Is Delta Airways Mad?
created: 07 May 2012 12:58
tags: refinery usa
Last week saw the release of the most surprising bit of news from the refining sector for many a year.
Delta Air Lines (NYSE: DAL) wholly-owned subsidiary, Monroe Energy LLC, has reached agreement with Phillips 66 (NYSE: PSX-WI) to acquire the Trainer Refinery complex south of Philadelphia.
Their reasons:
"This modest investment, the equivalent of the list price of a new widebody aircraft, will allow Delta to reduce its fuel expense by $300 million annually
That seems like an awful lot of savings, which raises the question. If Phillips 66 was making $300 million per year from jet fuel why did it close the refinery down?
The biggest problem that the refinery has is its source of light sweet crude, processing crudes from countries such as Angola, Congo (Brazzaville) and Nigeria. At a time when rivals had access to cheap WTI priced crude oil, Trainer Refinery and its neighbours the Philadelphia Refinery and Marcus Hook Refinery were processing crudes that in many cases are sold at a premium to Brent Crude.
Now the only feasible strategy for the refinery is to completely change its source of raw materials. The growing volumes from the Bakken Oil Field could make a huge difference if they can find their way east.
My personal view is that Delta bought the refinery not because it thought that it would be better at running it that Phillips 66, but rather that if it closed the extra cost of Jet Fuel in the North East would outweigh any losses the refinery might make. At least this way there is a potential upside.
Note that of the three Pennsylvania refineries that were slated for closure, only Trainer has a Hydrocracker, essential for a decent Jet Fuel yield.
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Canada Will Be A Big LNG Player
created: 13 Apr 2012 14:31
tags: canada lng
The Canadian industry took some time to adjust to the reality that their biggest natural gas customer no longer needed their product, but it seems that the point has truly sunk in and alternative plans are accelerating.
First up, Kitimat Lng Terminal, like so many of its US peers, changed from being an import to an export project. It received export permission last year, and is set to start exporting LNG from 2014.
Now it is being joined by the Douglas Channel Lng Terminal Project which has just been awarded an export licence
The Honourable Joe Oliver, Minister of Natural Resources, today announced that the Government of Canada has approved the issuance of a 20-year licence to BC LNG Export Co-operative to export liquefied natural gas from Kitimat, British Columbia.
Douglas Channel is a relatively small player. Shell on the other hand has much bigger plans. They want to export 12 million tons per year, and are in final talks with their partners. They plan to be in operation in 2020.
Unlike most of their US competitors, these terminals will be located on the Pacific coast, much closer to the world's most important Asian markets. They may face local environmental hurdles, but the idea of stopping them exporting gas is not really an issue north of the border.
Whilst all eyes are on the gulf coast, its just possible that Canada may have a bigger impact on global LNG markets than her southern neighbour.
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South America's Bakken, Shale Oil in Argentina and Colombia
created: 06 Apr 2012 06:26
tags: argentina canacol colombia exxon shale ypf
There can hardly be anyone left in the universe who has not heard of the Bakken, the world's most prolific "shale oil" production area. Its impact on global oil markets can be seen in the huge disparities between WTI and Brent crude prices. Little North Dakota has become the epicentre of a new Black Gold Rush.
Investor newsletters are awash with stories about the "Next Bakken", with Eagle Ford and Utica being popular favourites. Yet as with Shale Gas before it, Shale Oil is now starting to make the news outside of the USA.
Canacol Energy Ltd. (“Canacol” or the “Corporation”) (TSX:CNE) (BVC:CNEC) is pleased to announce that its wholly owned subsidiary, Carrao Energy Sucursal Colombia (“Carrao Colombia”), has entered into a farm-out agreement (the “FOA”) with ExxonMobil Exploration Colombia Limited, a wholly-owned subsidiary of ExxonMobil Corporation (“ExxonMobil”) (NYSE:XOM) for the exploration of the Corporation’s non-operated VMM 2 exploration and production (“E&P”) contract located in the Middle Magdalena basin of Colombia. The VMM 2 E&P contract is one of three adjacent contracts that Canacol has interests in, representing 126,000 net acres that expose Canacol to a potentially large, unconventional shale oil play.
The estimates of reserves are in the several hundreds of millions of barrels of oil, but as we know from past experience, these are no more than an educated guess.
Just a week ago, Shale Oil was making the news elsewhere in South America:
The positive result allows us to extend the estimate of the area prospects for such training at 2,000 km2 with an expectation of resources 1,000 million barrels of oil equivalent for this site in the Province Mendoza.
Yes you read that right. YPF believes it has discovered 1 Billion barrles of high quality Shale Oil in Argentina. So once again, South America is a source of exciting new developments. At this rate the Western hemisphere is going to become a net exporter of oil.
Given the newness of the technology and techniques, and the challenges facing explorers in many parts of the world, Shale Oil may be a very long time coming. Nevertheless, it does have the potential to change the destiny of nations. Argentina and Colombia may have a head start, but the race has just begun.
