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Carbon Bubble Fossil Fuels Finance

Shareholders File First-Ever 'Carbon Bubble' Resolutions

Unread postby Graeme » Thu 07 Mar 2013, 15:32:40

Shareholders File First-Ever 'Carbon Bubble' Resolutions

Two advocacy groups have come up with a new tactic to show how climate change—and laws to deal with it—could make investments in fossil fuel companies riskier and rock financial markets.

In a pair of first-of-their-kind shareholder resolutions, the groups have asked two of the nation's largest coal producers to report to investors how much of their coal assets would be left "stranded" in the ground if the United States were to pass sweeping greenhouse gas regulations.

As You Sow, a shareholder advocacy group for environmental issues, filed a resolution with CONSOL Energy late last year. The Unitarian Universalist Association, a religious organization that promotes social justice, filed a similar resolution with Alpha Natural Resources.

The groups' point is that coal and other energy companies would be dangerously overvalued in a carbon-regulated world, thus creating a "carbon bubble" that could one day pop.

"This carbon bubble is so big, it's going to make the housing bubble look like chump change," Andrew Behar, CEO of As You Sow, said in an interview. "It's another order of magnitude."


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Carbon Bubble Fossil Fuels Finance

Unread postby Graeme » Tue 26 Mar 2013, 18:42:54

Fossil Fuel Investment Spells 'Carbon Bubble' for Financial Markets

The financial markets racing to invest in Canada's untapped oil and gas reserves have grossly ignored the alarm raised by leading scientists and environmental watchdog groups leaving economies dangerously vulnerable to a "carbon bubble," cautions a new study published by the Canadian Centre for Policy Alternatives (CCPA).

"There has been a general failure among pension funds to account for climate risk, and a tendency to view any screening for environmental purposes to be detrimental to financial performance," says Marc Lee, CCPA Economist and author of Canada's Carbon Liabilities: The Implications of Stranded Fossil Fuel Assets for Financial Markets and Pension Funds. "Our analysis turns this on its head: by not accounting for climate risk, large amounts of invested capital are vulnerable to the carbon bubble."

CCPA makes the argument that those who have heavily invested in carbon reserves have not taken into account the long-term unsustainability of fossil fuels. Though the study specifically examines the effect of the "bubble" on the Canadian economy, the lesson can be transferred to any markets that are heavily invested in oil and gas reserves.


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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Plantagenet » Tue 26 Mar 2013, 19:02:20

Graeme wrote:
CCPA makes the argument that those who have heavily invested in carbon reserves have not taken into account the long-term unsustainability of fossil fuels.


CCPA has missed the whole point of investing in the tar sands.

Oil production there can be sustained for decades. Thats almost an eternity when it comes to investment strategies :idea:
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Graeme » Tue 26 Mar 2013, 21:09:00

I think you missed their point. Here is part of the summary from their report:

Mounting evidence of climate change impacts worldwide will inevitably lead to a new global consensus on climate action. Based on recent research, between two-thirds and four-fifths of known fossil fuel reserves have
been deemed to be unburnable carbon — that cannot safely be combusted.
This is of profound importance to Canada, a nation making fossil fuel
development and expansion the centrepiece of its industrial strategy. This
study looks at the implications of unburnable carbon for the Canadian fossil fuel industry and in particular for financial markets and pension funds.
We argue that Canada is experiencing a carbon bubble that must be strategically deflated in the move to a clean energy economy.

Doing the Math

A carbon budget is the maximum amount of CO2 that can be emitted in the
future, based on scientifically-estimated probabilities of staying below 2°C
of global warming, above which would lead to catastrophic or “runaway”
climate change beyond humanity’s capacity to manage. The world’s carbon
budget is now approximately 500 billion tonnes (Gt) of carbon dioxide, an
amount that would provide an 80% chance at staying under 2°C.
Canada’s share of that global carbon budget would be just under 9 Gt
based on its share of world gdP, and 2.4 Gt based on share of world population. An internationally negotiated carbon budget for Canada could go up depending on export arrangements with other countries, or down if larger historical emissions mean disproportionate reductions from rich countries. A plausible carbon budget for Canada would almost certainly fall between 2 and 20 Gt. Canada’s reserves of fossil fuels are significantly larger than Canada’s
fair share of a global carbon budget:

• Canada’s proven reserves of oil, bitumen, gas and coal are equivalent to 91 Gt of CO2
, or 18% of the global carbon budget.
• Adding in probable reserves boosts this figure to 174 Gt, or 35% of
the global carbon budget.
• A final, more speculative category including all possible reserves is
1,192 Gt — more than double the world’s carbon budget.

This means that business as usual for the fossil fuel industry is incompatible with action to address climate change that keeps global temperature increase to 2°C or less. Even at the high end of a 20 Gt carbon budget, this would imply that 78% of Canada’s proven reserves, and 89% of proven-plusprobable reserves, would need to remain underground.
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Plantagenet » Tue 26 Mar 2013, 21:43:53

Mounting evidence of climate change impacts worldwide will inevitably lead to a new global consensus on climate action.


There is nothing inevitable about it.

In order for a "global consensus" to arise and have any effect on Canadian oil production, there would have to be some kind of climate change treaty or other international constraint on Canada. But the UN climate change treaty process is dead----it died in Copenhagen in 2010.

The world is now on a path where energy producers will produce, and energy consumers will consume, without regard to the effect on climate. Political leaders will continue to posture and promise to fight climate change, but when it gets down to the lick log, they won't actually do anything that would restrict the use or oil out of fear it will damage their economies.

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Its climate versus economic growth, and political leaders are going to weigh in on the side of economic growth
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Graeme » Tue 26 Mar 2013, 22:28:56

Again you misinterpreted their message. Fossil-fuel companies are only after a quick buck. By ignoring climate change now, you risk precisely the opposite: severe damage to the intermediate- and long-term stability of the global economy.

Alternatively, the Stern review indicates that the worldwide economic
costs of climate change are likely to be between 5 and 20% of gdP per year
depending on the range of risks and impacts that are taken into account.95

Moreover, the Stern Review indicates that the “costs of stabilising the climate are significant but manageable; delay would be dangerous and much
more costly.” If significant steps are taken now, stabilizing emission levels
in the range associated with the 2°C scenario would cost approximately 1%
of global gdP annually.
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby kiwichick » Tue 26 Mar 2013, 23:32:58

just got worse


"missing heat " found in deep ocean

see climate progress
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Plantagenet » Wed 27 Mar 2013, 00:22:28

Graeme wrote: By ignoring climate change now, you risk precisely the opposite: severe damage to the intermediate- and long-term stability of the global economy.


Of course. But by ignoring the importance of energy to economic growth, you risk severe damage to the short-, intermediate- and long-term stability of the global economy.

There is no quick and easy way to side step the energy and economic issues, and there is no "global consensus" that will force Canada to stop producing oil because of climate change.
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Graeme » Wed 27 Mar 2013, 00:41:26

There are other sources of energy besides fossil fuels. Investment in renewable energy could be boosted. If the Canadian government ignores advice given to them by their scientists and economists, then they will do so at their peril. And unfortunately ours too because we are all part of the global economy.
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Graeme » Wed 27 Mar 2013, 01:30:02

I've just seen that New York state is telling it's investors that climate change may affect their finances.

State Tells Investors That Climate Change May Hurt Its Finances

In the wake of Hurricane Sandy, the administration of Gov. Andrew M. Cuomo has started to caution investors that climate change poses a long-term risk to the state’s finances.

The warning, which is now appearing in the state’s bond offerings, comes as Mr. Cuomo, a Democrat, continues to urge that public officials come to grips with the frequency of extreme weather and to declare that climate change is a reality.

A spokesman for Mr. Cuomo said he believed New York was the first state to caution investors about climate change. The caution, which cites Hurricane Sandy and Tropical Storms Irene and Lee, is included alongside warnings about other risks like potential cuts in federal spending, unresolved labor negotiations and litigation against the state.

“The state determined that observed effects of climate change, such as rising sea levels, and potential effects of climate change, such as the frequency and intensity of storms, presented economic and financial risks to the state,” the spokesman, Richard Azzopardi, said on Tuesday.


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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Pops » Wed 27 Mar 2013, 08:35:15

FF investment may be in a bubble but not because renewables are going to replace FFs.

You can see on this chart the contribution of the sexy renewables to global energy:

Image

Oh wait, you can't see the contribution of wind/solar/geotermal because they are less than 2% of the total even after decades of development.

There is no getting around it, short of cheap cold fusion tomorrow, when oil and gas peaks, energy use peaks, renewables simply can't be ramped up anywhere near the scale of FF even if a majority decided to curtail FF use tomorrow.

The entire economy is in a fossil fueled bubble. All investments are overvalued because FFs provide such a large surplus of virtually free energy. Think about that a second, everything we have, do, are, is because of cheap energy, almost too cheap to meter. Reduce that almost free surplus and the entire economy shrinks.


Gail had a good article the other day on renewables.
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby AgentR11 » Wed 27 Mar 2013, 10:19:36

Pops wrote:All investments are overvalued because FFs provide such a large surplus of virtually free energy. Think about that a second, everything we have, do, are, is because of cheap energy, almost too cheap to meter. Reduce that almost free surplus and the entire economy shrinks.


My read is that some investments are overvalued because of cheap FF, and some are *radically* undervalued. I'd suggest that any investment which turns FFs into a durable infrastructure asset, radically understates the book value of those assets. Given that our finance system has come full out on the print side, we can now say with certainty that as long as dollars are used to assess and collect tax from US residents, there will be no deflationary stall; that eliminates the one risk to the durable asset; on the other side, as the FF currency equivalent of its human labor amount rises with the increasing rarity of the FFs available, those assets which were built with cheap FFs retain their FF equivalent value, and thus greatly increase their book dollar value.

That bridge, warehouse, or asphalt road into town are about to become appreciating assets as stated in US$. The plastic, disposable widget maker on the other hand is about to get hosed... badly.
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Graeme » Wed 27 Mar 2013, 19:27:00

Pops, The bottom line is that we have to move away from fossil fuels asap otherwise we will not have a habitable planet to live on. What Gail has described is exactly what the fossil-fuel industry wants to hear. Lets keep us addicted to ff because there is nothing else. Well, she (and they) is (are) wrong. What she said is actually misleading and perhaps naive. I don't have access to all decisions being made about energy policy in business or government either. So I'm not sure that I can answer this question in one impromptu post but let me try.

Firstly, the 2004 fuel share of world total primary energy supply supply is closer to 14% if you include combustible renewables and waste (figure 1), and the 2004 renewables in electricity production is about 18% (figure 5, page 5). You can be sure that since 2004, the proportion of renewables in primary energy supply and electricity production has risen. Of course, these proportions vary from country to country (Table 1).

Secondly, the future outlook for renewables is what Gail ignored. I posted this figure in the "Victory at hand for the climate movement" thread. I'll re-post it here in case you missed it. In theory, the world could reach 100% renewable electricity supply by 2020 because solar and wind installations are growing exponentially and the current installed global electric power is around 2 TW.

Image

I have seen roadmaps for 100% renewable energy installation by 2050 by several groups including Greenpeace and the European Renewable Energy Council, WWF and Stanford University. A lot of people know that switching to renewables is possible in a short time frame. This is what the IEA said about renewable energy growth:

A steady increase in hydropower and the rapid expansion of wind and solar power has cemented the position of renewables as an indispensable part of the global energy mix; by 2035, renewables account for almost one-third of total electricity output. Solar grows more rapidly than any other renewable technology. Renewables become the world’s second-largest source of power generation by 2015 (roughly half that of coal) and, by 2035, they approach coal as the primary source of global electricity. Consumption of biomass (for power generation) and biofuels grows four-fold, with increasing volumes being traded internationally. Global bioenergy resources are more than sufficient to meet our projected biofuels and biomass supply without competing with food production, although the landuse implications have to be managed carefully. The rapid increase in renewable energy is underpinned by falling technology costs, rising fossil-fuel prices and carbon pricing, but mainly by continued subsidies: from $88 billion globally in 2011, they rise to nearly $240 billion in 2035. Subsidy measures to support new renewable energy projects need to be adjusted over time as capacity increases and as the costs of renewable technologies fall, to avoid excessive burdens on governments and consumers.


Incidently, the IEA also mention that energy efficiency will buy us time to make this energy transition.

There are difficulties which I can only touch on here. First the issue of energy storage. I have a thread devoted to this issue so it is clear to me that it is being addressed. Gail mentioned high electricity prices. The world could copy what is being implemented in Germany now.

Minister Altmaier claims that rising electricity bills are the biggest barrier to the Energiewende because they undermine public approval. He aims to prevent future price increases by addressing the EEG Apportionment (EEG Umlage) that finances the feed-in tariff scheme. He therefore proposes the “Strompreisbremse” (electricity price emergency brake – this word has caught on surprisingly well in German media) to freeze the apportionment, claiming to thus prevent a 10% increases in electricity prices this fall.

The apportionment is a surcharge on the electricity price that (most) consumers pay to finance the FIT. The money collected from the apportionment is used to guarantee renewable energy producers a profitable price for 20 years — based on the costs of the particular renewable technology, regardless of the market price (this system is called Advanced Renewable Tariff). This Advanced Renewable Tariff system is the newest and most sophisticated version of FITs that incentivizes renewable energy deployment even at small scale. For example, in 2010, 51 percent of renewable energy capacity built under the FIT was owned by individuals and farmers, coining the term democratization of energy supply in Germany.


Finally, I just saw this morning an important report by the IMF who state that climate change can be fought be eliminating fossil fuel subsidies. I'll post this in a separate thread.
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Pops » Wed 27 Mar 2013, 21:43:24

Graeme wrote:Pops, The bottom line is that we have to move away from fossil fuels asap otherwise we will not have a habitable planet to live on.

Replace FF with renewables? – Gah! Why didn't I think of that!

LOL, sorry.

Thanks for that post G but come on, it's me, Pops. I have no doubt we are going to use less FFs, why do you think I've posted here 12,000 times? You accuse Gail and me of being naive and shilling for the oil companies while you are dishing a rainbow stew of PV and wind with maybe a little short term "conservation" needed to get us over the hump into renewable nirvana?

Who's being naive?

My position has always been that a pre-emptive adaptation to a much lower energy intensive lifestyle is the only mitigation for either PO or GW, whether individually or societally. It isn't pretty and few will do it voluntarily but the choice is do it now voluntarily and learn how to live a full life or do it later when forced.

Thinking that we'll all of a sudden decide on a rapid conversion to renewables because Treehugger runs a convincing post with a fantasized timeline is just as bad as ignoring the entire situation because neither are reasonable. You are placing blissful ignorance with blissful optimism. Come on, 100% by 2020? I don't want to be disrespectful, you are a great contributor here and I appreciate the long post but that is ridiculous. Why even make a goal that is unreachable and bound to fail?

Even the EU, way out in front of most regions, are not going to make their target of only 20% renewables by 2020.

Posting increases in PV generation in MW is misleading because as I said before it barely registers on the global energy scale. The IEA blurb is comforting, they are designed to be I think, sort of the Chamber of Commerce of the world. Here was their Outlook in 2011:

Image
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Graeme » Wed 27 Mar 2013, 22:29:32

Pops, I meant that Gail was being naive, not you. She was playing into the industry hand by quoting a BP report which stated that renewables only account for about 2% of primary energy supply. That is not the case.

Of course I know that we won't reach 100% renewables by 2020. I said "in theory", meaning we are on track to do so if renewable growth continues to be exponential. But as you know there will be quite a few obstacles to overcome before we reach there. We will get there eventually. We have no choice but that is not the way the "industry" sees it. That it what the battle is all about.

Obviously, I haven't read all your 12000 posts nor have you read mine. But I do appreciate you backing me up in the "oil's tipping point has passed" thread. Thanks.

You mentioned a "lower energy intensive lifestyle". Does that also incorporate using energy more efficiently including fossil fuels? If so, then this will help us reach our 100% renewable energy goal.

In view of the role of this forum, do you seriously believe in the IEA forecast?
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Graeme » Thu 28 Mar 2013, 02:43:51

I liked Arthur75's post in the Laherrere thread.
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Pops » Thu 28 Mar 2013, 11:38:30

I actually didn't know how carbony we were so I took this quiz and came up with about 15k lb/yr for the 2 of us compared to the average of over 40k so I guess that's good.

What the quiz didn't ask was the age of our house, which is 100; the age of our vehicle: 15; how many January tomatoes we have flown in from Peru: none; how many carbon based gee-gaws we buy: few (comparatively). More than all those questions I think, the question of how much money one spends is a direct indication of how big is their "footprint". I make as little money as I can get away with so I buy as little carbon based stuff as I can, I grow as much food as I can and am a junk collector recycler/repurposer par excellence. I think those are at least as important as miles driven.

I'm not sure what you mean by believing the IEA forecast. I don't believe anyones forecast because there is not enough believable geologic data and too many non-geologic factors to make any kind of guess. But what I do believe is the IEA WEO set back PO and GW mitigation by 10 years - here is how it was reported by a major US nightly network newscast:
They [IEA] predict the u. S. Will be energy independent by 2030.
And become the world's largest exporter of oil, surpassing, counties like saudi arabia, venezuela, nigeria and even iran.
diane-sawyer-us-will-be-largest-exporter-t67702.html#p1138483
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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Graeme » Thu 28 Mar 2013, 17:58:43

I took the quiz too. Our household (3) uses 5K after taking "actions" again not to bad considering US average. It would be even better if we didn't have to drive gasoline-powered cars. NZ is just starting to introduce electric vehicles - no sign of them in car lots where I live. I saw an excellent analysis of electric cars on the Top Gear UK programme a few days ago. Jeremy, James and Richard do not like them mainly because they took around 12 hours to recharge, and they didn't like the expensive replacement cost for battery nor the initial price for the car. Their conclusion was that better batteries will have to be introduced otherwise these cars will not be widely adopted. Then at the end there was a single throw-away line that hydrogen cars would provide better range. Wish I could their show on these cars.

Of course the IEA prediction is wrong - I'll quote the report Arthur posted:

As in previous years, the International Energy Agency (IEA) in its latest World Energy Outlook 2012 (WEO 2012) projects a rising global oil demand and supply in the coming decades. The IEA explicitely asserts that for the forseeable future – to 2035 and beyond – no geological or technical restrictions will prevent a continually growing oil supply. The media were echoing this report by emphasising the likelihood of a global oil and gas supply glut triggered by new production technologies in the USA, while ignoring possible geological supply restrictions.

In contrast to the projections put forward by the IEA, in 2008 the Energy Watch Group(EWG) had published a report on the future world oil supply, presenting a scenario projecting a significant decline of global oil supply in the coming decades up to 2030. It is the intention of this new report to update these findings by analysing the developments which took place in the last five years and thereby to arrive at an enhanced understanding of the conditions determining present and future oil supply.


Empirical data shows that world oil production has not increased anymore but has entered a plateau since about 2005. The production of conventional oil is already in slight decline since about 2008. The peaking of conventional oil is now also accepted by the International Energy Agency. Present and future efforts by the oil industry are directed at upholding this plateau as long as possible while at the same time having to struggle with the growing decline of production in ageing fields. It is becoming increasingly more difficult to compensate this reduction by developing new fields which are getting harder to find, smaller, and are of poorer quality.


Back to topic of thread.

Fossil Fuels Divestment Fever: Canadian Students, Doctors Launch New Campaign

Calls in the United States for universities to divest their fossil-fuel holdings are starting to spread into Canada, where students and doctors are beginning to speak out.

Students from across the country are taking part Wednesday in what’s being called Fossil Fools Day, described as the first national day of action for the Fossil Free Canada campaign, an initiative being led by the Canadian Youth Climate Coalition.

More than a dozen Canadian university campuses are planning marches and rallies in an effort to urge their university administrations to divest their endowments from fossil fuel and pipeline companies. Many already have active campaigns.


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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Graeme » Thu 28 Mar 2013, 18:28:48

Just to indicate that Canada doesn't have to rely solely on ff.

Canada Could be a Green Energy Goliath

Canada has many times more energy in untapped wind, solar and hydro resources than it ever will from the Alberta tar sands a new report released today finds.

"Canada could be the world's green-energy superpower, the potential is nearly limitless," says Tyler Bryant, an Energy Policy Analyst at Vancouver's David Suzuki Foundation. "We have more than enough to meet our current and future needs," Bryant said in interview.

In fact Canada has far more green energy than it could ever use according to the report "An Inventory of Low-Carbon Energy for Canada."

"This is a long-overdue look at how much green energy potential Canada has," he said.

The report is part of the Trottier Energy Futures Project, partnership between David Suzuki Foundation, the Canadian Academy of Engineering, and the Trottier Family Foundation. The project is looking at how Canada could reduce its energy-related carbon emissions by 80 per cent by the year 2050, based on emissions in 1990.

"There are no physical limitations to prevent Canada from becoming a low-carbon society," said energy expert Ralph Torrie, managing director of The Trottier Energy Futures Project.

"Our renewable energy resources are enormous," Torrie told DeSmog Canada.

The biggest challenge is integrating all this largely de-centralized renewable energy into existing electricity grid. However the 'smart grid of the future' already has its toe in the door. Companies like IBM and Google see energy use as a 'data problem' and are investing heavily in smart energy technologies he says.


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Re: Fossil Fuel Investment Spells 'Carbon Bubble' for Market

Unread postby Graeme » Thu 28 Mar 2013, 18:56:14

Well, this is a very interesting development. Is it the beginning of the end for tar sands? Not according to the industry.

Total says oil sands rethink doesn't signal long-term doubt

This week's decision by Total SA's and Suncor Energy Inc to abandon a multibillion-dollar project to upgrade bitumen produced in the Canadian oil sands before shipping it abroad won't be the last rethinking of a capital-hungry oil sands project in a harsher economic climate.

But the chief executive of Total's Canadian unit said on Thursday he expects the problem of transport bottlenecks now plaguing the northern Alberta oil sands to be ironed out by the time his company starts up vast new mines in the region later this decade.

France's Total and Suncor, Canada's biggest oil producer, pulled the plug on the Voyageur upgrader on Wednesday because returns would not be high enough to justify the project, which would have transformed tar sands bitumen into lighter oil that can be more easily used by traditional refineries.

The companies have not said how much the upgrader would have cost, but analysts pegged the project at more than C$14 billion ($13.8 billion).

Total's Andre Goffart told Reuters that the partnership with Suncor is still solid as the companies evaluate the remaining projects in their joint venture: the Fort Hills and Joslyn oil sands mines, which will now produce bitumen diluted with lighter hydrocarbons instead of upgraded synthetic crude. The most recent start-up estimate for Fort Hills was 2017.

"If you look at the short term, those projects would be challenging because of the monetary netback we see right now because of the pipeline constraints," Goffart said.

"However, within the time frame we're looking at for both mines, we should have the logistical issue resolved, and we should see a more normal netback for bitumen... Taking into account those changes, both projects would be economically justified."

The partners are expecting to make a decision on whether to go ahead in the second half of this year, he said. Suncor has said it will provide cost details by the end of June.


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