No, in plain terms we're getting junky WTI-like prices when we could be getting delicious Gulf prices. The Midwest is oversupplied to the Nth degree, Cushing needs no more Canadian Crude. Hence why the XL project is so darned important.
Yeah, that is what I thought. The part I don't understand is why we'd get more than WTI/heavy oil prices just because it gets all the way to the gulf? The US will still be buying it will they not? I work in the upstream part of oilsands - admittedly I don't know the in's and out's of exports & marketing.
Yeah, that is what I thought. The part I don't understand is why we'd get more than WTI/heavy oil prices just because it gets all the way to the gulf? The US will still be buying it will they not? I work in the upstream part of oilsands - admittedly I don't know the in's and out's of exports & marketing.
Oil values are totally impacted by location, a barrel up here is worth a lot less since no one really has the ability to do anything with it. It has to get somewhere usable (ie refinery) which costs money, and then theres supply and demand at the various hubs based on the refining capacity available and a thousand other factors.
Just think of it this way. A block of ice is worth a lot more in the Desert than it is in Yellowknife. You've got a chuck of ice that you can sell for $5 in Yellowknife, but if you can get that same chunk down to scorching hot California, you can charge $50 for it. Sure keeping it cold and shipping it might cost $40, but then you're still making $10 for that $5 chunk of ice. Similar-ish sort of scenario.
Generally speaking of course, if you look at Louisiana Sweet (gulf), its worth a decent amount more than WTI @ Cushing or SCO @ Hardisty. Once you get the oil to the Gulf it can be exported a lot easier and there is a much larger refining market there as well. Louisiana Sweet is priced much like Brent as such.
Oilsands operators are so keen on the XL pipeline since it allows them to tap those higher differentials and a larger market.
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Ha, serious? I'd explain in much more detail but I can't (legally). Take a look at crude differentials (Brent in particular) and you'll see. In generalized terms, the US Gulf is a huge refining hub because it all gets shipped internationally from there.
It has nothing to do with the gulf being a refining hub. The value of crude around the world is more like what Brent goes for. WTI is a light crude that happens to be stuck in Cushing, it can't get to the markets that want it ... same as Cdn crude. Since it's trapped, it goes for a discount.
A Bbl of crude is maybe worth $80 in Edmonton, but that same bbl is worth $100 in Vancouver ... because you can ship it anywhere you want, not because Vancouver is a refining hub.
It has nothing to do with the gulf being a refining hub. The value of crude around the world is more like what Brent goes for. WTI is a light crude that happens to be stuck in Cushing, it can't get to the markets that want it ... same as Cdn crude. Since it's trapped, it goes for a discount.
A Bbl of crude is maybe worth $80 in Edmonton, but that same bbl is worth $100 in Vancouver ... because you can ship it anywhere you want, not because Vancouver is a refining hub.
Serious? Thats exactly what I said. Getting the oil to the gulf opens it up to world markets as well as Gulf refineries that are sitting with capacity. Read my post quoted below
Quote:
Originally Posted by Ducay
Oil values are totally impacted by location, a barrel up here is worth a lot less since no one really has the ability to do anything with it. It has to get somewhere usable (ie refinery) which costs money, and then theres supply and demand at the various hubs based on the refining capacity available and a thousand other factors.
Just think of it this way. A block of ice is worth a lot more in the Desert than it is in Yellowknife. You've got a chuck of ice that you can sell for $5 in Yellowknife, but if you can get that same chunk down to scorching hot California, you can charge $50 for it. Sure keeping it cold and shipping it might cost $40, but then you're still making $10 for that $5 chunk of ice. Similar-ish sort of scenario.
Generally speaking of course, if you look at Louisiana Sweet (gulf), its worth a decent amount more than WTI @ Cushing or SCO @ Hardisty. Once you get the oil to the Gulf it can be exported a lot easier and there is a much larger refining market there as well. Louisiana Sweet is priced much like Brent as such.
Oilsands operators are so keen on the XL pipeline since it allows them to tap those higher differentials and a larger market.
We should be building more refineries in Alberta and shipping the finished product to the States.
If SHELL for instance had followed through on their plans to build 5 upgrader expansions near Edmonton instead of stopping at one, the amount of high paying jobs created would have been staggering.
We should be building more refineries in Alberta and shipping the finished product to the States.
If SHELL for instance had followed through on their plans to build 5 upgrader expansions near Edmonton instead of stopping at one, the amount of high paying jobs created would have been staggering.
Working in the oil and gas business I agree. I don't think it's reasonable to expect a bunch of refineries to be built anywhere near super-quick, but I agree it would be a much better idea to run the whole operation here and ship them the finished product.
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We should be building more refineries in Alberta and shipping the finished product to the States.
If SHELL for instance had followed through on their plans to build 5 upgrader expansions near Edmonton instead of stopping at one, the amount of high paying jobs created would have been staggering.
What are the wages of a refinery worker in Edmonton vs say Texas?
We should be building more refineries in Alberta and shipping the finished product to the States.
If SHELL for instance had followed through on their plans to build 5 upgrader expansions near Edmonton instead of stopping at one, the amount of high paying jobs created would have been staggering.
Ideally it would have been nice a few years ago, but now with the Canadian dollar as high as it is, I doubt we'll see much additional refining here.
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We have neither the capital or the man power to build multi billion dollar upgraders. Its much more economical from a capital investment standpoint to buy an older refinery in the US and install the equipment to process dilbit.
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I've never understood the protests of pipeline projects. I understand protesting certain drilling projects, but I would think a pipeline would be less of a concern envirnomentally. As well, wouldn't it be the cleanest way to transport oil? Unless they are just upset because it encourages more drilling?
I must admit I don't know a whole lot on either side of this argument.
The inside word is that they have to / will approve it. Just a matter of time.
I'm actually working on the project right now in Indiana...
And out by Oyen there are acres of pipe just waiting to be put in the ground.
Not very often I log into CP and see my residency floating around a thread !!! But ya, there are quite a few locations out here where they have acres of land with pipe sitting just waiting to be put into the ground. Been here for awhile now.
From a landowners perspective (and no, I didn't get any of the p/l through mine), it has been nothing short of fantastic for the farmers in our area. The money received for the land used was astronomical in comparison to the "norm". Really a win in such a small, rural community. Even the Town of Oyen was able to do well from an economical standpoint when the first line was constructed. There was very little in terms of negativity (outside of one death in the camp from a drug overdose IIRC), but the money brought in to local businesses was fantastic and met with open arms (some maybe a little too open).
I've never understood the protests of pipeline projects. I understand protesting certain drilling projects, but I would think a pipeline would be less of a concern envirnomentally. As well, wouldn't it be the cleanest way to transport oil? Unless they are just upset because it encourages more drilling?
I must admit I don't know a whole lot on either side of this argument.
One issue is that the pipeline is a symbol of planned continued reliance on oil & gas to power N. America, rather than investing the same dollars and energy in to new alternative energy solutions. Environmentalists don't like the idea of building multi-billion dollar infrastructure in the oil & gas industry, as that will maintain our dependence on it.
I have a lot to gain from the pipeline being built, but I definitely see it as a step in maintaining the status quo of oil/gas's role in the N. American economy.
We have neither the capital or the man power to build multi billion dollar upgraders. Its much more economical from a capital investment standpoint to buy an older refinery in the US and install the equipment to process dilbit.
You know pretty much all the major Oilsands operations have multi-billion dollar upgraders? And what about the gigantic Redwater upgrader/refinery project underway?
Upgrading can and will be done in Canada for the most part, since you can get so much money for SCO compared to any unprocessed bitumen.
Refining on the other hand isn't as economical in Canada since there is so much excess capacity elsewhere (mostly in the Gulf).
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You know pretty much all the major Oilsands operations have multi-billion dollar upgraders? And what about the gigantic Redwater upgrader/refinery project underway?
Upgrading can and will be done in Canada for the most part, since you can get so much money for SCO compared to any unprocessed bitumen.
Refining on the other hand isn't as economical in Canada since there is so much excess capacity elsewhere (mostly in the Gulf).
Thanks tips, but good luck finding enough trades to construct them along with all the upstream projects being built. We're looking at flying in 30% of our trades from east, where we will be competing with major projects in NFLD, because there aren't enough people in the local market. Suncor's Voyageur project alone will need 5000-8000 people during construction. Upgrading soley in Canada is a great idea, but realistically we're never going to keep pace with production increases from the mines and SAGD facilities.
Last edited by burn_this_city; 09-28-2011 at 04:11 PM.
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!!! But ya, there are quite a few locations out here where they have acres of land with pipe sitting just waiting to be put into the ground. Been here for awhile now.
