Sonoro Energy Ltd (SNV)

[MHT]

Article on Heavy Oil in G&M


There was a whole article in Globe & Mail a couple of month back on the plight of Heavy Oil.


www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/in-texas-oil-sands-firms-fight-for-their-share/article1354643/


This was the paragraph that stuck out in my mind:

Production at Mexico's largest field, Canterell, is dropping rapidly, while Venezuela is not investing in expanding production and, as a result of the predilections of president Hugo Chavez, is looking to shift exports away from the U.S.


Venezuela & Mexico are the great North American exporters of Heavy Oil. Hugo Chavez has now decided to send his oil to China for upgrading (as opposed to Texas) and Mexico’s oil reserves have been dwindling.

This caused the Texas Upgraders to increase the price they were willing pay for heavy oil, because they can’t have their plants sitting on idle. The North American price differential between Heavy & Light was well over $20 until Chavez decided to ship his oil to China. As a result, the price differential dropped down to around $5.

In Europe, there is a lack of upgraders. If you go to Sedar, and look at Bankers Petroleum Management Discussion & Analysis Reports, you will see that Bankers trucks its Albanian oil to the coastline, and then ships it to Italy.

Apparently Italy is the closest country with an upgrader. As such, due to the lack of upgraders in the region, the Italians can ask for a greater premium; Hence the greater differential between Heavy & Light crude in Europe.

It’s also question of logistics for most of the Heavy Oil Companies in Eastern Europe. They can easily extract more oil out of the ground; however the transportation network is what is holding them back. There are only so many trucks/ships able to carry the oil. Companies like Bankers Petroleum could easily double their production. The only problem is that they wouldn’t know what to do with it.

The Sonic Generator would be the ideal machine to upgrade the oil right on site. The upgraded oil could then be transported via the pipeline system as opposed to relying on trucks (imagine if all oil were transported by trucks in North America as opposed to the pipelines – the transportation costs would be huge).

With the greater price differential, the lack of upgraders and the amount of untapped heavy oil still in the ground in Eastern Europe, I say forget about North America (especially Mirex with its break-even project). Let’s go to where one can get the greatest bang for the buck.