.pdf
After a liberal democrat candidate won a surprise victory in Canada’s oil province, oil shares suffered. However, US fracking might also be to blame for the drop
Considered the bedrock of Prime Minister Stephen Harper’s conservative government, the oilfield province of Alberta has been a safe conservative seat for more than forty years. When New Liberal Democrat (NDP) candidate, Rachel Notley, won a surprise victory in Alberta province this month, energy stocks fell. Large oil companies, such as Imperial Oil, Cenovus, Husks and Suncor all experienced a three to six per cent fall in the value of their stocks. Is this a political backlash? Or does it reflect the sliding trust in the industry’s viability?
The viability of heavy crude processing is being outrun by the influx of fracked oil and gas from the US. ‘The oil produced by fracking,’ explains Mark Barteau, Director of the University of Michigan Energy Institute, ‘for example, in the Bakken region of North Dakota, is generally lighter, easier to process, and closer to refineries and markets, than that from the oil sands.’
The fracked US product is becoming more attractive to investors. Unlike the oil sands, shale fracking reserves are not in remote regions – staff can be paid less and transport is not as much of an environmental and logistical issue. Meanwhile, oil sands extraction has been hindered for years by environmental protests to pipeline constructions, specifically, the Keystone XL which has been trying to get off the ground since 2010.
Canada faces a widening rift with America over climate change unless it deals with “excessive emissions” from the Alberta tar sands, according to a trusted adviser to both Barack Obama and Hillary Clinton.
John Podesta told the Guardian that Canada must do more to compensate for its exploitation of the carbon intensive tar sands ahead of a critical conference in Paris aimed at reaching an international agreement to fight climate change.
Canadian prime minister Stephen Harper has championed expansion of the controversial tar sands, one of 14 so-called carbon bombs around the globe.
These are vast reserves of fossil fuels that if extracted and burned would make it virtually impossible to keep the earth’s temperature rise to 2C, the limit beyond which would signal irreversible climate change.
In a sign of growing international dismay, Podesta said Canada’s climate change policies were falling short of what is needed ahead of the United Nations Climate Change Conference in Paris in December.
Podesta, who left the White House earlier this year to run Clinton’s 2016 presidential campaign, told the Guardian: “I think that there is a C02 premium on oil that is coming out of the oil sands and I think that has to be offset through other policies that they need to implement, or else that is a strategy that is likely to result in excessive emissions.”
He had seen no sign that Canada had a plan to compensate for those extra tar sands emissions.
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