Traditional oil markets saturated, forum told

Alberta’s traditional oil markets in the northern and Midwest U.S. are saturated, and the glut is forcing a $10-per-barrel discount and costing producers about $9 billion a year, says a Total E&P Canada vice-president.

“This is the new reality,” Gary Houston told the National Buyer/Seller Forum on Thursday.

He said the situation is obvious, with record amounts of oil in storage in the U.S.

“We know they are swimming in oil because the price delivered in Chicago is $10 a barrel lower than the equivalent barrel floating on the ocean. So at 2.5 million barrels a day we are talking about $9 billion a year lost in value to our industry, and that is not a rounding error.”

Houston said the answer is new pipelines, such as the planned Trans-Canada Keystone XL line that will ship more than 500,000 barrels a day of oilsands bitumen to the U.S. Gulf, where it will compete head-to-head with other imported heavy crudes from Venezuela, Mexico, Brazil and U.S. offshore production.

After decades of traditional markets which enjoyed a geographical advantage and good pipeline connections, the situation has changed. The only new markets are along the U.S. Gulf or overseas, Houston said.

And the job of selling oilsands production is not made easier with its environmental image damaged in the view of many global customers.

“It is no longer enough to simply produce a barrel of oil for the right price; we need to do it ethically. And the industry is changing fast,” he added.

The forum has heard from many speakers discussing the latestadvances in dealing with tailings ponds, new ways to save water in bitumen production and reduce greenhouse gas emissions.

But at the same time, after pressure from environmental groups, California and Europe are set to bring in low-carbon fuel standards that could remove the oilsands as a crudesupplier in those markets.

“These are reactions from the marketplace that we are going to see more frequently. We have to get out the facts as best we can” to counter this campaign, he said.

In Alberta, Total recently joined with Suncor to complete the Voyageur upgrader project and open mines at Joslyn and Fort Hills that will supply the upgrader.

“Two years ago each of these mines was earmarked to fill its own upgrader. In the new reality, instead of two partially filled upgraders we’ll have the Voyageur working at maximum capacity from virtually the first day,” he said.

And Total sees a need for moreupgraders in future, putting it at odds with others — such as Imperial and Cenovus — that have said they have no plans to build upgraders for their production.

“We believe there will always be a need for a balance of heavy and light oil in the marketplace, and as we bring on more and more production there will have to be a proportionate new capacity for upgrading some of that bitumen into synthetic crude.”

Republicans press Obama to approve oilsands pipeline
http://www.calgaryherald.com/business/energy-resources/Republicans+press+Obama+approve+oilsands+pipeline/4540352/story.html

The heated policy debate over Alberta’s oilsands took centre stage Thursday in the U.S. Congress, with Republican lawmakers claiming President Barack Obama has “failed to act” swiftly enough to ensure a secure long-term supply of Canadian crude.

A day after Obama said the U.S. will need “steady and stable and reliable” Canadian oil as it slashes overall imports over the next decade, GOP lawmakers said there is an “urgent” need for the U.S. to further tap Canada’s market by approving Calgary-based TransCanada’s $7-billion Keystone XL pipeline from Alberta.

One by one, GOP lawmakers on a House foreign affairs subcommittee pressed Obama to sign a presidential permit authorizing construction of the controversial pipeline, which would ship more than 500,000 barrels of oilsands crude a day from northern Alberta to refineries on the U.S. Gulf Coast.

“We need to immediately concentrate on replacing foreign oil from thugocrats like Hugo Chavez in Venezuela with reliable, stable allies like Canada,” said Rep. Connie Mack, a Florida Republican who chairs the Western Hemisphere subcommittee.

Rep. Ted Poe, a Texas Republican, said Obama’s policy on Canadian oil was to “delay, delay, delay” the Keystone XL project. His message to the U.S. president: “It’s time to start laying pipe.”

The Keystone XL pipeline has been in limbo as the U.S. State Department weighs whether to grant a presidential permit, required because the project crosses an international boundary.

State Department officials delayed the process further last month by ordering a supplemental environmental impact study to address concerns about pipeline safety and climate change issues around oilsands production. Several pro-pipeline witnesses at Thursday’s hearing said growing unrest in the Middle East poses the biggest threat to America’s energy security.

Oil from “quiet, stable, friendly” Canada “is not the perfect answer, but a step toward better energy security for the country,” said Paul Sullivan, a former National Security Council member and now a Georgetown University professor.

Increasing U.S. access to Canada’s oil resources of 175 billion barrels will “keep certain other countries in check,” said Sullivan, citing the price shocks often caused by disruption in supply from OPEC nations.

“Canada is not a member of OPEC. It could be a counter to OPEC.”

With the Middle East in turmoil, the witnesses said approval of the Keystone XL pipeline would provide Texas refineries with a source of heavy crude that could further offset declining imports from Venezuela.

Venezuela is currently the fifthbiggest supplier of oil to the United States -behind Canada, Mexico, Saudi Arabia and Nigeria. Canada is the biggest supplier -providing about 23 per cent of America’s oil imports -but Keystone XL would provide a new link to Texas refineries.

David Goldwyn, an international energy consultant, said in written testimony that getting Canadian oil to Texas would help “moderate” gasoline prices.

The lone anti-pipeline witness at the hearing said Keystone XL’s construction would do little to shield American consumers from gasoline price spikes.

Jeremy Symons, vice-president of the National Wildlife Federation, said prices of Canadian crude had jumped $20 per barrel since the recent crisis in Libya began.

“Why do oil prices in Canada go up when there is conflict in North Africa? Because oil companies don’t care about energy security or price stability,” Symons said in his written testimony. “They care about profits. And if there is a crisis in one part of the world, you can bet they will gouge us with high oil prices everywhere.”

Symons told the congressional committee Alberta’s “scorched earth tarsands operations are the most destructive source of oil on the planet.”

Rep. Eliot Engel, the ranking Democrat on the committee, said he has not made up his mind about Keystone XL. But he said it was important for the State Department to take its time in examining the project’s environmental impacts -a lesson the U.S. should have learned from the regulatory failures prior to last year’s BP oil spill in the Gulf of Mexico.

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