Neil is a little edgy this morning..............
July 14, 2006
U.S. over a barrel
Alberta has captive American market as oil hits $78US mark
By NEIL WAUGH
Yesterday, while Alberta Premier Ralph Klein was running around the oilsands with U.S. Energy Secretary Sam Bodman - showing George Bush's top oil guy what his penny-on-the-dollar royalty giveaway has created - oil hit a new record of over $78US a barrel in after-market trading.
Bodman didn't exactly need Klein's show and tell. He had already received the bad news - (bad, at least, for a Republican who has to fight the mid-term U.S. election on runaway gasoline prices).
Three days earlier, his department's Energy Information Agency (EIA) sent him its latest short-term energy outlook. It was not exactly the stuff to campaign on.
"Although higher prices have slowed world petroleum consumption growth," the outlook reported to Bodman, "expected growth remains strong at 1.6 million barrels per day in 2006 and 1.8 million barrels per day in 2007."
And there was more negativity for the president's man in the report. The OPEC price fixing cartel is all but tapped out. Especially with violence flaring up again in Nigeria's rebel-infested oil country.
"Most consumption growth will be met by increases in non-OPEC production," Bodman's report added.
In other words, they need us more than we need them. Especially when the EIA noted that, despite declining conventional production in the Western Sedimentary Basin, "Canadian production will increase due to rising oilsands production and the White Rose field." Or at least here's hoping.
Bodman's energy gurus also predicted that this summer U.S. gasoline prices will average $2.88US per gallon. Up 51 cents from what Yanks were paying at the pump last year.
One bright star in an otherwise gloomy sky is a predicted decline in natural gas prices. Unless you are an Alberta taxpayer who learned this week about the sweet deal that oilsands developers are getting on the massive volumes of gas it takes to operate the plants. Even though gas prices have settled down to nearly normal again, it still comes with no royalty charge.
Alberta Liberal energy critic Hugh MacDonald has written a letter to Alberta Energy Minister Greg Melchin demanding to know "how much natural gas is burned royalty-free each year in the generation of electricity and steam in the oilsands?
"And how much has this cost Albertans in lost royalties?"
Melchin hit the ditch with Tory leadership candidates this week when he claimed he had done a royalty review. It concluded Albertans are getting their "fair share" for our non-renewable resources - despite the royalty-free double dip that the oilsands companies have been given. Several Alberta premier wannabes said the PC caucus has never seen Melchin's mysterious review.
When pinned down by reporters, Klein countered he didn't give a "tinker's damn" whether his alleged royalty watchdog had completed his report.
Melchin's mailbox is getting pretty full.
Alberta NDP Leader Brian Mason wrote to the energy minister to remind him that, "this resource is owned by the people of Alberta, the government is merely the steward." Mason also wants a copy of Melchin's "alleged" report. Me too.
At the same time, OPTI Canada and Nexen were giving the bad news to shareholders. Their Long Lake SAGD project - which they hope will hit 240,000 barrels a day by 2016 - is now 10% over cost. The final price tag for the big huff and puff with an upgrader attached will be $4.2 billion.
"Lower than planned labour productivity," is to blame for the cost overruns. The project imported 300 welders and electricians from the Philippines while Edmonton union hiring halls had thousands of unemployed tradesmen on the books after the Shell and Syncrude jobs wound up.
"It's not an issue," insisted OPTI spokesman Alison Trollope. And what does it matter? It all gets paid for with the Alberta Tories' penny-on-the-dollar royalty giveaway that kicks in until the full cost of Long Lake is recovered.
Meanwhile, yesterday's cabinet orders included a rubber stamp for Connacher Oil and Gas's Great Divide project. It's now "full speed ahead" for the 10,000 barrels a day project that straddles Highway 16 south of Fort McMurray. Costs have also risen 15%.
But no worries there. The cash will flow when Connacher's "blended production" gets pipelined to the refinery the company recently purchased in Great Falls, Montana, where all the stable, high-paying refinery jobs will be located.
Just another day in Alberta's Tory paradise.
