Monday February 16, 2009

Canada tar sands boom hits a sticky patch

energybulletin.net -> guardian.co.uk :

After five years of frenetic building and activity, a race to extract crude from vast tracts of the Canadian oil sands has abruptly stalled, hit by a collapse in the price of a barrel of oil from a peak of $147.27 last July [2008] to barely $40. The remote, boggy landscape contains between 1.7-2.5 trillion barrels of oil, of which an estimated 173 billion can be extracted using expensive, hi-tech filtering technology. Canada's reserves are second only to Saudi Arabia's deposits, and a year ago 60 projects were being constructed by 25,000 workers living in temporary "camps".

But since oil prices began a downward tumble, energy companies including Shell, Syncrude and Petro-Canada have shelved more than US$90 billion worth of oil sands investment. Suncor has suffered its first quarterly loss in 16 years. Last month one developer, BA Energy, became the first oil sands firm to file for bankruptcy protection.

Analysts at Merrill Lynch estimate that oil needs to sell for $80 for companies to build the vast rigs required on the Canadian tar sands. If the crude oil price falls below $32, existing facilities will make an operating loss. The credit crunch has made it hard for oil companies to raise money, and a rapidly sinking global economy has hit demand. Merrill recently questioned if the sands were actually needed.

- It's a far cry from the days when the Canadian tar sands, or oil sands as some call them, were deemed to be "highly profitable". The peakoiler community has always looked upon the the tar sands operations as a kind of marginal thing, both from an EROEI* and economic point of view. The image is of very expensive equipment (a tyre change on one of those CAT trucks costs $30,000 each) versus volatile crude oil prices. When crude oil prices went up, profits went up for the tar sands operations, but only for a while until inflation caught up with them. When crude oil prices fell, profits went down and they started making losses and some of them are now starting to shut down. There's really no winning to this game. The economic issues and the environmental degradation angle are the main reasons I don't invest in this sector.

* EROEI = Energy Returned On Energy Invested

See also :

1. Oil sands: burning energy to produce it
2. Canadian crude oil production dropped in 2005, while profits soared
3. Canadian oil industry basks in profits, and tax cuts
4. Peak Oil : IEA reports global depletion rate could go up to 9.1%, struggle to produce crude oil
5. Global credit crisis slows food and energy shipments, may lead to shortages

(2009-02-16 05:09:30 SGT) [Energy] Permalink

Most popular blog postings on lowem.log :

1. Singapore MRT rail network length to double by 2020
2. 2010 Nissan Leaf electric car specifications : 107hp, 24KWh lithium-ion batteries, 100-mile range
3. Live spot gold price quotes chart on COMEX
4. 2010 Toyota Prius specifications released : 50 mpg, 1.8L, 134hp, Ni-MH, solar roof option
5. AVG Anti-Virus Free Edition 2011 direct download link
6. Real-time live gold and silver price quotes chart on COMEX
7. Singapore electric vehicles : Government agencies EMA and LTA to study EV introduction
8. Book review : Shut Down by William Flynn

Featured articles on lowem.log :

1. Book review : Shut Down by William Flynn
2. Singapore electric cars testing starts with 9 electric vehicles
3. Honda, GS Yuasa JV to make lithium-ion batteries for 2010/2011 Honda Civic Hybrid
4. 2010 Honda Civic Hybrid preliminary specifications released
5. 2010 Honda CR-Z hybrid, 2010 Honda Fit/Jazz hybrid models confirmed
6. 2010 Toyota Prius specifications released : 50 mpg, 1.8L, 134hp, Ni-MH, solar roof option
7. NYMEX crude oil recovers from $32.40 low after 2.2 mbpd OPEC production cut announced
8. Singapore : Nuclear power not ruled out