Why Alberta Will Win The War Over Trans Mountain

[stockmesh + 2]

Oh Checkmate William, you just knocked over your own King...

Are you unable to counter facts and highly probable conclusions with any kind of reasonable and credible alternate scenarios/consequences? 

Your response, "my emotional distress", are you kidding me, that's all you got?! Please don't translate your own emotions/feelings on to me...

Info in all 4 points are Fact filled with easily discernible conclusions that unfortunately don't fit your own biased paradigms...

Point #4 killing you the most and least quantifiable? In truth all the recent Canadian polls indicate the building ground swell against present US NAFTA Shenanigan's. Growing majority does not like sending their national resources to US for peanuts, what's the cure? Readily accessible Asian markets of course, where $Billions are shipped thru B.C. ports infrastructure on a weekly basis and with the chance to grow $$$ exponentially once additional O&G infrastructure is built, result = Canadian export dominance will return...

Tell me did it break your Eco-Heart when Horgan and Indians backed the Kitmat LNG project...  Shall I send you a tissue via an LNG powered delivery vehicle?

[Guest]

3 hours ago, stockmesh said:

Oh Checkmate William, you just knocked over your own King...

Are you unable to counter facts and highly probable conclusions with any kind of reasonable and credible alternate scenarios/consequences? 

Your response, "my emotional distress", are you kidding me, that's all you got?! Please don't translate your own emotions/feelings on to me...

Info in all 4 points are Fact filled with easily discernible conclusions that unfortunately don't fit your own biased paradigms...

Point #4 killing you the most and least quantifiable? In truth all the recent Canadian polls indicate the building ground swell against present US NAFTA Shenanigan's. Growing majority does not like sending their national resources to US for peanuts, what's the cure? Readily accessible Asian markets of course, where $Billions are shipped thru B.C. ports infrastructure on a weekly basis and with the chance to grow $$$ exponentially once additional O&G infrastructure is built, result = Canadian export dominance will return...

Tell me did it break your Eco-Heart when Horgan and Indians backed the Kitmat LNG project...  Shall I send you a tissue via an LNG powered delivery vehicle?

China is so eager to secure Canadian oil that a pipeline to the pacific coast is one of their preconditions to a fee trade deal, along with the ability to invest in the oil sands. 

Finding the markets doesn't appear to be an issue. Getting the pipelines built to market it are the far bigger hurdle, and I have little doubt that they'll proceed because the federal government is willing to back them.   

Edited May 22, 2018 by Guest

[TraderTate + 186]

The rest of us (well, I can't speak for everyone else, I suppose) find this thread fascinating, and are enjoying reading both arguments here. Maybe we can take a step back and pick apart both sides of this debate additionally and dispassionately? I'm interested to know more about demand, quality and the eventual impact of the IMO regulations...

[EXXMobil + 6]

Hello Folks,

Just an F.Y.I. on the Kinder Canadian Pipeline. 

I posted days ago, the pipeline will be approved and I also posted the Kinder stock we feel is dirt cheap at current levels paying an almost 5% yield. 

Today after the market closed, the following news was posted on select newswires that many oil traders / investors may not be able to access.

Here you go...Best of luck to everyone!

X

 

BRIEF-Alberta Premier says "getting closer" to deal on pipeline expansion

May 22 (Reuters) - Kinder Morgan Inc:

* ALBERTA PREMIER SAYS "GETTING CLOSER" TO DEAL WITH KINDER MORGAN CANADA TO ENSURE TRANS MOUNTAIN CRUDE PIPELINE EXPANSION GETS BUILT

* ALBERTA PREMIER SAYS BRITISH COLUMBIA HAS UNDERTAKEN STRATEGY OF "INJECTING UNCERTAINTY" INTO TRANS MOUNTAIN EXPANSION PROJECT Further company coverage: (Reporting by Julie Gordon)

 

British Columbia says it is not delaying Canadian pipeline expansion

VANCOUVER, May 22 (Reuters) - British Columbia's attorney general said on Tuesday that the West Coast province is not delaying Kinder Morgan Canada's Trans Mountain pipeline expansion, despite the company's saying that B.C.'s opposition was making the build "untenable."

The attorney general, David Eby, told reporters that British Columbia is approving Trans Mountain permits on the same timeline as other major projects, and that its new environmental rules and a jurisdictional challenge simply come down to the province protecting its interests.

"It is not to stop the pipeline, it is not to prevent it - it's to ensure that we have the protections in place for when the pipeline is built and turned on," Eby said.

[EXXMobil + 6]

Hello again,

Days ago I posted gas will hit $5.00 gallon. 

I also updated my photo to a $5 a gallon pic. People said I was crazy...well...many New York gas stations are now charging $5 a gallon. 

Search OilPrice.com for the following...

- $5 per galon in Manhattan

Also, news is hitting the wires as I type..here is one link...

http://www.fox5ny.com/news/gas-hits-5-a-gallon-in-new-york-city

Thanks again ...

X

[Tom Kirkman + 8,860]

2 hours ago, TraderTate said:

The rest of us (well, I can't speak for everyone else, I suppose) find this thread fascinating, and are enjoying reading both arguments here. Maybe we can take a step back and pick apart both sides of this debate additionally and dispassionately? I'm interested to know more about demand, quality and the eventual impact of the IMO regulations...

Agreed, and well said TraderTate.

This thread is fascinating, with insights from multiple viewpoints.

Have at it guys in discussing your views, just please tone down the emotions a notch.

[laduedad + 3]

William Edwards, you are assuming that that the pipeline will only supply bitumen for Bunker C type fuel.  While it is true that residual fuel has increasingly been utilized by the Maritime industry while other industries have decreased utilization, you are missing the elasticity of its other permutations. Coking residuum into higher valued products is based on the difference in value between the feedstock and the slate of higher
valued products that coking produces. The wider the difference, the greater the value to the
refiner of coking. Although coking may be the most severe form of conversion into higher valued feedstocks, there are other methods that can alter the product yield and improve product quality, such as cracking, reforming, alkylation, polymerization, isomerization and hydrogen treatment.  In other words,there is a Marshallian relationship between feedstocks and what they are ultimately converted into.  Your premise that the IMO regulation decreasing allowable sulfur content from 0.3.5% to 0.5% by 2020 will ultimately destroy the demand of bitumen from Alberta is myopic at best or totally disingenuous, at worse.

[William Edwards + 708]

1 hour ago, Tom Kirkman said:

Agreed, and well said TraderTate.

This thread is fascinating, with insights from multiple viewpoints.

Have at it guys in discussing your views, just please tone down the emotions a notch.

I need some advice, Tom. First, am I guilty of expressing emotions other than frustration at shallow knowledge cloaked with arrogance? If so, and that is unacceptable, I can admit that I am in the wrong place.

Having been exposed to my thinking for several years, I would presume that you agree that my arguments are fact and logic based. Since I have accumulated quite a bit of data over the decades, and since my powers of logic still remain intact, I tend to respond with impatience when instructed, arrogantly, by those who have not yet done enough study of the subject to know the basic data. Enduring their instruction is trying.

I have no skin in the Canadian game. For several years the numbers have suggested, rather strongly, that oil sands production was growing at a faster rate than was conversion capability. The announcement by the IMO, almost two years ago, clinched the deal. Global production of asphaltenic crudes would need to be curtailed around 2020, if not before. Apparently my presenting those conclusions resulted in emotional responses from some participants. I did not create the imbalance, I merely presented the arithmetic that produced that conclusion.

After that lengthy preamble, here is my question. Is the basic knowledge level of oil industry data within Oilprice.com so low that I will continue to struggle with teaching simple data from public sources in order to have a meaningful discussion? Must I spend 95% of my time politely correcting mis-impressions and filling in missing data for those who should have done a bit of study before pronouncing solutions? If so, I think that effort is not appropriate for me. If recent experience is an aberration, then I may hang on for awhile.

Advice, please.

[William Edwards + 708]

4 hours ago, TraderTate said:

The rest of us (well, I can't speak for everyone else, I suppose) find this thread fascinating, and are enjoying reading both arguments here. Maybe we can take a step back and pick apart both sides of this debate additionally and dispassionately? I'm interested to know more about demand, quality and the eventual impact of the IMO regulations...

The first step, Tate, is to recognize the global nature of the petroleum system. Canada is not a thing unto itself, it is part of the global pool. Secondly, you need to appreciate that every participant is a competitor of every other participant. If you spot an opportunity, you can be sure that many other participants have zeroed in on the same opportunity. So draw no fences or borders in your mind, other than logistical and economic ones.

The third step is recognizing that quality is a special thing. Many quality situations can be overcome by spending money. Some cannot. Unalterable quality can limit participation of a crude source.

Having taken the first three steps you will be ready to accumulate the data and do the arithmetic that allows you to gauge where and how Canadian crude production fits into the global picture. I am happy to share results of this assessment with you, but I am unable to do the data gathering and logical assements that you need to do yourself. 

I will share the result I got from completing this exercise.

[EXXMobil + 6]

Hello Mr. Edwards,

I sense that you are frustrated with answers recently received or should I say, lack of..?

As for everyone posting for / or against your opinions, maybe the links within will help many understand what is going on moving forward. 

Everyone is entitled to their opinions but when opinions become hostile, it is not good for anyone. 

If anyone wants to spend $4500 for a report...here you go...

https://www.reportlinker.com/p02070081/Global-Asphaltene-and-Paraffin-Inhibitors-Industry.html

The report / slide show (link) below is free.

http://www.spe.org/dl/docs/2012/stankiewicz.pdf

Here is another free report. 

https://www.omicsonline.org/asphaltene-stability-in-crude-oil-during-production-process-2157-7463.1000142.pdf

Another report from 1997

https://www.onepetro.org/conference-paper/SPE-37251-MS

A 25 Page paper on the problem.

http://cdn.intechopen.com/pdfs/29875/InTech-Asphaltenes_problems_and_solutions_in_e_p_of_brazilian_crude_oils.pdf

I am simply trying to quell the situation within this subject. Hopefully one of the links I supplied within will help many understand, if not, let me know exactly what you are looking for and I will again try to help. 

Thank you

X

[Tom Kirkman + 8,860]

37 minutes ago, William Edwards said:

Advice, please.

Hi William,

I hope you will stick around.  I've read your musings since the Oilpro days, and you truly do have a unique viewpoint about the global oil & gas industry.  Pretty sure no one can dispute that.

This forum is about 3 months old, and growing rapidly.  So I expect there will be a lot of diverse questions, opinions, viewpoints, disagreements and a kitchen sink or two thrown together on this forum.  Pretty exciting, actually.  Feels a bit like the baby days of Oilpro in 2014, when oil prices started going sky high during the previous oil bull run.

Anyway, if you go to my profile here, in the "About Me" section, I have previously written my general advice here in my role as a moderator:

*** Important !   I do *not* expect others to agree with my opinions.  I tend to have rather unusual opinions about international Oil & Gas.  I *do* hope that readers will fearlessly voice their own views about international oil & gas.

As a former moderator on the Oilpro forum, (and now a moderator here on the Oil Price Community forum) I *encourage* dissent, and *encourage* Freedom of Speech, and *encourage* others to freely voice their views and convictions about oil & gas. 

A diversity of global views is what makes the world a special place.  Conformity is just a slow, painful death of not speaking your mind.  So SPEAK UP.  Please don't be a jerk about about it, though.  If you want others to consider your views, please be willing to consider the views of others.

Let's work together to make the Oil Price Community forum the Number 1 Oil & Gas forum on the internet.

Cheers, Mate.

^ That is my general hope and view for this new forum.  Just my generic advice, but you already know my views as a Mod from the Oilpro days - even those contentious "environmental" threads on Oilpro could get wild and wooly and really raucous, but Mods would step in to keep the discussions from getting too emotional.

There will be hiccups as this new forum develops, of course.  But so far, I see this Oil Price forum as the best dedicated Oil & Gas forum which is able to replace the old Oilpro forum.

Soon, Oil Price forum members will be able to write their own original content (original articles) and post them here on the forum as articles.  Then link to your own articles here and repost them on sites such as LinkedIn.  Just like we used to do on the old Oilpro forum.  This morning,  I had already discussed the member's article feature with Oil Price staff, and they are working on this.

So again, I sincerely hope you will choose to remain, William.  Please feel free to message me if you wish.  I'll do my best to answer questions or throw in my 2 cents.

[William Edwards + 708]

2 minutes ago, Tom Kirkman said:

Hi William,

I hope you will stick around.  I've read your musings since the Oilpro days, and you truly do have a unique viewpoint about the global oil & gas industry.  Pretty sure no one can dispute that.

This forum is about 3 months old, and growing rapidly.  So I expect there will be a lot of diverse questions, opinions, viewpoints, disagreements and a kitchen sink or two thrown together on this forum.  Pretty exciting, actually.  Feels a bit like the baby days of Oilpro in 2014, when oil prices started going sky high during the previous oil bull run.

Anyway, if you go to my profile here, in the "About Me" section, I have previously written my general advice here in my role as a moderator:

*** Important !   I do *not* expect others to agree with my opinions.  I tend to have rather unusual opinions about international Oil & Gas.  I *do* hope that readers will fearlessly voice their own views about international oil & gas.

As a former moderator on the Oilpro forum, (and now a moderator here on the Oil Price Community forum) I *encourage* dissent, and *encourage* Freedom of Speech, and *encourage* others to freely voice their views and convictions about oil & gas. 

A diversity of global views is what makes the world a special place.  Conformity is just a slow, painful death of not speaking your mind.  So SPEAK UP.  Please don't be a jerk about about it, though.  If you want others to consider your views, please be willing to consider the views of others.

Let's work together to make the Oil Price Community forum the Number 1 Oil & Gas forum on the internet.

Cheers, Mate.

^ That is my general hope and view for this new forum.  Just my generic advice, but you already know my views as a Mod from the Oilpro days - even those contentious "environmental" threads on Oilpro could get wild and wooly and really raucous, but Mods would step in to keep the discussions from getting too emotional.

There will be hiccups as this new forum develops, of course.  But so far, I see this Oil Price forum as the best dedicated Oil & Gas forum which is able to replace the old Oilpro forum.

Soon, Oil Price forum members will be able to write their own original content (original articles) and post them here on the forum as articles.  Then link to your own articles here and repost them on sites such as LinkedIn.  Just like we used to do on the old Oilpro forum.  This morning,  I had already discussed the member's article feature with Oil Price staff, and they are working on this.

So again, I sincerely hope you will choose to remain, William.  Please feel free to message me if you wish.  I'll do my best to answer questions or throw in my 2 cents.

Thanks, Tom. I hope that Olprice.com leadership encourages civility of discourse.

[Tom Kirkman + 8,860]

28 minutes ago, William Edwards said:

Thanks, Tom. I hope that Olprice.com leadership encourages civility of discourse.

Yes we do. (I'm not Oil Price staff though, just a volunteer Mod.)

And the Oil Price staff are putting together the "forum rules" so no one has to guess what is and is not acceptable here.  The rules should be added to the forum soon, they are already working on it.

My recommendation to staff was to expand on an earlier comment by Rodent (another one of the Moderators here).

Good morning, Curtis, and welcome to our community! We do have a team of content police. We encourage debate, free thinking, and differing opinions (in fact, we encourage it), just so long as it is courteous. We are intolerant of spamming, active selling on the forum, and harassment of other community members.  

https://community.oilprice.com/topic/1834-what-will-happen-with-venezuelas-oil-sector-privatization-needed/?do=findComment&comment=10002

[William Edwards + 708]

1 minute ago, Tom Kirkman said:

Yes we do. (I'm not Oil Price staff though, just a volunteer Mod.)

And the Oil Price staff are putting together the "forum rules" so no one has to guess what is and is not acceptable here.  The rules should be added to the forum soon, they are already working on it.

My recommendation to staff was to expand on an earlier comment by Rodent (another one of the Moderators here).

Good morning, Curtis, and welcome to our community! We do have a team of content police. We encourage debate, free thinking, and differing opinions (in fact, we encourage it), just so long as it is courteous. We are intolerant of spamming, active selling on the forum, and harassment of other community members.  

https://community.oilprice.com/topic/1834-what-will-happen-with-venezuelas-oil-sector-privatization-needed/?do=findComment&comment=10002

I am getting a better sense that Oil Price is a work in progress. Good!

[Tom Kirkman + 8,860]

1 minute ago, William Edwards said:

I am getting a better sense that Oil Price is a work in progress. Good!

Yep.  A healthy, bouncing baby forum, almost 3 months old now.  There will be a few messes to clean up every now and again, but this baby forum is growing by leaps and bounds with new members. Around 1,000 new members last week I believe.  Maybe the site Admin will post numbers, like I asked for earlier?  < *cough* >

And do be aware there are generally more lurkers than members here so far.

So for forum members, try to remember that there are lurkers who may be reading your comments besides the member you are responding to.

[Mohammed + 9]

lovely artical

Edited May 23, 2018 by Mohammed

[Jan van Eck + 7,558]

21 hours ago, J Owens said:

Hugely helpful, thanks a lot!

I will be writing up a different perspective once I figure out where to insert it.  The shipping industry is not going where you folks think it will go. 

[kharef + 1]

hi , i am new and hello for all

 

[Tom Kirkman + 8,860]

3 minutes ago, kharef said:

hi , i am new and hello for all

 

Hi and welcome to the Oil Price forum, Kharef.

Please feel free to introduce yourself on the New Members thread, so we can know a bit about you:

 

[Vasile Ioan Vulpe 0]

Great 

[Jan van Eck + 7,558]

OK, here we go. 

First off, I think Mr. William Edwards is correct in his analysis, yet the result proposes certain implicit assumptions.  The major assumption would be that the IMO actually goes through with the 0.5% sulfur limit, and has the ability to make it stick against cheaters.  And there are reasons to suppose that that is not certain.

First off, note that the cost of converting an existing ship, say a containership running HFO  (heavy fuel oil) in the 88,000-ton size range, is going to be about $2.75 million  (that is for the scrubber).  That is a lot more than if you build that scrubber into the ship in the shipyard. The big engine in there can run straight diesel, but the cost of diesel (before any crowding-out factors that will drive the price of Diesel up relative to HFO or IFO  (Intermediate fuel oil) will more than double the fuel bill.  The shipper can lower that a bit by "slow steaming," but then the daily charter fees start to eat up the potential savings; also, continued slow steaming means that engine runs cooler and carbon will start to cake up inside, increasing maintenance costs considerably. So you will see new-builds incorporating diesels able to run HFO and with the scrubber built in. 

Now this leaves the existing fleet. Remember that ships are typically owned and then time-chartered out, so the outfit doing the shipping has different interests than the owner. Once a ship gets older, the charter fees it can command start to slip; also, at a certain point the ship has to be pulled from service, put in a dry-dock, and given a "special survey," a bit akin to an aircraft reaching a certain number of hours and going in for a "C" check. Those special surveys can be quite pricey, and then the ship will require more frequent surveys to remain "in class," without which it cannot sail.  This then puts pressure on the shipowner to consider scrapping.  You will find that, against the day that the IMO really puts its foot down and insists on low-sulfur fuels, a lot of these ships will be scrapped.  And that will drive the replacements to be built with scrubbers. 

So the market for heavy crude will not disappear. 

Now, what about the ships that are not scrapped, but the owners do not want to spend that $2.75 million each on an older ship that will soon enough go to the breakers?  Will those ships end up running on diesel?  Likely not, as diesel will start to get expensive fast.  Instead, I predict those ships will go to a drop-in fuel fully compatible with the tanks now in those ships that hold bunker.

And that magic fuel is methanol.  Methanol is a liquid at operating temperatures and thus is a drop-in.  Methanol will require some small rebuilding of the engine and the fuel injection system,but that is not really a big deal.  And, big bonus, methanol, as an alcohol,will drop the insurance policy premium as, if the ships wrecks and breaks up, the alcohol will cause zero harm to the environment and require zero clean-up effort.  So instead of an oil-spill cleanup bill for that old ship of $150 million, the insurer only pays out $5 million for wreck removal to the salvors.

Although methanol can be manufactured from biomass distillation, the more logical source will be conversion of natural gas.  That process is well understood and easily done.  Methanol can be safely shipped by rail tankcar, or fuel barge, so none of the refuelling is going to be a problem. And it is not going to bust the piggy-bank to keep that old ship running a few more years until it finally gets scrapped. 

Will the large-scale use of methanol put upward pressure on natural gas pricing?  I dunno. It might. But there is lots of gas out there and more coming on-line, so that effect would be more likely mild. 

In sum: the ship owner can avoid installing those pricey scrubbers by going to either diesel or methanol.  the older ships will head for the breakers soon enough.  The new stuff coming down the ways will have new scrubbers installed.  Ultimately the transition will continue to provide an outlet for HFO and IFO. And if the IMO is less stentorian than it is portrayed, and the deadlines end up elastic, then the impact will not be that severe.  

Will Canada take the hit in the short term, as Mr.Edwards predicts?  Probably.  Will that market eventually come back?  Probably.  Cheers.

[TraderTate + 186]

8 hours ago, William Edwards said:

Thanks, Tom. I hope that Olprice.com leadership encourages civility of discourse.

My earlier suggestion that we take a step back on this thread was a selfish one. I was not suggesting that anyone was breaking any rules--far from it. This is one of the most informative and educational threads so far, and I'm just worried that one or another of the people I am (selfishly) gaining insight from might get irritated with each other and stop coming back. So my suggestion was merely one that would hopefully keep the opinions and insights flowing

[William Edwards + 708]

1 hour ago, Jan van Eck said:

OK, here we go. 

First off, I think Mr. William Edwards is correct in his analysis, yet the result proposes certain implicit assumptions.  The major assumption would be that the IMO actually goes through with the 0.5% sulfur limit, and has the ability to make it stick against cheaters.  And there are reasons to suppose that that is not certain.

First off, note that the cost of converting an existing ship, say a containership running HFO  (heavy fuel oil) in the 88,000-ton size range, is going to be about $2.75 million  (that is for the scrubber).  That is a lot more than if you build that scrubber into the ship in the shipyard. The big engine in there can run straight diesel, but the cost of diesel (before any crowding-out factors that will drive the price of Diesel up relative to HFO or IFO  (Intermediate fuel oil) will more than double the fuel bill.  The shipper can lower that a bit by "slow steaming," but then the daily charter fees start to eat up the potential savings; also, continued slow steaming means that engine runs cooler and carbon will start to cake up inside, increasing maintenance costs considerably. So you will see new-builds incorporating diesels able to run HFO and with the scrubber built in. 

Now this leaves the existing fleet. Remember that ships are typically owned and then time-chartered out, so the outfit doing the shipping has different interests than the owner. Once a ship gets older, the charter fees it can command start to slip; also, at a certain point the ship has to be pulled from service, put in a dry-dock, and given a "special survey," a bit akin to an aircraft reaching a certain number of hours and going in for a "C" check. Those special surveys can be quite pricey, and then the ship will require more frequent surveys to remain "in class," without which it cannot sail.  This then puts pressure on the shipowner to consider scrapping.  You will find that, against the day that the IMO really puts its foot down and insists on low-sulfur fuels, a lot of these ships will be scrapped.  And that will drive the replacements to be built with scrubbers. 

So the market for heavy crude will not disappear. 

Now, what about the ships that are not scrapped, but the owners do not want to spend that $2.75 million each on an older ship that will soon enough go to the breakers?  Will those ships end up running on diesel?  Likely not, as diesel will start to get expensive fast.  Instead, I predict those ships will go to a drop-in fuel fully compatible with the tanks now in those ships that hold bunker.

And that magic fuel is methanol.  Methanol is a liquid at operating temperatures and thus is a drop-in.  Methanol will require some small rebuilding of the engine and the fuel injection system,but that is not really a big deal.  And, big bonus, methanol, as an alcohol,will drop the insurance policy premium as, if the ships wrecks and breaks up, the alcohol will cause zero harm to the environment and require zero clean-up effort.  So instead of an oil-spill cleanup bill for that old ship of $150 million, the insurer only pays out $5 million for wreck removal to the salvors.

Although methanol can be manufactured from biomass distillation, the more logical source will be conversion of natural gas.  That process is well understood and easily done.  Methanol can be safely shipped by rail tankcar, or fuel barge, so none of the refuelling is going to be a problem. And it is not going to bust the piggy-bank to keep that old ship running a few more years until it finally gets scrapped. 

Will the large-scale use of methanol put upward pressure on natural gas pricing?  I dunno. It might. But there is lots of gas out there and more coming on-line, so that effect would be more likely mild. 

In sum: the ship owner can avoid installing those pricey scrubbers by going to either diesel or methanol.  the older ships will head for the breakers soon enough.  The new stuff coming down the ways will have new scrubbers installed.  Ultimately the transition will continue to provide an outlet for HFO and IFO. And if the IMO is less stentorian than it is portrayed, and the deadlines end up elastic, then the impact will not be that severe.  

Will Canada take the hit in the short term, as Mr.Edwards predicts?  Probably.  Will that market eventually come back?  Probably.  Cheers.

It may be too much to ask, but can you give some sort of timeline for the events that you describe? And even further, can you estimate the impact on crude prices while the transformations/corrections take place? Even a month is a long time to go hungry!

[Rodent + 1,424]

Thanks to all, for the conversations and insights that take interestingly differing opinions. Can we dumb this down a bit into a reader's digest version? To answer @William Edwards earlier question, I suspect our readers vary in their oil price/oil industry knowledge, ranging anywhere from would-be traders to industry analysts. We hope to be all-inclusive, from those wanting to glean new insights and those who want to share their well-thought out insights, and everything in between. We appreciate everyone's patience with those who see things differently. A trying task indeed for everyone on both sides.

Can everyone who has a position break it down into three bullet points or fewer? Like a bullet stating your conclusion, and one or two stating your assumptions that led to the conclusion? Is it possible to summarize it in this way? There is a lot of great information flowing here and I don't want to miss any of it.

Also, one question. Is Kinder Morgan stalling on Trans Mountain, as it has professed, because it is leery of getting stymied by the hostile political landscape, or is it worried about the viability and usefulness of this massive project? Pre-buyer's remorse?

[Jan van Eck + 7,558]

Responding to Mr. Edwards:    

Basically, I dunno.  You are much more in tune to oil markets than I am.  

As far as the shipping end of things goes, the industry has its innovators and market technology leaders, such as Maersk Lines, and it has the laggard followers, mostly found in Greece.  The technology leaders are building ships running on everything from batteries to natural gas.  The new LNG tankers are being built with engines that can take the boil-off during the voyage and pump it into the ship engine, basically cheap fuel that the shipper would otherwise lose.  The Greek crowd typically buys second-hand, or even older, ships, reducing their capital requirements and keeping their bank debt down (and they still routinely get into trouble).  A lot of how these shipowners react is a function of the wild swings in the charter fees they collect, which is dominated by the "Baltic Dry Bulk Index."  And that has varied from below the cost of running the ship (variable costs), to $15,000 a day. Figure a 1,000% spread in recent times.

The general consensus in the shipping industry is that the IMO will "blink" and the 2020 standards will take a pass.  And if enough shipping companies believe that, then it becomes a self-fulfilling prophecy. Is the IMO prepared to shut down the global shipping industry because they are unprepared?  Probably not.  And even if the IMO tries to be tough, how do they enforce the abstainment from HFO?  Even now, these ships run dual tanks, and come into port on light diesel, having shifted over some 20 miles out.  When they leave, the drill is to start up on diesel, and motor offshore, let the engine warm up, pump heat into the HFO tanks to get the stuff to flow, and then start to swing the valves. Does the IMO have the resources to go do inspections on what is inside the fuel tanks of every ship that comes into port?  No chance. Will there be ports that will sell HFO in defiance of the IMO?  Of course.  So the Greek owner with his old ships is still going to be able to get around these new regulations - until the new ships with scrubbers start to filter down into the ranks of the second-hand, a process that is typically ten years. 

The wild card are the European politicians - who are in large measure driven by the ideologue greens in their constituencies.  If IMO on paper sets forth a 0.5% limit, then it is entirely predictable that European ports will enforce that, and will not allow bunkering of HFO - which will be banned from the ports.  But is that going to be the case in Nigeria?  In Karachi?  In Bombay?  Probably not.  Those guys are likely to bunker HFO to any ship passing by that can pay for it, and given the amounts of money involved (a doubling of the fuel bill with diesel), you already know that bootleg HFO will be out there.  You are going to see some pressure on HFO by insurers; whether or not that tips the scales is anybody's guess.  

The big hit on HFO will come if exports from China take a hit.  Nothing like a trade war to collapse the shipping industry.  And that is another wild card. 

My guess is that IMO will attempt to put some kind of limit in 2020, for political reasons.  As shipping consumes some 5% of oil use, and all of the crud, your analysis of a collapse of demand for Canada Heavy crude is more likely to come to pass in 2020 than not, for the costing reasons you elaborated on at length. But ships are going to continue to suck up HFO and IFO, rules or no rules, so it will not be the across-the-board collapse that you predict.  These guys will cheat. It will be a ten-year turnaround until there is enough shipping out there to use HFO with scrubbers, at which point Canada is back in the game with a vengeance.  I predict that nobody is going to blow the $2.75 mill to retrofit a scrubber; they will cheat instead.  And the more respectable part of the industry will use methanol, until new ships arrive (and then methanol will die out, except for ships in local coastal trade through sensitive areas).  These are just my guesses. 

Incidentally another aspect that is not much reflected on is that those ships burning 3.5% HFO contribute a large layer of SO2 into the upper atmosphere, which is reflecting the solar heat off the planet.  So we are about to embark on a new planetary experiment; when the HFO finally is banned and 0.5% is in place, the additional solar input will raise the earth's temp by about 0.5 degrees C. And that part, nobody is talking about.  Oh, well.