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Guest Post: A Run for the Canadian Border
The Gulf of Mexico disaster has changed U.S. priorities, costs, and
energy supply sources for years to come. But the fact that the U.S.
needs energy isn’t changing anytime soon, and as mass sources of green
energy are still a while away, the most likely alternative might be the
most surprising one.
With US$15 billion invested annually in offshore drilling in the United
States, the disaster in the Gulf of Mexico means that this money is
getting ready to migrate elsewhere. And it is the Athabasca oil sands
of Alberta, Canada, that are number one on the list.
Given the amount of bad press the oil sands get, this could come as a
shocker. But technological advances and improvements in recovery
methods, as well as reduction of water usage and greenhouse gas
emissions, have made oil sands a viable and popular option for the
future of U.S. energy.
The numbers, too, are looking in their favor. Out of the 1.34 trillion
barrels that is the world’s total proved oil reserves (2009), only
about 20% (270 billion barrels) of this number is actually available to
free-flowing capital investment – the vast majority is in the tight
grip of various national oil companies.
And a good chunk of these “free-market” barrels, about 178 billion, is
sitting underneath the feet of Canadians, or as some call them, the
Crazy Canucks. For a country that runs on oil, the United States
couldn’t have been presented with a better lifesaver. Compared to
alternatives such as Chavez’s Venezuela or the oil fields of the Middle
East, reliable oil from politically stable and friendly Canada is by
far the easier pill to swallow.
As it is, roughly one in every six barrels of oil consumed by a U.S.
citizen today comes from the Canadian oil sands. The fact that
infrastructure is already in place for oil sands development and oil
already flows through pipelines between the two countries only sweetens
the deal.
So, we wouldn’t be taking a huge step in assuming that any future
capital spending that will be diverted away from the Gulf of Mexico
will find it hard to bypass Canada. In addition, as global oil supply
is affected by the drilling restrictions, in the long term we’ll be
seeing higher oil prices. While this news might not make the drivers
amongst us happy, it couldn’t get better for Alberta and the energy
companies operating in the oil sands. With oil prices hovering over
US$70 a barrel, the stream of investment dollars into the oil sands is
guaranteed.
Submitted by Marin Katusa, Chief Energy Strategist, Casey Research
A Run for the Canadian Border
Obama’s first-ever Oval Office address has confirmed our expectations
of no more growth in the American offshore drilling industry anytime
soon. But the Gulf accounted for a large chunk of U.S. oil production
(25-30%) and consumption (9% – the entire consumption of France), and
that shortfall must be met.
While renewable energy is where the future of U.S. energy lies,
according to Obama, it is still some time before green energy producers
will be able to meet the full demands of the nation. In the meantime,
authorities have also realized the importance of Canada for U.S. energy
and are enticing companies with new pipelines. Plans on expanding the
Keystone Pipeline, linking up Texas and Oklahoma to 500,000 Canadian
barrels a day, have already been drawn up and put into motion.
The turmoil in the U.S. energy market has created a number of
opportunities, both in the short and long term. For now, investment
into the Canadian oil sands is about to increase dramatically, and
things are moving rapidly. We’ve uncovered the lowest-cost producer
with significant upside production, and they’re the one on the list as a
takeout target by Big Oil.
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The Canadian tar sands is the "lowest-cost producer"?!?!?
What's next, Goldman Sachs is a charity organization?
Get real FFS.
No no no, they've flagged the lowest cost producer. Cenovus (formerly the oil wing of Encana) proudly boasts they are the lowest cost producer but that'll change the moment Christina Lake blows up (it's gonna happen). MEG Energy is another interesting target, they are also very low cost but after their little water hammer incident they are extremely safety conscious and I believe their formation is only going to show improvement. Oh, also MEG's IPO, they have producing wells and competent operations. That might be a nice little catch unlike Athabasca.
What do you mean Christina Lake is gonna blow up?
Foster Creek is at least operated by people who aren't complete dunces, can't say the same thing about CL.
Another thing, Conoco-Philips is making a mint off their partnership with Cenovus, the refineries Cenovus has a partnership with are down a lot of the time and had a poor ROI to begin with.
The Canadian tar sands is the "lowest-cost producer"?!?!?
This may very well be true. No need to introduce democracy or overthrow our already American bag-licking government. So the usual war/puppet government premium is not a factor.
The Bakken Shale in North Dakota is also interesting, reserves are just as large. The key is horizontal drilling to remove the oil.
There is a shit ton of oil under the Rockies in Colorado too. Bigger than Bakken. Billions of barrels.
"For a country that runs on oil, the United States couldn’t have been presented with a better lifesaver."
While US treehuggers complain about dirty ducks and "dirty oil", the Chinese have been buying large stakes in these sands.
Snooze ya loose.
- man, this is pure comedy.
For a country that runs on oil, the United States couldn’t have been presented with a better lifesaver.
Oil sands has potential (and some drawbacks) but I think it's stupid not to seriously incentivize the development of US shale gas like it actually maters - which I've already ranted about earlier today under MHT's short-lived post: http://www.zerohedge.com/article/new-hedge-fund-free-lunch
It depends on how much energy you use to get the oil out. Not to mention the water that is used. Plus, this is only viable with $150+ oil.
SUNCOR BITCHEZ!!!!!
Couldn't resist.
Regards
Uh oh, Casey Research, sorta bottom of the barrel. For starters Marin, try looking up the word oil, then the word tar, then head north from Edmonton and tell us what you see.
Ah shit Babs, I don't know what it is you have against Doug Casey; mb you didn't buy gold or a mining junior when he pointed it out to you, I don't know (personally I think Casey often gives lucrative info, and at the very least erudite info).
Anyway, the Canux have been giving thanks and holding their ankles so long while Their Infamous Uncle Sam takes 'em dry from behind (see NAFTA) you need not worry your little 'Muhrikan head about them; not to mention that Alberta Premier 'Steady Eddy' will fall over backwards to make sure you can pipe that raw bitumen stateside for a tithe, refine it and sell it right back to those stupid Great White Northers for any mark-up you care to charge. Did you know that the most expensive place to buy gasoline/diesel in Alberta is in Ft. Mac? That's about 20 km from where they burn all their available natty and drain the once mighty Athabasca to extract it from the sands. And NAFTA's afterbirth revisions ensure no pesky sovereignty issues will get in the way of the good ol' US of A getting at least 68% of anything they pull out of the ground (despite all their oil Canada is still a net importer!), regardless of any Mordor style landscapes the backwater hickster Canuckistanians are left to deal with after it's all gone. And not one speck of recompense for that will come calling to Uncle Sam, ever. The Canadian Taxpayer will blithely cover it, and be glad of the opportunity to clean something else up.
Sure, it isn't pretty, but then again Northern Alberta is a backyard far far away from your homestead, so relax, you won't have anything too nasty washing up on your borders... mb a little BC bud to keep your ferocious tempers in check. After all, those Canadiennes gotta make a little lack, eh.
Regards
(despite all their oil Canada is still a net importer!)
Wrong, dipshit. Canada's NET oil exports were almost 3% of GDP in 2009.
It's true that because of lack of East-West pipelines, Canada imports oil into Eastern Canada, but it sends so much more south from Alberta and Saskatchewan that we net out a winner. Of course, since the Chinese have made some hefty investments in the oil sands, and it looks like a pipeline is going to be built to northern BC, we may be selling it to the Chinese instead of Will Smith and friends.
KevinB:
Pardon me. I should have left out the 'net', my bad. Thank you for pointing that out, dickslap.
And that whole Chinese thing: indeud. Though I doubt it will be sent to them 'rather' than the US, more like 'as well'. IE Anything left after Canada meets its NAFTA obligations will be legally obligated to head for China. Leaving for Canadians exactly zero, at which point, judging by the average size of the trucks preferred by your average Albertan, 'net importer' instead of merely 'importer' might not be incorrect at all. But hey, like I wrote above, the US will be more than happy to sell the finished product back to Canux at a 'fair' price, I'm sure.
not questioning Doug Casey's intelligence. His smug arrogance can be grating, but it's mostly the shallow, 'step right up ' nature of the publications that steers me elsewhere.
Fair enough Babalooee. Though Mr.Casey and crew can hardly be considered snake oil salesmen. Excellent cutting-through-the-crap techniques for accurate valuations and DD to be found in their reports, IMHO. Casey reco's aside, I even unearthed a few mining gems of my own before they started touting them, courtesy of their approach. Just sayin': that's been my experience.
Regards
Since we're not allowed to grease up the Gulf for a while, instead, let's strip-mine the 'Lungs of North America' to get at more of that Tar-Sand; it's not such bad stuff after-all.
Let's face it, the party really is over!
Clearly you have never visited the tars sands... Lungs of North America, in an area with almost no trees?
EROI is what matters, Gulf oil is higher than tarsands. The lowest-cost producer is Syncrude. They have the Cadillac deposits, all surface.
Syncrude the lowest cost producer? Are you on drugs man? UE-1 pooched that title for Syncrude. Suncor currently is LCP for minable oil sands but SAGD oil is cheaper per barrel than any minable lease.
- we're down in the dregs boys, scraping the bottom of the barrel, now we are mining for oil, instead of poking a hole in the ground.
Not to put a bottom on the price of oil, but a fair number of currently operating tarsands projects in Alberta are still in the black at $35USD/bbl. ( Late 2008 DXY and natty prices, note this does not include the price of environment 'reclamation', naturally. As if that really matters.)
Regards
Shell Albian was so far over budget they need >$70 oil just to break even over the length of production. UE-1 was 110% over budget and pushed Syncrude from $20/bbl to over $34/bbl. No idea about Suncor but Nexen... they'll need $200/bbl for Long Lake to ever break even.
get real guys.....the US is in a huge predicament. It will take the oil from whomever has it and on whatever terms are offered. Unless of course you think they might just try winding up the war machines again.