Saudi Prince Alwaleed bin Talal said in an interview yesterday that “oil is never going back to $100.” Let me translate: “We are sick of Americans and Russians taking our market share, and we’re taking it back forever.” These were strong words from one known to publicly disagree with his government, and whose personal wealth has been estimated at over $20 billion.
Continued weak oil prices are seriously damaging US energy companies with companies like Breitburn Energy, Goodrich Petroleum, and Continental Resources among it’s biggest losers in recent months. I remain very bearish for several reasons…the Saudis’ apparent serious resolve to reset the markets, downward trend in heavy hydrocarbon demand, and the high break-even costs for unconventional resources. I believe we are in for a long haul here.
On October 30, TransCanada filed a plan to build a new pipeline from the oil sands projects in Alberta east to St. John, New Brunswick. Even though the company says otherwise, Transcanada’s Energy East’s pipeline, with a capacity of 1.1 million barrels of oil per day, provides a direct substitute for the XL extension to the Keystone pipeline which has be in political limbo for 3 years.
The $12 billion pipeline construction project will involve the conversation of an existing natural gas pipeline as well as construction of approximately 900 miles of new pipeline. Along with the pipeline, a new deepwater terminal for export will be constructed at St. John.
Most important for Transcanada, since the project is wholly contained within the borders of Canada, the project cannot be delayed or used as a political football by US politicians. So, what’s happened is exactly what markets and economics cause to happen; the XL project has been delayed by US politicians for the benefit of themselves so long that Transcanada has developed a more expensive, but likely more certain alternative that provides a market for crude produced from the oil sands in Alberta.
The lesson here, at least for us? It is long past time for us to adopt a comprehensive energy policy around weaning ourselves from heavy hydrocarbons and developing more sustainable cleaner fuels to power our future. The XL pipeline debacle should be another one of those moments in time with which we are occasionally presented that should be used to change our national direction. Perhaps, one day, we’ll actually take advantage of those opportunities to improve the future for our kids, grandkids, and their kids.
If only that was at the front of our collective consciousness.
In my early career in the oilfield, when I was working on cement and frac crews, I breathed plenty of dust from cement, frac sand, and powdered guar used to make frac gel. Throw in a little xylene and hydrochloric acid, and I think my lungs have experienced plenty of challenges. Read the rest of this entry
Rising US crude oil production knocking a hole in OPEC’s power over us.
Fuel Fix » Fracking threatens OPEC as U.S. output at 20-year high.
This morning, the Houston Chronicle reported on the $21 per barrel price differential between West Texas and Cushing, Oklahoma a major pipeline hub and pricing point for crude oil. With the advent of horizontal and hydraulic fracturing technology, the US is producing almost 50% of its daily needs. This reduces the need to import oil from countries who hate us, but has, at the same time, created huge price differentials in different parts of the country because of the shortage of pipeline capacity.
There has been a persistent oil sheen near the site of BP’s Macondo well blowout in the Gulf of Mexico ever since the well was shut in and eventually plugged in late 2010. Alarmists use that oil sheen as some kind of evidence that the well is flowing, alleging a massive conspiracy to cover up the fact that it can’t be controlled. It’s not flowing. Read the rest of this entry
Last week, the EPA published its draft report, Investigation of Ground Water Contamination Near Pavillion, Wyoming. The report summarized a multi-year study conducted by the EPA after years of landowner complaints about petroleum products, natural gas, and chemical smells in their drinking water. Pavillion is a small town in the Wind River basin of central Wyoming, home to 169 gas wells. The field around Pavillion was discovered in the 1960s, and was actively drilled up until the early 2000s. Frac’ing became very active in the last 20 years as technology improved and some additives were not reported by frac companies, citing proprietary technology.
When the report was released, reaction was swift from both sides of the controversy. Read the rest of this entry