Why Alberta Will Win The War Over Trans Mountain

[Guest]

1 hour ago, William Edwards said:

I’m sorry to have offended you, but your naivity regarding major oil company management caught me completely off guard. Having had experience both within and outside of the upper management of major oil companies has given me a different perspective from that which you expressed. My knee-jerk reaction was the result.My knee-jerk reaction was the result.

 

Please refrain from interacting with me, please and thank you. 

Edited May 23, 2018 by Guest

[Guest]

25 minutes ago, Jan van Eck said:

At one time there was this oil major that invested billions in Arctic oil. They built this giant oil tanker to haul the stuff on a dedicated route to refineries in Los Angeles.  They built it with a single-bottom shell plate.  The major had nothing in place to monitor the captain and the crew. The captain allegedly was drinking on departure, the first mate took over, and ran the tanker onto the rocks.  The waters  wrecked with 250,000 tons of oil, costing more billions to fix, was named Prince William Sound.  The ship was the Exxon Valdez. 

There was another big oil major that was drilling in the Gulf off Louisiana.  Pieces of drill collar rubber (the "blowout preventer") started coming up.  The oil major had a man on board the rig as their representative; he demanded that the drill be pulled same day, instead of first isolating the "christmas tree" on the sea floor to prevent a blowout.  Well,the shutoff valve failed, and staggering amounts of oil polluted hundreds of miles of coastline.  The company was BP and they paid $25 BILLION to the US for cleanup. 

$25 Billion is a lot of money.  Tough to have to write the check because management on site does dumb things. Just because a company is an "oil major" and can throw investor dollars around like spare change does not mean that they have collective brilliance.  Those guys can screw up just like the rest of us.  The difference is that their mistakes are more costly. 

You might be correct, although I'm not certain that major disasters are as predictable as long term outlooks. 

Its impossible to forecast what's going to happen. Not very many people saw the bottom dropping out of prices in 2008 or in 2014, and many people didn't see the sudden dramatic price increases that we've seen lately. 

No doubt that an oil major can screw up, but it does stand up to logic that they had their reasons for choosing to invest that were well thought out and scrutinized to death at the very highest levels. So with that being said, this is why I find it hard to believe that they wouldn't analyze the market enough to ensure they had a customer for their product prior to sanctioning multi billion dollar projects. 

 

[George Howe 0]

I've just registered and until i have spent time reading all the areas, i can't comment. 

[Refman + 207]

Found this today

 

http://business.financialpost.com/commodities/energy/death-spiral-canadian-oil-flows-into-u-s-gulf-coast-market-as-venezuela-falls-apart

 

Edited May 23, 2018 by Refman

[Tom Kirkman + 8,860]

7 hours ago, Ajan Bosnjacki said:

 

I think the government should form an independent body to provide the necessary cost due diligence on the business case for oil-sands oil over the next decades.

A Canadian government appointed body to study the issue?  Good Lord, I hope not.

[Guillaume Albasini + 851]

A document from Shell on the IMO 2020 with some interesting charts on global residual fueloil demand and bunker demand forecasts :

https://www.shell.com/business-customers/marine/fuel/marine-network/_jcr_content/par/textimage_1253347556.stream/1497626896370/1f511fb11dae6ae91ba293a525c0cedb92e68946e70d24adc747f0c91f98a969/shell-marine-imo-brochure.pdf

[William Edwards + 708]

2 hours ago, Guillaume Albasini said:

A document from Shell on the IMO 2020 with some interesting charts on global residual fueloil demand and bunker demand forecasts :

https://www.shell.com/business-customers/marine/fuel/marine-network/_jcr_content/par/textimage_1253347556.stream/1497626896370/1f511fb11dae6ae91ba293a525c0cedb92e68946e70d24adc747f0c91f98a969/shell-marine-imo-brochure.pdf

Shell presented this information more than a year ago. In site of the dramatic drop in high sulfur bunker fuel demand that they predict, Canada has still not made the connection that their main crude export, oil sands crude, is the most significant contributor to the oil needing to be removed from the system. Go figure!

[William Edwards + 708]

4 hours ago, Refman said:

Found this today

 

http://business.financialpost.com/commodities/energy/death-spiral-canadian-oil-flows-into-u-s-gulf-coast-market-as-venezuela-falls-apart

 

This article may be an example of slanted misstatement by the author, backed up by his cherry picking the data at a particularly opportune time. For comparison with another EIA display, here are the lines for Venezuelan and Canadian imports into the US since January 2017. Draw you own conclusions as to whether Canadian imports are pushing out Venezuela in a big way.

[Jan van Eck + 7,558]

8 hours ago, Fulcaneli said:

 

No doubt that an oil major can screw up, but it does stand up to logic that they had their reasons for choosing to invest that were well thought out and scrutinized to death at the very highest levels. So with that being said, this is why I find it hard to believe that they wouldn't analyze the market enough to ensure they had a customer for their product prior to sanctioning multi billion dollar projects. 

 

Large corporations tend to be run by, and controlled by, like-minded men.  The interests of the corporation, its shareholders, and the public are made subordinate to the interests of the Managers, especially the colossal ego of the CEO.  This is an endemic problem with the Corporation form of economic activity.  As "Exhibit A," I present to you Mr. Jamie Dimon, the head of J.P.Morgan Chase & Co., in New York. Mr. Dimon was paid $29.5 million last year.  During a stock analyst presentation meeting, Mike Mayo, a Managing Director at Credit Agricole Securities,  asked Mr. Dimon how he came to the conclusion he could get away unscathed doing what he did with that bank. [The actual question regarded whether or not capital ratios were a factor for depositors selecting a specific bank, which ratios Chase had let slip in the pursuit of Mr. Dimon's ego projects.]  Mr. Dimon, dismissing Mr. Mayo as the house imbecile,  replied, "That's why I'm richer than you."

These corporations run on gigantic egos.  Now the problem with this is that, when the Boss says [pick your example]:  "I want to go drill for oil off the coast of Brasil in 22,000 feet of water," then the entire workforce understands that their Reports,  Reserves Estimates, and costings better uphold the wisdom of the Master, or they will find themselves transferred to being a security guard on a tool-shed at Point Barrow [Alaska].   If by "at the highest levels" you are referencing the Board of Directors, then remember that Boards are groupthink at the most extreme level. 

To illustrate, recall that Maurice Greenberg, the CEO of American International Group  [AIG], thought it would be a bright idea to go issue single-premium insurance policies on mortgage-backed securities ["MBS"] known as "derivatives."  He even issued them without subrogation rights, so that when the Security went South and AIG paid the value of principal and interest to the insured (typically, some outfit like Deutsche Bank), AIG would not receive title to the underlying securities.  That stunt led to the "financial crisis" with all these brilliant Wall Street bankers (led by the guys at Goldman Sachs) descending on George W. Bush asking for many hundreds of billions in bail-out cash.  Greenberg's AIG picked up $88 Billion and had it all spent in 24 hours.  So much for the brilliance of huge corporations, their CEO's,and their Boards of Directors.

Edited May 24, 2018 by Jan van Eck
scrivener's errors

[William Edwards + 708]

8 hours ago, Jan van Eck said:

Large corporations tend to be run by, and controlled by, like-minded men.  The interests of the corporation, its shareholders, and the public are made subordinate to the interests of the Managers, especially the colossal ego of the CEO.  This is an endemic problem with the Corporation form of economic activity.  As "Exhibit A," I present to you Mr. Jamie Dimon, the head of J.P.Morgan Chase & Co., in New York. Mr. Dimon was paid $29.5 million last year.  During a stock analyst presentation meeting, Mike Mayo, a Managing Director at Credit Agricole Securities,  asked Mr. Dimon how he came to the conclusion he could get away unscathed doing what he did with that bank. [The actual question regarded whether or not capital ratios were a factor for depositors selecting a specific bank, which ratios Chase had let slip in the pursuit of Mr. Dimon's ego projects.]  Mr. Dimon, dismissing Mr. Mayo as the house imbecile,  replied, "That's why I'm richer than you."

These corporations run on gigantic egos.  Now the problem with this is that, when the Boss says [pick your example]:  "I want to go drill for oil off the coast of Brasil in 22,000 feet of water," then the entire workforce understands that their Reports,  Reserves Estimates, and costings better uphold the wisdom of the Master, or they will find themselves transferred to being a security guard on a tool-shed at Point Barrow [Alaska].   If by "at the highest levels" you are referencing the Board of Directors, then remember that Boards are groupthink at the most extreme level. 

To illustrate, recall that Maurice Greenberg, the CEO of American International Group  [AIG], thought it would be a bright idea to go issue single-premium insurance policies on mortgage-backed securities ["MBS"] known as "derivatives."  He even issued them without subrogation rights, so that when the Security went South and AIG paid the value of principal and interest to the insured (typically, some outfit like Deutsche Bank), AIG would not receive title to the underlying securities.  That stunt led to the "financial crisis" with all these brilliant Wall Street bankers (led by the guys at Goldman Sachs) descending on George W. Bush asking for many hundreds of billions in bail-out cash.  Greenberg's AIG picked up $88 Billion and had it all spent in 24 hours.  So much for the brilliance of huge corporations, their CEO's,and their Boards of Directors.

You realize, don't you Jan, that it will now be difficult for me to get my nomination of you to corporate boards accepted?

[Frackerwacky + 1]

On 5/19/2018 at 10:27 AM, William Edwards said:

You failed, Richard, to refute one fact. Instead you continued to object to my conclusions, without offering any defense of your own ideas other than "there are more intelligent people than you". Good luck with your unwillingness to investigate and learn. I will cease trying to be of assistance to your thinking.

Hi William, it is a pleasure to read some of your analysis of the Canadian heavy oil sands and it has definitely given me some things to think about.

My immediate reaction though is flabbergash  !!!!

I get that the heavy oil market demand will contract if all else remains unchanged. But do you really believe that Canadian oilsands production is doomed?  First, do you really think a $43,000,000,000/yr problem for Canadian production won't have some chemists working overtime to find a solution ?

Also, do you think a IMO 2020 policy that tips the world energy supply into a critical deficit will just be happily rolled out costing the world a possible rapid oil spike ? Big money will have other plans.

I've also read that growing permian light oil production requires mixing with heavy oil for processing. The growing US and world production of tight light oil will require more heavy oil ...not less. Iraq oil is making up for Venezuelan loss but isn't displacing Canadian oil. Right now, the world is producing more light oil at the expense of heavy oil. I see the WCS discount to WTI narrowing in the coming years !

Lastly, all of our production of bitumen is diluted and shipped to the US as heavy oil. The oil being shipped to BC is refined products that is consumed there. And lastly, 85% of bitumen is used in the construction industry (ie asphalt)...not shipping. 

[William Edwards + 708]

4 minutes ago, Frackerwacky said:

Hi William, it is a pleasure to read some of your analysis of the Canadian heavy oil sands and it has definitely given me some things to think about.

My immediate reaction though is flabbergash  !!!!

I get that the heavy oil market demand will contract if all else remains unchanged. But do you really believe that Canadian oilsands production is doomed?  First, do you really think a $43,000,000,000/yr problem for Canadian production won't have some chemists working overtime to find a solution ?

Also, do you think a IMO 2020 policy that tips the world energy supply into a critical deficit will just be happily rolled out costing the world a possible rapid oil spike ? Big money will have other plans.

I've also read that growing permian light oil production requires mixing with heavy oil for processing. The growing US and world production of tight light oil will require more heavy oil ...not less. Iraq oil is making up for Venezuelan loss but isn't displacing Canadian oil. Right now, the world is producing more light oil at the expense of heavy oil. I see the WCS discount to WTI narrowing in the coming years !

Lastly, all of our production of bitumen is diluted and shipped to the US as heavy oil. The oil being shipped to BC is refined products that is consumed there. And lastly, 85% of bitumen is used in the construction industry (ie asphalt)...not shipping. 

My assessments may be flabbergast, indeed, but in order to actually determine that you need to quantify your various points, beginning with a global supply/demand balance. When you do that balance you might be surprised at the results. However, without that global quantitative assessment your comments may prove to be unsound.

[jimrdon + 1]

Please advise me, specifically, of any claims that I have made that are not supported by factual evidence.

You might also examine whether your opinions are being influenced by the bias resulting from your own vested interest.

In case you do not wish to go to the trouble of validating your criticisms of my assessment, please check back with me in a couple of years and let me know how it all turned out.

William Edwards,

 

Your comments are not correct. There is demand for Canadian oil, otherwise we would not be building, or planning on building pipelines. You show a lot of arrogance, in that only you know all about this.

[William Edwards + 708]

5 minutes ago, jimrdon said:

Please advise me, specifically, of any claims that I have made that are not supported by factual evidence.

You might also examine whether your opinions are being influenced by the bias resulting from your own vested interest.

In case you do not wish to go to the trouble of validating your criticisms of my assessment, please check back with me in a couple of years and let me know how it all turned out.

William Edwards,

 

Your comments are not correct. There is demand for Canadian oil, otherwise we would not be building, or planning on building pipelines. You show a lot of arrogance, in that only you know all about this.

Thank you for your kind advice. It is always worthwhile to get assistance from those who know so much more about the subject than I do.

[rfowlkes1678 + 3]

William Edwards,

I enjoyed both your explainations and the fact you have the patience of a saint.  I just read through all 7 pages of comments.  One thing that struck me was that everyone assumes that the US refineries will not retrofit their facilities to take the fracked oil that the US is exporting at a discount.  With fracked oil production continually increasing it will not be long before either the refiners or the politicians to decide that US refineries need to process US oil first.

The reason the most US refineries are geared to heavy crude is because the US had reached peak oil production in the 1970s and would never be able to produce enough light crude for its refineries again.  Now the US has large amounts of oil being pumped from Texas and other locations that we had never expected it to be and have difficulty shipping it to market or refining it.  Since we now are producing more than we did at "peak oil" with no peak in sight it will not take to long to solve the transportation and refining problems we are now facing.

[Jan van Eck + 7,558]

5 hours ago, William Edwards said:

You realize, don't you Jan, that it will now be difficult for me to get my nomination of you to corporate boards accepted?

Yup, sure do. 

But then again, as a CEO, I would look any Board straight in the eye, and tell them:

(1)  Do not allow your CEO to sit on your Board, and assuredly not as the Chairman.  Doing that is a recipe for total disaster. You want to hear from the CEO, then send him a meeting invitation. 

(2)  Disband the Compensation Committee and hire an independent outside entity to do that work.  You can send an Outside Director over to provide Board input, but no more. Pay the CEO a salary, reasonable but modest.  If your CEO is demanding outsize compensation claiming to be a SuperStar  (the Jack Welsh mentality), fire the CEO.  His eqo will wreck the enterprise soon enough.  If you need verification of this fundamental truth, take a gander at what a mess Jeff Immelt left over at GE.  Just unreal.  And be sure the compensation package provides for no golden parachute; that is an insult to a competent manager.

(3)  Make sure half your Board consists of outside Directors.  You cannot run the enterprise for the benefit of stakeholders, and that specifically includes the workers, the town the workforce lives in, the State, the customers, and also the shareholders, without having outside Directors. 

(4)  If your manufacturing plant is big enough and the town it is sitting in is small enough, then have the Company pick up the tab for the property taxes of the residents.  Example:  your plant has sales of 65 million and your contribution margin is 55%.  The Town has 3,500 inhabitants and the property tax comes to $3 million.  Write that check.  First, it makes the Company a hero, you have no grief with the Selectboard; second, you want the town to be out of poverty, and the fastest way to distribute some prosperity is to remove the property tax.  And nobody is ever going to put a parking ticket on your car, either!  (That alone is worth the 3 mill).  Cheers.

[Frackerwacky + 1]

1 hour ago, William Edwards said:

My assessments may be flabbergast, indeed, but in order to actually determine that you need to quantify your various points, beginning with a global supply/demand balance. When you do that balance you might be surprised at the results. However, without that global quantitative assessment your comments may prove to be unsound.

The global supply/demand balance is very difficult to pin down but the indication is towards a supply deficit as the general consensus points to a overall decline in OCED inventories. The API reports are very clear on US inventory draws of over 100M this past year and if that inventory loss in the US was exported at the expense of growing inventories elsewhere Brent would not be trading at a premium to WTI.

Most of the points I made about your position on a Canadian oil collapse implied a present small supply deficit and the climbing price of oil is indicative of that. I have made a quantitative global supply/demand assessment.

[William Edwards + 708]

6 minutes ago, Frackerwacky said:

The global supply/demand balance is very difficult to pin down but the indication is towards a supply deficit as the general consensus points to a overall decline in OCED inventories. The API reports are very clear on US inventory draws of over 100M this past year and if that inventory loss in the US was exported at the expense of growing inventories elsewhere Brent would not be trading at a premium to WTI.

Most of the points I made about your position on a Canadian oil collapse implied a present small supply deficit and the climbing price of oil is indicative of that. I have made a quantitative global supply/demand assessment.

 Thank you again for your partial answer. I’m sure I don’t have to mention it to you, but the absence of a balance of asphaltenic  crudes renders the overall balance less than sufficient. Since I’m sure you have done that as well, I’ll look forward to receiving the results of that assessment. Thanks so much. 

[William Edwards + 708]

38 minutes ago, rfowlkes1678 said:

William Edwards,

I enjoyed both your explainations and the fact you have the patience of a saint.  I just read through all 7 pages of comments.  One thing that struck me was that everyone assumes that the US refineries will not retrofit their facilities to take the fracked oil that the US is exporting at a discount.  With fracked oil production continually increasing it will not be long before either the refiners or the politicians to decide that US refineries need to process US oil first.

The reason the most US refineries are geared to heavy crude is because the US had reached peak oil production in the 1970s and would never be able to produce enough light crude for its refineries again.  Now the US has large amounts of oil being pumped from Texas and other locations that we had never expected it to be and have difficulty shipping it to market or refining it.  Since we now are producing more than we did at "peak oil" with no peak in sight it will not take to long to solve the transportation and refining problems we are now facing.

Thank you for your kind words, Richard, and thank you for your intelligent response. Your dissertation is right on target and accurately describes the situation. The Exxon announcement of a 600,000 barrels a day refining project is proof of your assessment. The US will run its own crude. It will reject the heavier crudes that it formerly had to process.

Thanks for your participation. 

[Frackerwacky + 1]

7 minutes ago, William Edwards said:

 Thank you again for your partial answer. I’m sure I don’t have to mention it to you, but the absence of a balance of asphaltenic  crudes renders the overall balance less than sufficient. Since I’m sure you have done that as well, I’ll look forward to receiving the results of that assessment. Thanks so much. 

Oh yes, how could I overlook that the balance of asphaltenic crudes will have a catastrophic impact on the overall health of the Canadian oil industry !

By the way,  ALMOST ALL our 3.5M barrels of heavy oil goes to the US which is needed for refining. Our heavy oil is needed by the gulf refineries which are configured to process it ? Did you know that it is used to produce DIESEL as well?

Was hoping your analysis would be alittle more convincing.

 

 

 

[William Edwards + 708]

31 minutes ago, Frackerwacky said:

Oh yes, how could I overlook that the balance of asphaltenic crudes will have a catastrophic impact on the overall health of the Canadian oil industry !

By the way,  ALMOST ALL our 3.5M barrels of heavy oil goes to the US which is needed for refining. Our heavy oil is needed by the gulf refineries which are configured to process it ? Did you know that it is used to produce DIESEL as well?

Was hoping your analysis would be alittle more convincing.

 

 

 

Two elements are required for the successful transmission of a convincing analysis, a competent analyst and a sufficiently competent receiver of the analysis. Apply your own judgement as to which is missing here. With that helpful comment, I shall sign off.

[William Edwards + 708]

2 hours ago, Jan van Eck said:

Yup, sure do. 

But then again, as a CEO, I would look any Board straight in the eye, and tell them:

(1)  Do not allow your CEO to sit on your Board, and assuredly not as the Chairman.  Doing that is a recipe for total disaster. You want to hear from the CEO, then send him a meeting invitation. 

(2)  Disband the Compensation Committee and hire an independent outside entity to do that work.  You can send an Outside Director over to provide Board input, but no more. Pay the CEO a salary, reasonable but modest.  If your CEO is demanding outsize compensation claiming to be a SuperStar  (the Jack Welsh mentality), fire the CEO.  His eqo will wreck the enterprise soon enough.  If you need verification of this fundamental truth, take a gander at what a mess Jeff Immelt left over at GE.  Just unreal.  And be sure the compensation package provides for no golden parachute; that is an insult to a competent manager.

(3)  Make sure half your Board consists of outside Directors.  You cannot run the enterprise for the benefit of stakeholders, and that specifically includes the workers, the town the workforce lives in, the State, the customers, and also the shareholders, without having outside Directors. 

(4)  If your manufacturing plant is big enough and the town it is sitting in is small enough, then have the Company pick up the tab for the property taxes of the residents.  Example:  your plant has sales of 65 million and your contribution margin is 55%.  The Town has 3,500 inhabitants and the property tax comes to $3 million.  Write that check.  First, it makes the Company a hero, you have no grief with the Selectboard; second, you want the town to be out of poverty, and the fastest way to distribute some prosperity is to remove the property tax.  And nobody is ever going to put a parking ticket on your car, either!  (That alone is worth the 3 mill).  Cheers.

Boy! You sure blew your CEO chances now. The only people who will vouch for you are citizens and stockholders.

[EXXMobil + 6]

Hello Folks,

Days ago I posted the Kinder Pipeline will get approved and I also asked where you can deposit $1000 and get 5% Interest. 

News Just In...

https://www.ctvnews.ca/politics/pass-this-bill-immediately-senators-implore-feds-to-declare-pipeline-in-national-interest-1.3941772

This news HAS NOT hit Dow Jones News Wires yet...

Kinder stock is dirt cheap at current levels. The stock should be trading upwards of $25

Also, some members asked me where I heard Canada offered to cover any Kinder loss...

Here you go...

https://www.wsj.com/articles/canada-ready-to-compensate-kinder-morgan-for-pipeline-losses-1526479735

Anyone interested in the stock and the story should take note and do your own research. 

Do not make any kind of investment unless you know what you are doing. 

I supplied the news, you decide your future. 

Best of luck!

X

[Jan van Eck + 7,558]

2 hours ago, William Edwards said:

Boy! You sure blew your CEO chances now. The only people who will vouch for you are citizens and stockholders.

And not even them!  Cheers.

[jimrdon + 1]

 

9 hours ago, rfowlkes1678 said:

William EdwardI enjoyed both your explainations and the fact you have the patience of a saint.  I just read through all 7 pages of comments.  One thing that struck me was that everyone assumes that the US refineries will not retrofit their facilities to take the fracked oil that the US is exporting at a discount.  With fracked oil production continually increasing it will not be long before either the refiners or the politicians to decide that US refineries need to process US oil first.

The reason the most US refineries are geared to heavy crude is because the US had reached peak oil production in the 1970s and would never be able to produce enough light crude for its refineries again.  Now the US has large amounts of oil being pumped from Texas and other locations that we had never expected it to be and have difficulty shipping it to market or refining it.  Since we now are producing more than we did at "peak oil" with no peak in sight it will not take to long to solve the transportation and refining problems we are now facing.

 

9 hours ago, William Edwards said:

Thank you for your kind words, Richard, and thank you for your intelligent response. Your dissertation is right on target and accurately describes the situation. The Exxon announcement of a 600,000 barrels a day refining project is proof of your assessment. The US will run its own crude. It will reject the heavier crudes that it formerly had to process.

Thanks for your participation. 

US oil production from Shale will not be the savior everyone thinks it will be. The wells have steep decline rates, and GOR's start increasing, and more water production as well. Shale oil is a tread mill, the only way to keep production steady is to continue to drill, companies spend more than they bring in and we all know how that ends. The increase in the price of oil helps, but then we get higher costs for drilling, completion etc. which leaves the companies no better off. As far as Exxon announcing a 600,000 BBl refining project, the only one they have talked about is Beaumont which they say will double the already 365,000 BBl capacity, far from an increase of 600,000 BBls!!  There was a company in Canada by the name of Rennaisance Energy back in the early 2000's that learned about high decline rate wells, they were bought out by Husky for about $15/share, their stock price was $50, 2.5 years earlier. The treadmill got to them, at some point you cant drill enough to keep up with the decline rates, especially once the sweet spots have been drilled up.

Thanks