Category Archives: Canadian oil production

Flood of Oil Is Coming, Complicating Efforts to Fight Global Warming

A surge of oil production is coming, whether the world needs it or not.

A Norwegian oil platform in the North Sea. Norway’s production has declined for two decades, but its development of the Johan Sverdrup deepwater field should reverse the trend.
A Norwegian oil platform in the North Sea. Norway’s production has declined for two decades, but its development of the Johan Sverdrup deepwater field should reverse the trend. Credit…Nerijus Adomaitis/Reuters
The New York Times, by Clifford Krauss, Nov. 3, 2019

HOUSTON — The flood of crude will arrive even as concerns about climate change are growing and worldwide oil demand is slowing. And it is not coming from the usual producers, but from Brazil, Canada, Norway and Guyana — countries that are either not known for oil or whose production has been lackluster in recent years.

This looming new supply may be a key reason Saudi Arabia’s giant oil producer, Aramco, pushed ahead on Sunday with plans for what could be the world’s largest initial stock offering ever.

Together, the four countries stand to add nearly a million barrels a day to the market in 2020 and nearly a million more in 2021, on top of the current world crude output of 80 million barrels a day. That boost in production, along with global efforts to lower emissions, will almost certainly push oil prices down.

Lower prices could prove damaging for Aramco and many other oil companies, reducing profits and limiting new exploration and drilling, while also reshaping the politics of the nations that rely on oil income.

The new rise in production is likely to bring economic relief to consumers at the gas pump and to importing nations like China, India and Japan. But cheaper oil may complicate efforts to combat global warming and wean consumers and industries off their dependence on fossil fuels, because lower gasoline prices could, for example, slow the adoption of electric vehicles.

Canada, Norway, Brazil and Guyana are all relatively stable at a time of turbulence for traditional producers like Venezuela and Libya and tensions between Saudi Arabia and Iran. Their oil riches should undercut efforts by the Organization of the Petroleum Exporting Countries and Russia to support prices with cuts in production and give American and other Western policymakers an added cushion in case there are renewed attacks on oil tankers or processing facilities in the Persian Gulf.

Driving New Production

Daniel Yergin, the energy historian who wrote “The Prize: The Epic Quest for Oil, Power and Money,” compared the impact of the new production to the advent of the shale oil boom in Texas and North Dakota a decade ago.

“Since all four of these countries are largely insulated from traditional geopolitical turmoil, they will add to global energy security,” Mr. Yergin said. But he also predicted that as with shale, the incremental supply gain, combined with a sluggish world economy, could drive prices lower.

There is already a glut on the world market, even with exports from Venezuela and Iran sharply curtailed by American sanctions. Should their production come back, that glut would only expand.

Years of moderate gasoline prices have already increased the popularity of bigger cars and sports utility vehicles in the United States, and the probability of more oil on the market is bound to weigh on prices at the pump over the next few years.

The oil-supply outlook is a sharp departure from the early 2000s, when prices soared as producers strained to keep up with ballooning demand in China and some analysts warned that the world was running out of oil.

Then came the rise of hydraulic fracturing and drilling through tight shale fields, which converted the United States from a needy importer into a powerful exporter. The increase in American production, along with a choppy global economy, shaved oil prices from well over $100 a barrel before the 2007-9 recession to about $56 on Friday for the American benchmark crude.

Those low prices have forced OPEC and Russia to lower production in recent years, and this year many financially struggling American oil companies have slashed their exploration and production investments to pay down their debts and protect their dividends.

An Era of Cheaper Oil

The new oil will accelerate those trends, energy experts say, even if only for a few years as production declines in older fields in other places.

“This could spell disaster for every producer and producing country,” said Raoul LeBlanc, a vice president at IHS Markit, an energy consultancy, especially if the United States and Iran come to some sort of nuclear deal.

Like the shale boom, the coming supply surge is a sudden change in dynamics. Guyana currently produces no oil at all. Norwegian and Brazilian production has long been in decline. And in Canada, concerns about climate change, resistance to new pipelines and high production costs have curtailed investments in oil-sands fields for five consecutive years.

Production of more oil comes at a time when there is growing acknowledgment by governments and energy investors that not all the hydrocarbons in the ground can be tapped if climate change is to be controlled. But exploration decisions, made years ago, have a momentum that can be hard to stop.

A drilling ship operated by Noble Energy for Exxon Mobil off Guyana. The South American country’s entry into the ranks of oil producers follows a string of major discoveries. Credit…Christopher Gregory for The New York Times

“Legacy decisions keep going,” said John Browne, BP’s former chief executive. “Things happen in different directions because decisions are made at different times.”

The added production in Norway comes despite the country’s embrace of the 2016 Paris climate agreement, which committed nations to cut greenhouse-gas emissions. Its sovereign wealth fund has cut investments in some oil companies, and its national oil company, Equinor, has pledged to increase its investments in wind power.

Equinor, which recently changed its name from Statoil to emphasize its partial pivot to renewable energy, nevertheless defends the new field on its company website, asserting, “The Paris Agreement is quite clear that there will still be a need for oil.”

Norway’s rebound from 19 years of decline began a few weeks ago as Equinor began production in its Johan Sverdrup deepwater field. The field will eventually produce 440,000 barrels a day, increasing the country’s output from 1.3 million barrels a day to 1.6 million next year and 1.8 million in 2021.

In Brazil, after years of scandal and delays, new offshore production platforms are coming online. Production has climbed over the last year by 300,000 barrels a day, and the country is expected to add as much as 460,000 more barrels a day by the end of 2021. In the coming days, Brazil is scheduled to hold a major auction in which some of the largest oil companies will bid for drilling rights in offshore areas with as much as 15 billion barrels of reserves.

In Canada, the 1,000-mile Line 3 pipeline that will take oil from the Alberta fields to Wisconsin, is near completion and awaiting final permitting. Energy experts say that could increase Canadian production by a half million barrels a day, or about 10 percent.

And the most striking change will be in Guyana, a tiny South American country where Exxon Mobil has made a string of major discoveries over the last four years. Production will reach 120,000 barrels a day early next year, rising to at least 750,000 barrels by 2025, and more is expected after that.

Guyana potentially has the most complicated future of the four countries. Its ethnically divided politics are sometimes turbulent, and Venezuela claims a large portion of its territory. But with the oil fields miles offshore, drilling is largely protected. In addition, Venezuela is mired in a political and economic crisis and unlikely to challenge a Chinese state company which has an oil investment in Guyana, along with Exxon Mobil and Hess.

Energy experts say the new production from the four nations will more than satisfy all the growth in global demand expected over the next two years, which is well below the growth rates of recent years before economic expansion in China, Europe and Latin America slowed.

At the same time, new pipelines in Texas are expected to increase United States exports to 3.3 million barrels a day next year, from the current 2.8 million.

That adds up to a vast surplus unless there is a resurgence of global economic growth to stimulate demand, or a prolonged conflict in the Middle East or other disruption to supply.

“To support prices, OPEC is going to have to extend and probably deepen their production cuts for a while,” said David L. Goldwyn, a top State Department energy diplomat during the Obama administration. “Getting the prices up to the point where Aramco can launch its I.P.O. is a big Saudi priority.”

The new barrels on the world market will also put pressure on companies producing in the United States, where profit margins for shale production are slim at current price levels and stock prices are falling.

“If I was in the business I would be scared to death,” said Philip K. Verleger, an energy economist who has served in both Democratic and Republican administrations. “The industry is going to face capital starvation.”

American oil executives express concern that drilling will fade in North Dakota, Oklahoma, Louisiana and Colorado as oil prices drop to as low as $50 a barrel in the next few years. Small companies are expected to merge, while others go bankrupt.

Scott D. Sheffield, chief executive of the Texas-based producer Pioneer Natural Resources, said he expected the growth of United States oil production to ease from 1.2 million barrels a day this year to 500,000 barrels next year and perhaps 400,000 barrels in 2021. Those increases are modest compared with the average increase of a million barrels a day every year from 2010 to 2018.

But Mr. Sheffield said he was optimistic, in part because new supplies coming to market could be offset by production declines in older fields in Mexico and elsewhere after 2021.

“There are no more big, giant new projects except Guyana,” he said. “We just have to be patient for a couple of more years.”


A version of this article appears in print on , Section A, Page 1 of the New York edition with the headline: Needed or Not, Oil Production Is Set to Surge.

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    Tar-Sands oil industry in trouble in Canada as Koch Brothers disinvest

    Repost from The Energy Mix

    Koch Brothers Abandon Alberta Tar Sands/Oil Sands

    By Geoffrey Morgan, August 16, 2019, Full story: Financial Post
    jasonwoodhead23/flickr

    Wichita, Kansas-based conglomerate Koch Industries has sold off its substantial position in the Canadian tar sands/oil sands, selling thousands of hectares of land to Cavalier Energy Inc., a subsidiary of Calgary-based Paramount Resources Ltd., the Financial Post revealed Wednesday.

    “Koch, one of the world’s largest private companies owned by American billionaires and Republican donors Charles and David Koch, has also abandoned the licences it did not sell in the transaction with Paramount and has been allowing its leases in the play to expire,” the Post reports.

    The news lands just days after tar sands/oil sands analysts bemoaned the poor response the industry is receiving from investors, despite its continuing efforts to cut costs.

    “The majority of Koch Oil Sands licences have been transferred to Paramount Resources Ltd.,” Alberta Energy Regulator spokesperson Shawn Roth said in an email. “All of the remaining licences for well sites have been abandoned, which means they have been permanently sealed and taken out of service.”

    A Koch subsidiary, Flint Hills Resources, still owns oil storage tanks in Hardisty, Alberta and runs U.S. refineries that process diluted bitumen from Alberta. “However, the company confirmed it had sold down its upstream oilsands holdings and surrendered expired leases in the play,” the Post states.

    “Those leases, which were held by Koch Oil Sands Holdings, have varied over the years,” wrote spokesperson Rob Carlton. “These recent transactions are merely a reflection of the opportunities that are currently available in the marketplace and our desire to prioritize other initiatives.”

    The Post lists a half-dozen international fossils that have abandoned the tar sands/oil sands since 2017, leaving Canadian firms like Suncor Energy Inc., Canadian Natural Resources Ltd., Cenovus Energy Inc., and Athabasca Oil Corporation to solidify their holdings. While the Post blames the departures on a lack of export pipeline capacity and price pressure from fracking fields in the U.S. Permian Basin, the analysis earlier this week pointed to intense competition from efficient, affordable renewable energy and electric vehicles that is rapidly eroding future demand for oil as a transportation fuel. “Koch is not the only company allowing leases in the oilsands to expire as the pace of development in the play has slowed in recent years,” the Post reports. “In a move to cut costs, MEG Energy President and CEO Derek Evans said on his company’s recent earnings call that his company would allow leases on its longer-term holdings to expire, rather than pay escalating rents on the land.”

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      Emissions at four Alberta tar sands mines 64% higher than previously reported

      Oilsands CO2 emissions may be far higher than companies report, scientists say

      By Mitchell Beer, The Energy Mix, April 23, 2019 | Full Story: Canadian Broadcasting Corporation @CBCNews

      Carbon pollution from four major tar sands/oil sands mines in northern Alberta is 64% higher than their owners reported using the United Nations’ standard emissions measurement framework, according to a study released this morning in the journal Nature Communications.

      “The researchers, mainly from Environment Canada, calculated emissions rates for four major oilsands surface mining operations using air samples collected in 2013 on 17 airplane flights over the area,” CBC reports. The study found gaps from 13 to 123% between reported and actual emissions at the four facilities, a finding that “could have profound consequences for government climate change strategies”.

      As for the fossils that submitted the data, “they’re just doing exactly what they’ve been told to do,” said John Liggio, an aerosol chemist at Environment and Climate Change Canada. “They’re not doing anything on purpose.”

      But that doesn’t make the research finding any less significant. Accurate numbers on carbon pollution “inform national and international climate policies,” the study states. “Such anthropogenic GHG emission data ultimately underpin carbon pricing and trading policies.”

      “The bottom line is we still have more work to do in terms of really determining how much is being emitted,” Liggio told CBC.

      The findings of this one study place Canada’s total greenhouse gas emissions about 2.3 higher than they were previously believed to be, CBC notes. “If research eventually shows that other oilsands sites are subject to similar underreporting issues, Canada’s overall greenhouse gas emissions could be as much as 6% more than thought—throwing a wrench into the calculations that underpin government emissions strategies.”

      On CBC, Liggio explained the standard, “bottom-up” method by which fossils are required to report their production emissions is fraught with uncertainty, factoring in everything from the carbon intensity of the fuels they use to whether plant maintenance activities may have driven a temporary spike in emissions.

      With their flyovers, Liggio and his colleagues took “a ‘top-down’ approach involving hundreds of air samples taken during more than 80 hours of flights over four major surface mining operations in northern Alberta: Syncrude Canada’s Mildred Lake facility, Suncor’s Millennium and North Steepbank site, Canadian Natural Resources Ltd.’s Horizon mine, and what was then Shell’s Albian Jackpine operation, now majority owned by Canadian Natural,” CBC explains.

      “Left out of the study, notably, are emissions from all oilsands operations that use in-situ extraction, pumping steam into the ground to get the petroleum out. About 80% of oilsands reserves, and the majority of current production, require in-situ extraction,” which means “the overall amount of underreported greenhouse gas emissions could be significantly higher.”

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        Updates On The Threat Of Crude-By-Rail In California

        Repost of an email…
        [Editor: The email came with this March 2019 Mesa Refinery Watch Group Newsletter.  For much more, see mesarefinerywatch.com.  – R.S.]

        ——–
        From:
         Martin Akel, March 22, 2019
        Subject: Updates On The Threat Of Crude-By-Rail In California

        Dear [            ]:

        There’s no denying it — there are deliberate attempts to overturn regulations and policies that protect our environment, health and safety.  Therefore, regardless of the rejection of Phillips 66’s crude oil trains, we must remain educated about potential threats.  Click on the link below to read the latest MRWG newsletter, which includes …

        ► How Kern County followed in SLO County’s footsteps … saying “NO!” to crude oil trains.

        ► How the federal government used flawed data when canceling improved brakes for trains.

        ► How railroads have yet again missed the deadline for installing new safety technology.

        ► How Canada is expanding their production of dangerous tar sands and investing in crude oil trains.

        ► Why Phillips’ former claim of needing oil trains to gain “energy independence” was simply misleading.

        ► Plus — dozens of recent examples of serious railroad and oil industry safety problems.

        Respectfully,
        The Mesa Refinery Watch Group
        www.mesarefinerywatch.com

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