Energy Security

Greenpeace report challenges Canada’s need for dirty, risky fossil fuels

jessie — Thu, 09 Sep 2010 09:14:58 -0700

Greenpeace report challenges Canada’s need for dirty, risky fossil fuels

9 September 2010 (Toronto) — Greenpeace today released a comprehensive analysis of Canada’s energy potential that challenges the need for dirty oil from the tar sands and shows that Canada can create tens of thousands of green jobs, while providing over 90 per cent of the country’s electricity and heating needs from renewable sources by 2050.

“Greenpeace worked with energy experts to show how Canada can break its addiction to dirty tar sands oil, coal and gas and save consumers $5.3 billion a year by investing in renewable energy and energy efficiency,” said Keith Stewart, Greenpeace climate and energy campaigner. “We challenge the oil industry and governments to lay out their plan for protecting Canadians from climate change and rising costs for fossil fuels. It’s past time for this debate.”

The new research is in a report, Energy [R]evolution: A Sustainable Energy Outlook for Canada, prepared by Greenpeace and the European Renewable Energy Council (EREC) in conjunction with dozens of experts around the world (1). It shows that:

· Low-impact renewable energy can supply 96 per cent of electricity and 92 per cent of our total heating needs by 2050.

· Renewable sources of energy would rise from 15 per cent of Canada’s primary energy demand today, to 25 per cent by 2020 and 74 per cent by 2050.

· Primary energy demand would drop by 50 per cent through aggressive energy efficiency measures and reliance on wind, sun and other cost-free fuels,

· Canadians would save about $135 per person a year or $5.3 billion on average on their energy bills over the next 40 years, as we use less energy and switch away from increasingly costly fossil fuels,

· The market for the dirty oil of the tar sands could be eliminated through a global scenario of investments in public transit, more efficient vehicles and a rapid shift to electric vehicles that would reduce the world’s demand for oil by 25 per cent by 2030 and 66 per cent by 2050,

· About 77,000 jobs would be created in Canada in the renewables sector alone by 2030, as part of a global expansion of 12 million jobs,

· Energy-related greenhouse gas emissions in Canada would drop by 21 per cent by 2020, and by 95 per cent by 2050,

· Canada would cut its greenhouse gas emissions to the levels international scientists say would protect people from the catastrophic climate change now threatening millions,

· Canada could make a fair contribution to reductions in greenhouse gas emissions in developing countries, in line with our historic responsibility for creating the problem and capacity to pay.

"Unlike other energy scenarios that promote energy futures at the cost of the climate, our energy revolution scenario shows how to save money and create good, green jobs without fuelling catastrophic climate change," said Sven Teske, Greenpeace energy expert and co-author of the report.

“Canada has vast renewable energy potential that can replace expensive and unsustainable fossil fuels and nuclear,” said Christine Lins, Secretary-General of the European Renewable Energy Council, the world’s largest industry association for renewable energy. “The renewable industry is ready and able to deliver the needed capacity to make the energy revolution a reality. There is no technical impediment, only political barriers to rebuilding the global energy sector."

At present Canada’s continued reliance on fossil fuels is part of a global problem that makes massive climate change almost certain to occur, leading to irreparable damage to the planet. This dire future can be avoided through the Energy [R]evolution with major investments in energy efficiency and renewable energy.

“There is no future for the tar sands in a world that is taking action on global warming," said Dave Martin, Greenpeace climate and energy campaigner. "The good news for Canada, with its wealth of renewable energy resources, is that there are a lot more jobs in stopping global warming than in fuelling it."

- 30 –

Notes:

1. The report was prepared by Greenpeace and the European Renewable Energy Council (EREC), in conjunction with specialists from the Institute of Technical Thermodynamics at the German Aerospace Centre (DLR), the Dutch Institute Ecofys and more than 30 scientists and engineers from universities, institutes and the renewable energy industry around the world.
2. A brief backgrounder, the executive summary of the report and the full report are available at: www.greenpeace.ca/enrevcan Download warning: the full report is more than 9 megabytes.

For more information:

Brian Blomme, Greenpeace communications coordinator, (416) 930-9055
Keith Stewart, Greenpeace climate and energy campaigner, (416) 985-5936
Sven Teske, Greenpeace International Energy [R]evolution campaign, +49 171 878 7552

Oil-sands protest greets Nancy Pelosi on Parliament Hill

jessie — Wed, 08 Sep 2010 14:23:44 -0700

Oil-sands protest greets Nancy Pelosi on Parliament Hill

Environmental groups are demanding that Alberta’s Premier apologize for misleading Canadians over his province’s environmental record on the oil sands.

Wednesday, September 8, 2010 4:29 PM

Jane Taber, Globe and Mail

Photo: Globe and Mail

The increased pressure comes as Ed Stelmach and other premiers prepare to meet with one of the most powerful officials in the Obama government, House of Representatives Speaker Nancy Pelosi, on the oil sands issue Wednesday night.

“Frankly, the level of trust of government and industry claims regarding the environmental performance of the tar sands is very low,” Rick Smith, executive director of Environmental Defence, told reporters Wednesday afternoon.

The conference call was held in advance of a meeting between Ms. Pelosi and environmental NGOs on Thursday. Her visit is attracting a lot of attention, pitting environmentalists against industry and governments over the impact on climate and habitat of oil sands production.

A strong environmentalist, Ms. Pelosi is also here to talk about energy security. Wednesday evening, she is to have dinner with Mr. Stelmach as well as Saskatchewan Premier Brad Wall and Quebec’s Jean Charest.

Mr. Smith, meanwhile, said one of the reasons for the conference call was “particularly galling” comments by Mr. Stelmach in which he said he will reason with Ms. Pelosi about the “environmental improvements” being made in the oil sands.

The environmentalist accused the Premier of misleading the public, pointing to a recent study that “caught out” the government on its suggestion pollution in the Athabaska River is natural and not caused by oil-sands production.

Toxic levels of mercury, arsenic, lead and other pollutants have been found in the river, Mr. Smith said. Some were found at levels that exceeded Canadian and Albertan guidelines for the health of aquatic life.

“So for misleading the public, for choosing PR over effective environmental enforcement and for ignoring the best available science, we think that Premier Stelmach owes Canadians an apology.”

There is also concern with the possible approval of a new cross-border pipeline called Keystone XL. Liz Barratt-Brown, senior attorney for Natural Resources Defense Council, warned that it threatens the drinking water of over two million Americans.

There are concerns, too, with oil spills after the disaster in the Gulf of Mexico and the more recent Enbridge pipeline leak in Michigan. Ms. Barrat-Brown cautioned that U.S. dependence on “tar sands oil” will have detrimental impact for both countries for years to come.

Outside, meanwhile, protesters opted to send a message to the Conservative government and Ms. Pelosi through agit-prop. In a demonstration organized by the Rainforest Action Network and LUSH Cosmetics, a model draped in the Maple Leaf was doused in molasses as others waved placards decrying “dirty oil” and declaring Parliament Hill a “global warming crime scene.”

The Canadian Press

Protesters gather on Parliament Hill to demonstrate against the Alberta oil sands ahead of a visit by U.S. House of Representatives Speaker Nancy Pelosi on Sept. 8, 2010.

http://www.theglobeandmail.com/news/politics/ottawa-notebook/oil-sands-p...

Oilsands backlash hits Alberta

jessie — Tue, 20 Jul 2010 10:10:29 -0700

Oilsands backlash hits Alberta

By Gillian Steward, Toronto Star --

The anti-oilsands campaigns south of the border have really revved up over the past few weeks. And it doesn’t look as though they are about to stop any time soon.

In early June in Bellingham, Wash., just across the B.C. border, the city council voted 7-0 in favour of a resolution to reconsider what sort of fuel Bellingham buys for its fleet vehicles. The resolution fingers “high carbon fuels such as those derived from the Canadian Tar Sands” as the kinds of fuels that should be replaced.

The resolution is largely symbolic, since the city of 76,000 is locked into its current fuel supply contract until 2015, but it highlights the spreading political pressure on oilsands producers and the Alberta government.

Less than a month later, 50 U.S. congressmen made a case that the $12 billion Keystone XL pipeline expansion should be put on hold. The pipeline is expected to carry oilsands crude from Hardisty, Alta., to Monchy, Sask., before heading into the U.S. midwest and eventually Texas. The U.S. politicians argued it would double consumption of Alberta crude and pay no heed to the potential impact on climate change. Their concerns were echoed a few days later by Henry Waxman, chair of the U.S. Congress’s powerful energy and commerce committee.

Premier Ed Stelmach immediately offered a counter opinion to the Washington Post, which refused to publish it. So he took out a full-page ad that cost $56,000.

Stelmach’s ad opens with the comment: “A good neighbour lends you a cup of sugar. A great neighbour supplies you with 1.4 million barrels of oil per day.” He also points out that Canada is a much more reliable supplier than Saudi Arabia, Venezuela, Nigeria, Iraq, Angola and Algeria.

But the attack that outraged Albertans the most was the one launched by a coalition of environmental groups operating under the umbrella of Corporate Ethics International, a San Francisco-based NGO that promotes ethics in business by publicly embarrassing companies deemed unethical.

Called Rethink Alberta, the campaign features YouTube videos, billboards and a website which urge tourists to reconsider a trip to Alberta’s famous mountains and lakes because Alberta is also home to the world’s largest and dirtiest oil extraction projects.

The video is clever in that it effectively juxtaposes all the stunning landscapes, wilderness and wildlife that Alberta is famous for with gloomy, lifeless and earth-scarring images of oilsands production. And, of course, images of ducks drowning in the toxic glue of a tailings pond. Although there was a factual error in the Rethink Alberta video (which was corrected), it’s hard to counter those vivid images with factoids and rational arguments about what the industry has done to clean up its act.

Some commentators here have slammed the Rethink Alberta campaign as yet another example of hypocritical Americans, given that no one there is suggesting a boycott of Louisiana or Florida because of the disastrous BP deep-water blowout.

But the coalition behind this campaign features Canadian environmental groups, not just U.S ones. They include the Polaris Institute, and Forest Ethics, which just happens to have an office in Bellingham, as well as San Francisco, Vancouver and Toronto.

There’s no question that Stelmach and the energy industry are much faster on their feet then they used to be when it comes to defending the oilsands. But if the pressure keeps up, they may soon have to dance even faster.

Canadian Centre for Sustainable Living Opens in Windsor, ON

jessie — Mon, 21 Jun 2010 13:17:52 -0700

Canadian Centre for Sustainable Living Opens in Windsor, ON

Media Release

For release June 16, 2010

Canadian Centre for Sustainable Living Opens in Windsor, ON

Windsor, ON – Effective July 1, 2010, the Canadian Centre for Sustainable Living (CCSL) will be opening its doors in Windsor, ON. The initial focus for the Centre is to deliver high quality education and community awareness programs focused on renewable energy technologies. Some of the programs available were previously offered through the Renewable Energy Technology Center. Robin Easterbrook, founder of CCSL, said “I felt that it was important to remove education programs from an association with a commercial enterprise in order to ensure a balanced approach to the technologies available. Further, it is important that Windsor have access to education focused on more than just solar technology. For example, CCSL will soon have program offerings for small wind, and geothermal technologies as well.”
The first program offering through CCSL will be a class for trades people or those with some “hands-on” skills who are looking to gain design and installation experience in solar photovoltaic (solar PV) systems. The first offering of this class will take place July 5 – July 9. The class totals 40 hours of classroom time and is fully compliant with the standards of the North American Board of Certified Energy Practitioners (NABCEP) and the Canadian Electrical Code. Graduates of the exam will be ready to challenge the NABCEP solar PV basics exam which will be offered in Windsor for the first time following the conclusion of this class. Cost of the class is $2,495.00 plus applicable taxes and includes the examination fee. This is the first time such a class will have been offered in Southwestern Ontario to general members of the public or the solar PV industry.
“Given the growth in the number of solar PV installations happening in Ontario at the moment, it is almost criminal that people with no qualifications or only marginal experience are being allowed to work with these systems” said Easterbrook. “Anyone considering a residential or commercial installation of a solar PV system should demand that their installer have this type of education. Better system design leads to optimal system performance and better installation processes lead to a safely installed system with long life.”
This first class is limited to 20 participants and is expected to fill up quickly. Registration is through the Center’s website www.cdncsl.com after June 21. Alternately, people can reserve space by calling CCSL at 519-791-4096.

The Canadian Centre for Sustainable Living is located at 1680 Kildare Road in Windsor, ON.

For more information about CCSL, contact:
Robin Easterbrook
Telephone: 519-791-4096
Fax: 519-254-5442
e-mail: reasterbrook@hotmail.com

- 30 -

Oil spill to upset crude's price balance

jessie — Mon, 03 May 2010 10:26:01 -0700

Oil spill to upset crude's price balance

Peter Tertzakian, Calgary Herald, May 3, 2010--Maybe I was the only one on the flight from Florida to Texas last week feeling the irony of the situation. Hugging the Gulf of Mexico coastline for most of my otherwise routine business trip, I thought of the contradiction below: The jet fuel that was being consumed to coincidentally fly me over the disastrous BP oil spill probably originated from an offshore oil well in the nearby region.

To be sure, such events remind us, implicitly, that we live in a conflicted society that goes to the ‘ends of the earth’ to drill for the oil that promotes the way we “live, work and play,” under a long shadow of environmental, geopolitical and economic consequence. No doubt, the widening BP oil slick, reportedly spewing uncontrollably at a rate of 5,000 barrels per day from the ocean floor, will heighten our sense of this inner societal conflict. The markets will feel the conflict too, likely pushing oil prices higher over the near term, and triggering bigger changes longer term.

Oil prices in the $75/B to $85/B range over the past nine months have led to a quiet, multi-party balance. Consumers within this price range are not quite screaming at the pumps, governments have been tending to other matters, and oil producers have been content that their financial hurdles are being met at the cost margins, even at the ends of the earth. The worsening ecological disaster in the Gulf of Mexico upsets this balance.

A stronger oil price over the next 12 to 24 months was already looking probable, but now the time fame is likely going to come forward as markets perceive costlier and scarcer supply sources. Yet rising price will also reinforce the ultimate consequence of this disaster, which will be a redoubled effort by fully industrialized economies like the United States to try to “get off oil” over the longer term. Potentially significant advances toward that effort – whether it’s the adoption of direct petroleum substitutes, efficiency gains or the mitigation of demand – now have greater chance to accelerate as early as mid-decade. Such a ‘break point’ in the oil complex was already percolating; gauging the magnitude of this environmental disaster over the next few weeks will dictate how much faster the agenda of long-term change accelerates.

Aside from oil sands, offshore drilling is where most of the world’s incremental oil barrels now come from, and it’s those higher-cost marginal barrels that set price. Indeed, a large fraction of the world’s growing oil needs since the early 1990s has come from the discovery of new, deep offshore reservoirs. The trend, which is global, is best illustrated with data from the US Gulf of Mexico. Figure 1 shows the components of US monthly oil production between January 1981, and the end of 2009.

Top line oil volumes peaked in the mid-1980s and then started a long declining trend. The United States has been producing commercial quantities of crude oil for over 150 years, so it’s no surprise that onshore oil fields, the top wedge in Figure 1, would ultimately succumb to maturity. Onshore scarcity, geopolitics and new technology facilitated migration to deep offshore resources in the early 1990s, with production volumes from the Gulf of Mexico rising in the latter part of the decade (the bottom wedge in Figure 1). The sharp dips you can see in recent years are hurricane disruptions. But note how offshore US production really began to ramp up in the last couple of years, leading to the first overall rise in domestic America oil supply since the 1980s. Unbeknownst to most, the US has been a significant contributor to new oil supply over the past 18 months or so.

It’s no wonder the Obama administration, and other constituents who are determined to “get off foreign oil,” were eager to open up hitherto protected areas of offshore exploration. The volume increases from environmentally sensitive regions like Alaska and Florida are potentially significant contributors to the nation’s oil supply, if not the world.

Of course now there is a halt to offshore oil exploration in restricted areas. Drilling in areas already open for business will continue, but with heightened attention to safety, greater aversion to risk, more regulatory scrutiny, and more opposition from those affected – for example, fishermen. All of these factors translate into greater exploration and development costs and longer lead times to production. Of course this tragedy in the Gulf of Mexico won’t stop oil drilling in the deep waters off the shores of Brazil, Africa, India, China and even the North Sea to name a few of the extreme regions that the industry explores. But these places are not cheap to drill for each of their own circumstances, whether for technical, environmental or political reasons.

A seemingly insignificant 5,000 barrels per day of rogue oil, on 86 million barrels per day of global consumption, is going to cause a lot of change sooner than expected. We shouldn’t be surprised, because history shows that the way our society consumes its energy, and the way that our society is supplied its energy, always changes due to factors we least expect.

Shell puts oil sands expansion plans on hold

jessie — Thu, 29 Apr 2010 06:24:00 -0700

Shell puts oil sands expansion plans on hold

Nathan VanderKlippe and David Ebner, Globe and Mail, April 29, 2010--Costs to build in the oil sands have grown so high that one of the world’s largest energy companies plans to wait at least five years – perhaps much longer – to expand its presence there.

The oil sands have become one of the most costly places on earth to pursue oil projects, said Marvin Odum, the Americas head for Shell (RDS.A-N62.591.522.49%).

As a result, the company will delay any decisions on expanding its Athabasca Oil Sands Project (AOSP) until at least the second half of this decade, and will focus instead on wringing more production out of its existing facilities.

That process could increase its production, which will hit 255,000 barrels a day later this year, by a further 30,000 to 80,000 barrels per day, Mr. Odum said.

“We certainly have seen the cost environment in Alberta go up considerably,” he said in an interview with The Globe and Mail editorial board on Wednesday. “We see the ability for lower investment levels to bring more production online over the next four, five, six years.”

It is Shell’s most definitive declaration that it is retreating from one of the grandest growth schemes in the business. In 2007, as its current 100,000-barrel-a-day expansion began, Shell talked about eventually mining almost 800,000 barrels of bitumen a day. Now, the oil sands are very much a next-decade resource, as Shell instead chases offshore oil in Alaska, the Gulf of Mexico and Brazil.

The first 155,000-barrel stage of AOSP was hugely profitable for Shell, spinning out a per-barrel profit 66-per-cent higher than its other producing assets and paying back its capital costs in just five years at oil prices in the mid-$50s (U.S.).

But the company’s expansion, which will enter production this year, has been far more costly. Shell was one of the few companies to continue oil sands construction – both through the height of the boom and the subsequent crash – and saw expansion costs climb from $9.4- to $12-billion in 2006 to $14.3-billion earlier this year.

The expansion will now require an oil price of $70 to $75 to turn a profit, making it “some of the most expensive production that we have,” Mr. Odum said.

Shell internally forecasts future oil prices between $50 and $90 – a range that potentially excludes the oil sands, and makes other global projects more attractive unless the company can find a way to beat back costs.

Shell will only commit “to watch the market and see when is the next time to commit to the next major expansion of the oil sands,” Mr. Odum said.

In the meantime, it is looking for ways to beat back costs, both through project design and through securing longer-term contracts with suppliers and construction firms.

Chevron Corp. and Marathon Oil Corp. each own 20 per cent of AOSP – one of several major oil sands operations that have come under assault for their environmental record, which includes scarring the landscape and using large quantities of water and energy.

Mr. Odum defended the industry’s record on greenhouse gas emissions, which he called “not ridiculously high,” but said companies have done a poor job of making that point.

“Industry needs to do a lot more in terms of getting out and being more transparent and very clear about what is truly involved in these operations,” he said.

In the meantime, Shell supports the idea of building a West Coast pipeline that would open access to Asian markets, a project proposed by both Enbridge Inc. and Kinder Morgan Canada.

“Typically the more options you have for distribution of your product, the better,” Mr. Odum said.

And the company has research teams across the continent looking at ways to refine extraction techniques, he said, even holding out the possibility that bitumen could become a relatively green source of energy.

Mr. Odum said he has challenged his research teams to make oil sands crude less greenhouse gas-intensive than conventional oil, making it “a preferred [resource] from a CO2 and water standpoint.”

Oilsands flowing south

jessie — Wed, 03 Feb 2010 17:09:16 -0800

Oilsands flowing south

Dina O'Meara, Calgary Herald, Feb. 3, 2010--Oilsands will continue to be needed to meet growing energy demands, with thermal recovery schemes taking over from mining operations, industry officials said at a conference in Calgary.
At the same time, heavy oil and bitumen volumes will travel south to existing refineries, boosting demand for diluent, an agent used to enable the sticky resource to flow on pipelines.

In the past 18 months, the price differential between heavy and light oil has narrowed to around $10 per barrel from $25, squeezing refinery margins and pushing back upgrading projects. The list of oilsands projects has been increased in the past month unaccompanied by a similar number of upgraders, analyst Stephen Fekete, with Purvin and Gertz, said Tuesday. Fekete noted that while production from the oilsands will be growing, upgrading and refinery capacity in Alberta is not.

"The list of projected upgraders is as long, but with the exception of a couple, most remain deferred or cancelled," he told an audience at the Insight conference. The situation already is leading to a diluent supply gap between what will be required to thin heavy oil for shipping and what is available, he said.

The light-heavy-differential squeeze raises interesting issues around pipeline capacity as production in the oilsands ramps up, added Steve Reynish, president of Marathon Oil Canada Corp.

"We do have mining and upgrading in our existing facilities and our expansion has mining and upgrading as well," he said. "Beyond that, we would consider looking at mining only and maybe taking the drillbit south of the border to any upgrading refining that already exists. The economics, at this point in time: the brownfield expansion of existing refineries looks like the cheaper option than the greenfield upgrader."

On Monday, Marathon announced it was cutting its oilsands capital budget by 32 per cent to $668 million, partly due to partner Royal Dutch Shell's holding back on investing in a second expansion phase of the 155,000-barrel-per-day Athabasca Oil Sands Project.

Thermal operations, where the bitumen is heated to a consistency where it can flow rather than be mined, are the future of Alberta's oilsands, said industry representative Pat Nelson.

Nelson, a former provincial energy and finance minister, is now the vice-chairwoman of the In situ Oilsands Alliance, a six-member group of oilsands developers using emerging technologies to squeeze bitumen from the Alberta sands.

"The future, in my view, is in situ," she said. "Only two per cent of our oilsands resources can be mined; the balance has to be developed through in situ processes."

Industry association spokesman Greg Stringham agreed that promoting a positive vision of Canada's oilsands needs to be addressed, but added the resource will continue to have a market.

Canadian oil will be needed by the United States to fill the gap of reduced volumes coming from Mexico and Venezuela, even in a flat demand scenario, said Stringham, spokesman for the Canadian Association of Petroleum Producers.

Production growth from the oilsands is seen as flattening for the next few years until major project expansions kick in fully and smaller projects come on board, he told the audience.

Rights to the Pipe

jessie — Wed, 03 Feb 2010 12:31:04 -0800

Rights to the Pipe

Lindsey Bright, Sidney Herald, February 2, 2010--For the past months, drilling activity has been on the rise in Montana, and as it has been for the past two years, a roar can be heard from the Bakken in North Dakota.

As Montana Gov. Brian Schweitzer said, Currently, there are only two American states that have consistently continued to increase their production, and that’s North Dakota and Montana. However, despite this increase, there’s something troubling to the oil and gas producers, the landowners and the governing bodies of the state – the market differential of Bakken crude is too great.

“During its height in 2008, there was a difference of $23,” Continental Resources President Jeff Hume said. Currently, the price is much lower, Harold Hamm issuing a statement last week saying it is $8 to $12 per barrel, and that’s a price that adds up even with oil at a fairly steady price of about $70 per barrel.

This difference means Bakken producers will receive $63 or so as compared to $73. Where the difference comes in is the lack of suffecient infrastructure for Bakken producers to ship their product to market. This means there’s not enough room in the pipeline systems, and not enough pipelines to easily ship the crude oil.

The common thought is that once the oil is extracted it goes straight into a nice pipeline that will soon send it directly to a refinery. However, that’s not how it goes in the Montana or North Dakota Bakken. Companies have built rails, tracks, and must truck their product either to a refinery or to a tap, “on ramp,” of a pipeline that is going to the proper market.

TransCanada, a Canadian pipeline company, has proposed an expansion to its current Keystone pipeline system, which mainly serves producers of the Alberta tar sands.

“The first purpose of the Keystone XL pipeline system is that it can grow the oil source in Canada with increase in demand in the U.S.,” Jeff Rauh, the project representative for the Keystone XL, said.

The current pipeline starts in Hardisty, Alberta goes through Saskatchewan, down eastern North Dakota and ends in Cushing, Okla., or Patoka, Ill. The proposed Keystone XL pipeline will start in Hardisty but this time cut through eastern Montana, right through Bakken territory, and continue all the way to the markets on the Gulf.

The oil the pipeline will be carrying, as of right now, is Alberta tar sands, mined and extracted by Canadian producers.

“The problem is they [TransCanada] forgot to ask us,” Gov. Schweitzer said.

A praise that had been made in reference to this proposed pipeline system was that by giving the tar sand a new avenue to get to market, then room in other pipelines would be made. So, Bakken producers would have their oil highway – the bottleneck would be relieved.

“That logic is flawed,” Schweitzer says, believing instead as the avenues for tar sands widen, the Canadian producers will increase their production, filling both Keystone XL and Enbridge.

Now, the Keystone pipeline system is a common carrier system. “Any shipper interested can sign a contract for capacity on the pipeline,” Rauh said.

The process seems straightfoward and formal – a shipper expresses interest in contracting capacity, once enough interest has been shown by various shippers, an “open season” auction is held. During this, shippers may bid for capacity. If this is so, then why the commotion from the governor? Why a sudden demand that U.S. Bakken producers get to have a tap onto TransCanada’s oil highway?

For the Keystone XL, several “open seasons” have already been held. Eighty-three percent of the pipe’s capacity is under contract – the contract year average being 17 years.

“You’re comparing apples and oranges here,” Hume said, referring to the difference in the Canadian tar sands producers and the U.S. Bakken producers. The tar sands are more similar to mining operations than oil productions – it will be easy for them to increase production and keep that production at a high volume.

“There’s not an American entity that can put that kind of volume for that long-term on the pipeline,” Hume said.

If producers were given the chance to access the pipe, either by contracting as a collective or coming to terms through extensive negotiations with TransCanada for shorter-term contracts, Hume believes it is something that all producers would benefit from and utilize.

“It would give access to another avenue to move out,” Hume said. “Making the market differential as low as possible.” Something that matters not only to oil men but also to landowners and local and state governments which receive a percentage of each barrel through taxes.

The money the states of Montana and North Dakota receive through oil is substantial. If the product was being sold within a couple of dollars of market value, the more the state financially benefits.

Schweitzer sees himself in the role of a facilitator, starting and encouraging the dialogue between U.S. shippers and TransCanada. A meeting with Montana and North Dakota local government and Bakken producers will soon be announced. The governor is also looking into the legalities of a pipeline running through several states and, by way of asking for contracts unreasonable for independent oil producers, not allowing oil from that state’s capacity.

Last week, Schweitzer sent a letter to the Montana Public Service Commission asking for clarification on the state’s laws of imminent domain. In other words, can Montana force its oil onto TransCanada’s pipeline?

So far, nothing has been found, but it seems this fight for pipeline room is still in its beginning stages. Since the central force setting TransCanada, government officials and producers in motion is economics, it’s a fight that no party will drop easily.

Already, the rhetoric on the American-side, by government and producers, has taken on patriotic overtones. That truly being the pressing factor by either the government or businessmen is unlikely. Money is involved so there are business decisions.

“We should have access to market,” Hume said. “We’re not asking for a free ride. We’re willing to pay.” Continental and other producers say that right now they are just asking for a way to get on the Keystone XL. “Is it fair to make unrealistc commitments for independent American oil and gas producers?” Hume asks, and then answers in the negative.

High oil sands costs are driving Shell elsewhere

jessie — Fri, 29 Jan 2010 14:08:37 -0800

High oil sands costs are driving Shell elsewhere

Nathan Vanderklippe, Globe and Mail, Jan. 26, 2010--More than a year after it delayed a decision on a major new oil sands expansion, Royal Dutch Shell PLC is backing further away from Canada's richest crude resource.

Shell will dramatically slow its future growth in the Fort McMurray area, according to chief executive officer , who said that high costs in the oil sands are the reason the company is steering exploration dollars to other parts of the world, including the Gulf of Mexico and Kazakhstan.

A spate of decisions by other international oil companies to revive projects has created hope that the oil sands are recovering from the beating they sustained at the hands of high construction costs and lower oil prices.

But in Alberta, Shell's reticence comes as a warning that cost inflation in the oil sands may not have been entirely cured - a fact that raises questions about the province's ability to recover quickly.

Shell was once one of the world's most aggressive oil sands developers, accumulating a large land base and laying plans for a series of mines and bitumen upgraders that together would produce 770,000 barrels per day.

It currently pumps 155,000 daily barrels from its Athabasca Oil Sands project and is building a 100,000 barrel expansion, which will be completed in the next year. It has approval to nearly double that output to 470,000 barrels per day.

But Shell began to cast that growth into question in October, 2008, when it delayed a second 100,000 barrel expansion until costs had cooled in Alberta's construction sector. Mr. Voser now says the company has "clearly scaled down" its oil sands ambitions.

"Over the past two years and certainly over the past six to eight months, I've taken the pace out of that because we have enough other growth opportunities," he said to the Financial Times.

Mr. Voser's comments come after a series of major project announcements just brought hope of an oil sands revival. ConocoPhillips Co. and Total SA announced plans for a major expansion in northern Alberta. Imperial Oil Ltd., which is controlled by Exxon Mobil Corp., decided last year to press forward with its Kearl mine north of Fort McMurray.

Perhaps most notable of all was the decision by Husky Energy Inc. and partner BP PLC to spend $2.5-billion on their Sunrise project, whose costs they said had fallen 40 per cent.

Mr. Voser's comments, however, may serve as a warning that declining oil sands costs are not what they appear.

Though the company's construction expenses have been far higher than some of its competitors - a fact that puts Shell in a somewhat unique situation - it does have an important vantage point on costs, since it was one of the few companies to build through the entire downturn.

Others, too, warn that promises of cheaper construction price tags may vanish once oil sands work resumes and competition for labour and equipment returns.

"A lot of these cost savings will be pretty elusive to capture," said BMO Capital Markets analyst Randy Ollenberger.

Mr. Voser did not say whether the company is abandoning its oil sands growth targets altogether, or simply delaying them. Company officials declined comment until Shell reports its earnings next week. Shell has not backed away from the applications it has made to regulators who are still working to approve its full slate of potential projects.

Neither the Fort McMurray boom, nor the subsequent oil bust, were kind to Shell. The company saw a significant increase in the cost of its 100,000-barrel-a-day expansion, which it is now building, and whose price tag rose to nearly $14-billion from earlier estimates of $10-billion to $12.8-billion. Weak oil prices also brought losses to its oil sands operations in early 2009.

The company has stopped disclosing its oil sands earnings.

Canadian Natural Resources Buying Upgrading Plant, Further Expansion of Oil Sands

jessie — Fri, 29 Jan 2010 13:47:15 -0800

Canadian Natural Resources Buying Upgrading Plant, Further Expansion of Oil Sands

Jeffrey Jones, Reuters, January 28, 2010--Canadian Natural Resources Ltd., the country's biggest independent oil explorer, is buying into a multibillion-dollar upgrading plant that was stalled by the financial crisis, the latest in a raft of announcements showing the oil-sands sector on the rebound.

Canadian Natural said it will buy 50% of privately held North West Upgrading Inc., which plans to build an upgrader near Edmonton for an undisclosed sum.

The two companies will apply to take advantage of an Alberta program aimed at stimulating processing of its vast oil sands within the province, rather than shipping the resources and jobs elsewhere. They hope the government will supply 75%, or 37,500 barrels a day, of the raw bitumen for the plant from volumes it will take in from developers in lieu of cash royalties. Canadian Natural, one of Alberta's largest producers of heavy oil and oil sands, would supply the rest.

"We're planning for startup in 2013, and one of the things we have to do is secure the feedstock, so we're making a proposal to the Alberta government to process their bitumen royalty volumes," said Ian MacGregor, chairman of North West.

If all the pieces fall into place, construction could start in 2011, Mr. MacGregor said.

The companies gave no cost estimate for the plant, which is designed to turn extra-heavy crude into low-sulfur diesel fuel and other petroleum products.

North West had previously said the plant would process 231,000 barrels a day, starting with a 70,000-barrel-a-day phase costing about $4-billion. That capacity is made up of 50,000 of raw bitumen and the rest light fuel used to move the crude in pipelines.

North West deferred construction plans as the credit crisis took hold in 2008. It said last year that the Alberta government's bitumen-in-kind proposal had the potential to put the project back on track.

"It's a pretty good strategic move for Canadian Natural, because they are taking a long-term view on protection in terms of where heavy oil versus light oil differentials end up being," analyst Chris Feltin of Macquarie Securities Canada said.

Over the past two years, the price spread between the two grades of crude has been narrow, due to high demand for the thicker oil from U.S. refineries in the Midwest and Gulf Coast, hurting profit margins for upgraders. However, as more oil-sands projects in Canada and heavy-crude developments around the world start up, the discount could increase again, Mr. Feltin said.

In the past two weeks, several companies have announced they are proceeding with oil-sands projects in the first flurry of activity since the financial crisis forced the deferral of as much as $90-billion worth of investments in the sector.

ConocoPhillips Co. and Total SA will proceed with the second phase of their Surmont project, Husky Energy Inc. and BP PLC are nearly ready to go ahead with their $2.5-billion Sunrise venture, and Canadian Natural aims to approve the expansion of its Horizon oil-sands project and construction of its Kirby development by year-end.

Also on Thursday, Enbridge Inc said it will spend $250-million boosting pipeline capacity to the Christina Lake, Alta., oil-sands project run by Cenovus Energy Inc. and ConocoPhiillips. The proposed upgrading plant would use gasification to convert the heaviest parts of the bitumen into hydrogen to cut the need for natural gas in the processing. Carbon dioxide would be piped to old oil fields to boost production there. The transaction is expected to close later this year.

Canadian Natural shares were off 72¢, or 1%, at $69.17 on the Toronto Stock Exchange, amid a broad-based sell-off.