OPEC Sneezes, US Industry Gets the Flu and Canada Gets Pneumonia

[D Coyne + 305]

On 5/6/2019 at 2:54 PM, ceo_energemsier said:

Cenovus has JV refineries in the US, where they process their crude moved by rail and pipeline to IL and to TX, which reduces their exposure to the Canadian crude price spiral to a degree on their production side.

The diluted Canadian crude is moved west and south into the USGC and also the MIdWest, refineries do run this crude oil (majors and indies both). Given the shale production, these Canadian barrels are blended again and processed at USGC refineries as well. One big market for this blend of crude oil is in China and India.

I had heard there is a bit of a problem with refining these "dumbbell blends" where there is very light and very heavy API weights, without much in the middle where the money is made.  I do not know refinery operations, it may be easy to deal with these blends, and not everything one finds in print is correct.  In any case, the present problem is a lack of transport capacity to move the Canadian crude to market as quickly as it is produced.  Or so I have read.

[Falcon + 222]

On 5/6/2019 at 3:35 PM, Ward Smith said:

. If they can't get raw product out in sufficient volume, how can they get refined product out? Alberta with their 4 million consumers aren't going to make a dent. 

YOU CAN TRANSPORT FINISHED PRODUCT VIA TANKER SHIPS

YOU CAN NOT SHIP DILBIT VIA TANKER SHIP

Syncrude is not DILBIT

WCS is not DILBIT

Canadian Heavy is not DILBIT.

 

 

Edited May 7, 2019 by Falcon

[Ward Smith + 6,615]

7 hours ago, Falcon said:

YOU CAN TRANSPORT FINISHED PRODUCT VIA TANKER SHIPS

YOU CAN NOT SHIP DILBIT VIA TANKER SHIP

Syncrude is not DILBIT

WCS is not DILBIT

Canadian Heavy is not DILBIT.

 

 

Dude WCS by DEFINITION is Dilbit. Look it up

[Falcon + 222]

13 hours ago, Ward Smith said:

Dude WCS by DEFINITION is Dilbit. Look it up

You're half right.  Let me explain.

WCS contains dilbit.  Another name for WCS is Summit.

Originally in the early 2000's all the majors wanted to get into Canada to process bitumin. In 1998 to 1999 OPEC once again put the squeeze on the IOCs.  The IOCs were kicked out of Venezuela and US production was drying up.

With oil price over $100 the planned to mine the bitumin and process it, basically refine it just to turn it into crude oil or Sunrise.  While a very costly proposition they made money while oil prices still very high.  

Prices dropped. So the plan was to send the bitumin to the refineries on the gulf that could handle it.  They invented dilbit diluting bitumin with condensate (around 30% condensate). This caused a couple of problems.(1) the acid level(TAN) was high. When temp got above 150 degrees caused erosion in pipelines and distillate towers. The refineries had to replace steel towers with buckle molybdenum alloy. They had to place temp sensors on pipelines to monitor. (2) the other problem was separation. Even moving thru a pipeline there was separation or formation of gas bubbles. When these bubble occurred the system would alert for LOW PRESSURE. So the engineers would crank up the pressure. This would eventual rupture the pipe. That’s what happened in Arkansaw and Kalamazoo.

So to address these problems plus high sulfur and heavy metals content they derived ew blends.

WCS was blended by Encana (oil division later became Cerovus) and eventual standardized as WCS.

The blended Dilbit with the lighter and sweeter Syncrude. First they didn’t have to buy as much expensive condensate, Syncrude mixed better without separation and flowed with less friction.  WCS is part Dilbit, but not Dilbit and is often called Synbit.  It’s more expensive then shipping straight Dilbit via pipelines (which still accounts for large volume of imported Canadian oil)

Straight Dilbit can ship on pipelines but not ocean tankers or rail cars.  Even the Dilbit storage tanks need stir wheels and special vents sto lessen separation and address the      accumulation of toxic gases.

So that’s why the Chinese and others want to build refineries in Alberta and ship product to coast for sale overseas.

Anyway you look at doesn’t change the fact that Tar Sands was one of the biggest mistakes ever.  

Edited May 8, 2019 by Falcon

[Ward Smith + 6,615]

1 hour ago, Falcon said:

You're half right.  Let me explain.

WCS contains dilbit.  Another name for WCS is Summit.

Originally in the early 2000's all the majors wanted to get into Canada to process bitumin. In 1998 to 1999 OPEC once again put the squeeze on the IOCs.  The IOCs were kicked out of Venezuela and US production was drying up.

With oil price over $100 the planned to mine the bitumin and process it, basically refine it just to turn it into crude oil or Sunrise.  While a very costly proposition they made money while oil prices still very high.  

Prices dropped. So the plan was to send the bitumin to the refineries on the gulf that could handle it.  They invented dilbit diluting bitumin with condensate (around 30% condensate). This caused a couple of problems.(1) 

Falcon, I'm not going to mince words here. You're the one who's half right. 

Dilbit = diluent + bitumen. You don't mix bitumen with dilbit, you mix bitumen with condensates (like pentanes plus) as the diluent to create dilbit, what Cenovus and others sell as WCS. Period. 

[Falcon + 222]

47 minutes ago, Ward Smith said:

Falcon, I'm not going to mince words here. You're the one who's half right. 

Dilbit = diluent + bitumen. You don't mix bitumen with dilbit, you mix bitumen with condensates (like pentanes plus) as the diluent to create dilbit, what Cenovus and others sell as WCS. Period. 

Ward I just finished my post from before. 

WCS = Dilbit + Syncrude

It sounds like the same thing but really is different 

Either way Canadian Tar Sands is screwed. Only surviving for now on cash flow from all the write offs and sunk costs depreciation expense. 

Buffet just invested billions in Suncor, the Syncrude producer, for the cashflow

Edited May 8, 2019 by Falcon

[Ward Smith + 6,615]

16 minutes ago, Falcon said:

Ward I just finished my post from before. 

WCS = Dilbit + Syncrude

It sounds like the same thing but really is different 

Either way Canadian Tar Sands is screwed. Only surviving for now on cash flow from all the write offs and sunk costs depreciation expense. 

Buffet just invested billions in Suncor, the Syncrude producer, for the cashflow

Normally I'm not fond of wiki links, but this saves me grabbing from Canadian sources that are more cumbersome. 

https://en.m.wikipedia.org/wiki/Dilbit

Diluent is the mechanism by which you dilute something, it is essentially the solvent. Dilbit is a contraction for diluted bitumen. There are literally hundreds of potential diluents, pentanes, naptha, xylene, light crudes, syncrude, etc. There isn't a magic "diluent" that is somehow different from other diluents, the very act of blending the viscous bitumen with the low viscosity solvents creates the dilbit. WCS is just one "flavor" of dilbit. 

Unlike low recovery rate shale plays, where the fall off is about 80%, bitumen producers are recovering 60-95% of the original oil in place (OOIP) a term you should be familiar with. Furthermore their depletion rate is from 0.5-3% which is vastly superior to shale and beats the industry average of 7% per year, to which it is contributing outlier statistics. 

Yes it's energy intensive and overly expensive, but it is uniform and reliable. The longer they operate the more efficient they should become. But they're fighting a three front war. 

[Falcon + 222]

43 minutes ago, Ward Smith said:

Normally I'm not fond of wiki links, but this saves me grabbing from Canadian sources that are more cumbersome. 

https://en.m.wikipedia.org/wiki/Dilbit

Diluent is the mechanism by which you dilute something, it is essentially the solvent. Dilbit is a contraction for diluted bitumen. There are literally hundreds of potential diluents, pentanes, naptha, xylene, light crudes, syncrude, etc. There isn't a magic "diluent" that is somehow different from other diluents, the very act of blending the viscous bitumen with the low viscosity solvents creates the dilbit. WCS is just one "flavor" of dilbit. 

Unlike low recovery rate shale plays, where the fall off is about 80%, bitumen producers are recovering 60-95% of the original oil in place (OOIP) a term you should be familiar with. Furthermore their depletion rate is from 0.5-3% which is vastly superior to shale and beats the industry average of 7% per year, to which it is contributing outlier statistics. 

Yes it's energy intensive and overly expensive, but it is uniform and reliable. The longer they operate the more efficient they should become. But they're fighting a three front war. 

Syncrude is made from bitumen

Dilbit derived from blending bitumen

I remember listening in on the question and answering session at Exxon investor day in I think Feb 2013. The CEO was asked about progress on the Keystone XL.  He answered in an angry tone, “ If they stop us from shipping it to the gulf we’ll sell it to China”.  As if that’s a threat ?  Then someone asked, I thought you can’t ship Dilbit in ships. He then stammered and said we’ll thats true something about gases separations and Dilbit solidifying in the ships storage”

Also, some conflate Cd Heavy oil as Dilbit.

Anyway you cant ship Dilbit in rail cars or ships.

they tried in rail cars with heating systems and stir wheels. It could be done but very very expensive. And when the system failed you ended up with a 680 bbl hockey puck

Why debate tar sands ? It’s losing proposition.

Edited May 8, 2019 by Falcon

[Marc Savoie + 19]

I will never get the time I spent reading about dilbit back 😝.

Falcon: 'Tar Sands was one of the biggest mistakes ever'? Served Alberta well and filled the Canadian coffers for decades. Served Quebec even better; half price tuition at McGill courtesy of Alberta. 

[Jan van Eck + 7,558]

Taking the first steps towards figuring out how to extract crude oil from the tar sands was a stroke of genius.  It demonstrates what man can accomplish when they put enough capital to work, in a gigantic project.  

But now Canada has to go the next step.  First, they have to get past all the animosity, the finger-pointing and the shouting, and sort out a rational way to develop those sands, and apply newer technologies to it.  and then figure out a way for everyone to profit.  I think that means new political leadership.

As much as I admired Pierre Elliott Trudeau back in the day, and his ability and determination to defeat the FLQ by sending in the army to the streets of Montreal, even declaring Martial Law, I conclude that his son is not up to the task any more. And I suspect the rest of Canada up there has come to the same conclusion.  Being the Prime Minister is not easy;  and these days, dealing with the aboriginals is getting very difficult, mostly due to the expansions of aboriginal land rights that cripple new projects.  How you get around that is anybody's guess.  I offer no solutions. 

Yet it is clear that the oil has to have a market.  Right now, the USA takes some 95% of Alberta crude.  IT is nothing more than an alternate supply source for that vast US market.  Yet, nothing stops Canada from developing its own market internally, other than classic Canadian lethargy.  Time to get the lead out. 

My guess is that the technique of using a cocktail of solvents to dissolve and remove the oil from the sand itself, when cooked in a lower-temperature cooker, is going to go places.  Those Petroteq guys are possibly on to something.  If all that works, and it seems technically able, then you have the first stages of development of a new, lower-cost procedure,  I suspect that you can forcibly create an internal market by making Canada an import-less, closed market.  But to do that requires raw political guts and force of will, the sort of determination you would have seen in say Winston Churchill.  Justin is a nice guy, but he is no Churchill.  Is he up to the job?  Well, the Canadian voters will be deciding soon enough.  

Whoever takes over as Prime Minister has to tackle this issue of exploiting and shipping the tar sands oil straight on.  It will require technical savvy and political skill.  I see no one, other than myself, on that horizon capable of doing it. Then again, nobody is voting for me.  Oh, well. 

[Jan van Eck + 7,558]

19 hours ago, Falcon said:

So that’s why the Chinese and others want to build refineries in Alberta and ship product to coast for sale overseas.

The Chinese do not want to build anything in Canada.  they are not going to spend one nickel.  Canada is sitting on their prized business executive, that woman who runs the finances of the electronics giant Huawei Corp. [Meng Wanzhou, the daughter of Huawei’s founder].   Canada is doing that at the bidding of Trump and the Americans, who have filed this extradition request, in order to try her for criminal espionage, or whatever the technical charges are or will be.  The Chinese are greatly aggravated.  In revenge, they have upped the punishment for these two young Canadians they have picked up and jailed, to the death penalty.  The death penalty in China is very real; they haul you off to the outskirts of town straight from the courtroom (there is no appeal process in China) and shoot you in the head.  Then they carve your organs out, so the local province administrators can make a few bucks selling your kidneys and liver.  It is not a pleasant society over there.

Do you seriously think, in that environment, the Chinese are going to show up with billions of spare change and build you some refineries?  No chance.  Absolutely no chance.  Not going to happen.  Not now, not later, not ever. 

[Jan van Eck + 7,558]

2 hours ago, Marc Savoie said:

I will never get the time I spent reading about dilbit back 😝.

Falcon: 'Tar Sands was one of the biggest mistakes ever'? Served Alberta well and filled the Canadian coffers for decades. Served Quebec even better; half price tuition at McGill courtesy of Alberta. 

Marc, your analysis is trenchantly correct.  Quebec (and the other Provinces) have benefited greatly from the flow of riches out of Alberta.  And not just from oil.  Also from minerals. 

Ironically, it is now Quebec, traditionally the poor-boy second cousin of Confederation, that is the financially strongest, and will be totally debt-free in just a few decades.  Where is the wealth now coming from?  Selling electricity to the Americans, off those monster hydro dams up North.  Quebeckers have come of age, they have a new generation of well-trained young engineers, scientists, and entrepreneurs.  Quebec is going to do very well in this century.  Quebec is now the leader of Canada, and will continue to be, as long as the resource provinces continue to wither and die, due to Federal incompetence. 

Can Quebec still become an independent nation?  Sure it can.  Could sovereignty-association become the new model in Canada?  Sure it can. Probably won't, but don't sell the Quebeckers short.  They have figured out how to do it right, now that the English-hating has finally subsided, and the place is working towards common goals.  Hey, maybe I'll even move back there and start dating some French women.  Could happen. 

[Falcon + 222]

14 hours ago, Marc Savoie said:

I will never get the time I spent reading about dilbit back 😝.

Falcon: 'Tar Sands was one of the biggest mistakes ever'? Served Alberta well and filled the Canadian coffers for decades. Served Quebec even better; half price tuition at McGill courtesy of Alberta. 

I agree.  The Oil Majors that invested hundreds of Billions in Tar Sands paid for your tuition.  You should send a thank-you card to Rex Tillerson the former CEO of EXXON that made the decision to invest in Tar Sands and spurned the shale industry as a folly. Trying to catch up on missed opportunity in shale he overpaid ($41 Billion) for XTO. Rex bought after 2008 crash when gas dropped from $14 mm/BTU to $7.50 mm/btu. Rex thought would rebound to $14 , but dropped to $3.50.  Another example of not understanding shale industry

McGill great school.

 

Edited May 9, 2019 by Falcon

[Falcon + 222]

11 hours ago, Jan van Eck said:

The Chinese do not want to build anything in Canada.  they are not going to spend one nickel.  Canada is sitting on their prized business executive, that woman who runs the finances of the electronics giant Huawei Corp. [Meng Wanzhou, the daughter of Huawei’s founder].   Canada is doing that at the bidding of Trump and the Americans, who have filed this extradition request, in order to try her for criminal espionage, or whatever the technical charges are or will be.  The Chinese are greatly aggravated.  In revenge, they have upped the punishment for these two young Canadians they have picked up and jailed, to the death penalty.  The death penalty in China is very real; they haul you off to the outskirts of town straight from the courtroom (there is no appeal process in China) and shoot you in the head.  Then they carve your organs out, so the local province administrators can make a few bucks selling your kidneys and liver.  It is not a pleasant society over there.

Do you seriously think, in that environment, the Chinese are going to show up with billions of spare change and build you some refineries?  No chance.  Absolutely no chance.  Not going to happen.  Not now, not later, not ever. 

The Chinese won't abandon their $15 Billion Tar Sands investments. Once (if) a trade deal gets signed Trump will drop charges against Menzhou and she can go back home.

Petroteq is for "dry" bitumen. Will never make it with dry or wet bitumen. SELL YOUR SHARES if you can find a buyer.  Greater fool theory.

As for Canadian oil sands only those still stranded care about it.  Even with Transmountain and Keystone XL pipelines opportunities are scarce.

Smart producers got out early, Total, Conoco.

Edited May 9, 2019 by Falcon

[Ward Smith + 6,615]

54 minutes ago, Falcon said:

The Chinese won't abandon their $15 Billion Tar Sands investments. Once (if) a trade deal gets signed to will drop charges against Menzhou and she can go back home.

Petroteq is for "dry" bitumen. Will never make it with dry or wet bitumen. SEL YOUR SHARES if you can find a buy.  Greater fool theory.

As for Canadian oil sands only those still stranded care about it.  Even with Transformation and Keystone XL opportunities are scarce.

Agreed about Petroteq. They're mining the public, not asphalt ridge in Utah. The problem with All solvent recovery methods is the same. What is the cost of the solvent, what is the recovery rate of that same solvent?

The open pit mining method used in Canada wasn't because people were stupid, it was, as usual, because politicians were stupid. THEY'RE the ones who mandated greater than 90% recovery rates of the OOIP. That was the law, so mining and washing the sands was the Only way to achieve that mandate. But that method only applies to 4% of the oil sands, for all the rest, the stripping factor is too great. One rule of thumb says it's worth removing 2X thickness of overburden versus payzone. That quickly changes based on price, but once committed, you're committed. If your payzone is 400 meters thick and you've just spent $4billion moving 800 meters of overburden, you can't just stop because oil is less than half the price it was when you started. You're only now getting to the income side of the equation, and you'll be collecting income on that work for many decades. And who knows, maybe the price goes back up?