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abarrelfullabarrelfull wrote on 21 Dec 2009 06:50
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Keystone XL is in America's Interests

created: 13 Nov 2015 07:56
tags: canada pipeline usa

rating: +2+x

So the US President has denied permission to Transcanada to construct the Keystone XL Pipeline Project.

The project was launched in 2008, and has been waiting for US government approval since 2009.

The pipeline project has numerous critics, who claim many problems including

  1. It's not Safe
  2. It's bad for the climate
  3. It's bad for health and the environment
  4. It's bad for the economy
  5. It's a step backwards

If we are to be realistic, any energy project is not without its social and environmental costs, and all good companies, pressured of course by central and local regulators, try to minimise these costs whilst maximising the benefits.

Much of what its detractors claim, appear to be exaggerated or wrong headed however, and they completely fail to face up to the costs of refusing this project.

The Climate:

  • The way to fight climate change is to reduce the usage of fossil fuels, not stop their production. Less production in Canada will increase oil prices marginally, increasing incentives to produce oil elsewhere. Given that companies doing business in Canada are held to much higher standards than in most oil producing countries decreasing Canada's market share looks irresponsible

Local Pollution:

  • The problems in the oil sands production areas and with pipeline spills are well documented. The right solution here is undoubtedly making the polluter pay, and stricter controls. As in the point above, the environmental devastation in places like Nigeria is unthinkable in the USA or Canada

The Economy:

  • There are worries that the crude will be exported. Even if it is, that does not stop the project being positive for the USA. Moreover, refineries in most other countries are unable to effectively process this heavy crude in the way that those on the Gulf Coast can. So majority will definitely be processed locally.

The Opportunity Cost

  1. Canada's biggest trading partner is the USA. Anything that hurts Canada, reduces their ability to buy US imports
  2. Canada needs to sell this crude, and if the USA doesn't want it, China does. At a time when China's inexorable rise is worrying everyone, why push the Canadians into their arms.
  3. The countries that will gain from Canada's loss, are a who's who of dysfunctional petro states
  4. Canada, along with domestic tight oil, have raised the prospect that the USA in the future, will not need to buy any crude oil whatsoever from the Middle East. This means less need to intervene, less risk of conflict and fewer body bags.

Mr President, you may have made some of your supporters happy, but you have failed to look out for the Nation's interests.


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Then there were Five

created: 29 Sep 2015 07:52
tags: australia lng

rating: +2+x

Just 5 years ago, Australia only had two operating LNG producing plants, the relatively small single train Darwin LNG Terminal and the original North West Shelf LNG plants, which are much larger and consists of five trains.

In 2012, these were joined by the Pluto LNG Terminal, and Australia started to become a more significant player in LNG globally.

2015 however, will forever be the turning point for LNG in Australia. First the Queensland Curtis LNG Terminal reached full commercial production and now we have this announcement that Gladstone LNG Terminal is up and running. So we now have about 35 million tpa capacity and 5 operating facilities.

This is before the great silver backed gorilla of a project, Gorgon LNG Terminal, will add another 15 million tpa capacity. That's not all, Australia Pacific LNG is to add 9 million tpa this year and next, whilst the Wheatstone LNG Terminal will add another 9 million tpa next year.

A year from now, total Australian capacity will be almost 70 million tons per annum, a close second place to Qatar which has 77 million.

The impact of all this on a market that has already seen big falls in prices, is going to be huge. This is before we take US investments into consideration. In fact given the bearish outlook for LNG prices, the shift from oil to gas will continue even at today's low oil prices. Which is yet another reason to be bearish on oil itself.


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Why The USA Should Export Crude: EIA Report

created: 18 Sep 2015 06:49
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I have something of an obsession with the ban on crude oil exports from the USA, both for ideological and practical reasons. A country that preaches the free market, should not indulge in such mercantile games. Moreover, I have never believed that the ban was good for the USA as a whole (though as with all such restrictions, there are beneficiaries, who tend to be very vocal in their support).

Now the EIA has published A Report examining the restriction and its impacts under a number of different scenarios.

They come to a number of conclusions, in line with what I have always thought:

  1. In cases where the Brent-WTI spread grows beyond $6/b–$8/b, removal of current restrictions on crude oil exports would result in higher wellhead prices for domestic producers, who would then respond with additional production.
  2. Petroleum product prices in the United States, including gasoline prices, would be either unchanged or slightly reduced by the removal of current restrictions on crude oil exports.
  3. Refiner margins (measured as the spread between crude input costs and wholesale product prices), which tend to increase as the Brent-WTI spread widens, would be lower without current restrictions
  4. Unrestricted exports of U.S. crude oil would either leave global crude prices unchanged or result in a small price reduction

So only US Refiners would lose out. The report calculates that they need a WTI/Brent differential of about $15 per barrel to encourage investment. Given the cost of this differential to crude oil producers, and the impact on their investments, favouring refineries is inefficient.

So for everyone's sake, lets repeal the law and get US crude exports flowing.


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