Friday, April 22, 2016

"Dilbit Dogma" - The Tyee Weighs in on Alberta's Big Scam

They're still flogging the line about how they must get Athabasca dilbit to
"tidewater" but it's calculated, industry spin or, as any Alberta cattle rancher would call it, "bullshit."

Western Canadian Select (WCS) -- the key Canadian benchmark for heavy oil -- trades at a discount to other benchmarks such as West Texas Intermediate (WTI), the primary benchmark for U.S. Gulf Coast and Midwest oil. The two key factors are quality and geography: WCS trades for less than WTI because it is lower quality crude that is more expensive to refine, and it must travel longer distances to refineries.

...for a period in 2013 to 2014, there was a bottleneck in the U.S. Midwest to the Gulf Coast and WCS was trading at a deeper discount -- an average of $24 a barrel, with daily peaks that surpassed $40. However, since that time, enough new pipeline capacity has come online in the U.S. to alleviate the bottleneck, and "effectively eliminate the market-driven portion of the price differential."
...In fact, there is now surplus capacity that, according to theInternational Energy Agency, would allow for additional Canadian exports to Asia without the construction of either Kinder Morgan's Trans Mountain expansion, Enbridge's Northern Gateway or TransCanada's Energy East pipeline. Instead, they could follow existing routes including pipelines to Oklahoma and the existing Trans Mountain line to access Asian and OECD (Organization for Economic Cooperation and Development) markets.

...The Oil Change International brief concludes that "if sent to Europe or Asia, tar sands crude would fetch notably lower prices than in the U.S." It reaches this conclusion by comparing the prices achieved by a similar heavy sour crude benchmark, Mexican Maya, which over the past 15 months was priced, "on average $3.70 less in Europe than in the U.S. Gulf Coast and $8.73 less in the 'Far East.'"

Accessing Asian and European markets doesn't address the quality and geography discounts that WCS currently faces. In fact, those discounts may be even steeper in Europe and Asia, which are a lot farther from Canada than Oklahoma. One of the impacts of the U.S. lifting its export ban was that the WTI benchmark and European Brent Crude benchmark became much more aligned, meaning that the "world price" for oil (Brent) is more or less the same as WTI. This supports the conclusion that Canada is already getting the best price for its oil with current pipeline capacity.


the salamander said...

.. unsurprising.. The Tyee delivers the goods on dilbit economics .. that Canadians just don't get from mainstream news.. I keep maintaining that grade school level projects could leave lamestream media red faced regarding the dogma and lickspittle droned out ad infinitum.. But of course, the tripe peddled from Peter McKay, Joe Oliver, Rona, Tony Clement is 'newsworthy' .. and easy to pawn off as 'news' or fact.. and it must be just too plumb onerous to define 'oil' or spell the word diluent or condensate.. which must for some complicated reason be sent to the tar sands via its own pipeline.. ..

The Mound of Sound said...

Sal, old friend, not you! The most cringeworthy word I know is "tidewater" but second place arguably belongs to Sarah Palin's "lamestream" media. Go wash out your mouth with soap. Never again darken this blog with vile lamestreaming. Something, anything but that, I implore you.

Anonymous said...

The push to build pipelines to the coast is driven by a 'make work'project' rather than real need for more oil.
It's much like Christy Clarks site C ; it serves no purpose other than the immediate moment.
Whilst short term jobs will be created our children and grandchildren will be left with the real costs financial and environment degradation.

Northern PoV said...

Ya I liked that article too. Here is an edited version of what I posted over there:

Yes .. the price of oil will stay low until our civilization collapses OR fossil fuels get banned. (Place yer bets!)

The Saudis woke up to this fact a while back and opened the spigots. They will sell off their cheap, (relatively) 'clean' oil while they still can.
Fracked shale oil & gas, and especially bitumen, will be increasingly be shunned.

Northern PoV said...

Thought you might be interested in this (ICYMI) ....

The concept of EROI is very useful in explaining why "unconventional" fossil fuels suck.
"Energy Return on Investment"

and this...
"Simply put, recent data from farming systems and pasture trials around the globe show that we could sequester more than 100 percent of current annual CO2 emissions with a switch to widely available and inexpensive organic management practices, which we term ‘regenerative organic agriculture’… These practices work to maximize carbon fixation while minimizing the loss of that carbon once returned to the soil, reversing the greenhouse effect."