Monday, February 24, 2020

The Dizzying Death Spiral of All Things Bitumen

No country would find 173 billion barrels of oil in the ground and just leave them there

There'll be no new mega-mine in the Athabasca Tar Sands. Teck Resources will not be proceeding with the Frontier mine project that was supposed to produce 260,000 barrels of bitumen per day.

Getting an extra quarter million barrels of dilbit per day moving to markets would have demanded a big uptick in pipeline capacity. Something very much like the Trans-Mountain pipeline expansion, TMX or, as I like to call it, Trudeau's Folly. The expansion was intended to increase capacity from the current 300,000 barrels per day to a massive 800,000 barrels per day.

TMX hasn't been working out for the prime minister lately. First came news from the Parliamentary Budget Office that the Trudeau government paid way over market value when it bought the old pipeline from Kinder-Morgan. Then came news that the feds costs projections for the expansion were way off mark - about $4 billion too low. Popular support for Trudeau's Folly began to sag. Now this.

Then came rumblings that the financial markets were losing their appetite for high-carbon, low-value fossil fuels such as bitumen. Big players such as BlackRock and JP Morgan washed their hands of Tar Sands projects.

Then Teck bowed out of the overly-ambitious Frontier mine venture. It didn't seem that Teck attracted many suitors for the investment.

Boom, boom, boom, boom, bust - it's beginning to sound like an artillery barrage. This is no time for schadenfreude. High-carbon, low-value fossil fuel has been foolishly allowed to become a major component of the Canadian economy. We ignored endless warnings from people such as Mark Carney that we were playing with fire, that this was a Carbon Bubble. So who is going to wear that? Every Alberta premier since Peter Lougheed? The federal Conservatives and Liberals?

So, what's Plan B? What do we do in a post-bitumen Canada? Where are the great leaders of vision? What, we don't have any?

Let's not forget the 260 billion pound gorilla in the room - the cost of site remediation across Alberta from thousands of orphaned wells in the south to the massive tailing ponds of Athabasca. That is a more than two hundred and sixty billion dollar time bomb. That's a whisker under $7,500 for every man, woman and child in Canada. How much of that do you want to pay?

It will be interesting to see what Trudeau does with Canada's pipeline now. The government already tried to flog it once. No takers. It's a far worse deal now. Costs are way up. Athabasca's tar pits are on their way down. Would you buy a pipeline from this prime minister?


Northern PoV said...

"It will be interesting to see what Trudeau does with Canada's pipeline now. The government already tried to flog it once. No takers. It's a far worse deal now. Costs are way up"

If they used the existing pipe to ship refined fuels to Vancouver and light crude to Sumas for 20 years, they could at least break even, maybe make some $$. It is only the expansion that has no viable biz case.

Everyone should know that zero oil tankers left the TMX terminal in Burnaby in January after a long decline for the past two years.

The Disaffected Lib said...

I hope the edifice tips over into the ditch before this government openly clashes with pipeline protesters whose case is now more unassailable than ever, NPoV. Trudeau chose to put himself on the wrong side of this. Now it's up to him to get on the right side.

The Disaffected Lib said...

What caused the stoppage at Burnaby?

Anonymous said...

Nobody's interested in buying the TMX. Even those former Enron scam artists at Kinder Morgan couldn't find a mark until they ran into Morneau and JT. Hell, even Chevron can't find a buyer for its LNG terminal in Kitimat, and is taking an $11 billion writedown. No, the private sector sees the writing on the wall for Canada's oil & gas industry and is stampeding for the doors. As always, they'll leave the public sector to pick up the pieces and bail out reckless investments by "too big to fail" banks.


The Disaffected Lib said...

It's not the banks I worry about, Cap, but the pension funds that got heavily into some of these investments.

No one with a rudimentary grasp of physics could ever have imagined a viable future for high-carbon assets. I sometimes wonder whether cognitive dissonance hasn't become orthodoxy in Alberta government circles.

the salamander said...

.. the Chevron & Woodside venture icluding Pacific Trail Pipeline from NE BC's Liard & Horn River Basins

- not to be confused with LNG Canada venture via TC Energy's Coastal GasLink Pipeline from the Monteny Formation and running west just to the north (see Chevron map) and also to Kitimaat

The Disaffected Lib said...

Thanks for the link, Sal. Those maps and graphics were quite helpful.

Trailblazer said...

Old news


The Disaffected Lib said...

I'm a bit wary of petro-news from any PostMedia source, TB, especially stuff from 2018. As we've seen over the past two months, the worm is turning.

the salamander said...

.. Andrew Leach & Martin Olszynski deliver Pulitzer level fact re Teck, much prior to Teck dropping out

50.00 Benchmark Oil price today - likely WTI West Texas Intermediate, light sweet crude
30.80 WCS Western Canada Select diluted Bitumen price today

Trailblazer said...

Wary or not, that the only customer for the tarsands junk IS the USA.
Doubling production will not increase the PPB.


The Disaffected Lib said...

Thanks for the link, Sal.