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EXCLUSIVE: Out of the LOOP: The Fatal Flaw of Alberta’s Oil Export Expansion

Two weeks ago, the first supertanker capable of holding two million barrels of oil departed for the first time from America’s newly upgraded—and only—terminal able to dock and load crude-carrying behemoths of this size. Bound for China, the inaugural run signals a major shift in global oil shipping patterns, economics, and the highly competitive oil refinery business.

It is no accident that the Louisiana Offshore Oil Port (LOOP), terminal was built deep in the Mississippi Delta. To the south, a 29-kilometre pipeline stretches across the shallow Gulf of Mexico coastal shelf, to a point deep enough to allow Very Large Crude Carriers (VLCCs) to unload or load their vast tonnages of oil. Just north of Port Fourchon, an underground complex of salt caverns and surface tanks stores both oil imports headed for U.S. refineries, and fast-increasing volumes of oil bound for export.

The LOOP terminal is a speculator’s venture on steroids. Built with private capital, it is North America’s first oil port dedicated to the planet’s largest crude tankers, handling bi-directional oil flows. It’s designed to thrive on fierce global fights over not just oil supply and demand, but the multi-billion dollar bets corporate oil traders and hedge funds place, hoping to buy low and sell high—now, or two or five years from now.

Any VLCC from any country can now unload or load at LOOP. They can bring oil from the Persian Gulf, Nigeria, Russia, or Brazil. They can carry it—two million barrels at a time—to China, India, Indonesia, or Europe, at a shipping price lower than smaller tankers. And because the LOOP bi-directional pipeline can pump oil at a mind-bending 100,000 barrels per hour, supertankers can arrive with one load for refining and take off with another, by barely dropping anchor.

That will likely prove fatal to Alberta’s plans to expand unrefined bitumen exports either by the proposed Trans Mountain pipeline to the British Columbia coast, or the proposed Keystone XL pipeline because:

• Potential foreign refiners and customers will demand that future oil price, quality, shipping costs, and delivery speeds match those that LOOP can offer.

• For marine safety reasons, the maximum oil tanker cargo allowed through B.C.’s Burrard Inlet is an Aframax class ship at 80% capacity carrying 550,000 barrels, only about one-quarter the load of a VLCC. That means a refiner in Asia would need to book and pay for four tankers to ship the same amount as from the LOOP terminal, then wait longer for the full order to arrive.

• The diluted bitumen Alberta wants to export has chemical and combustion properties that make it far inferior to the higher-quality oil LOOP has access to from U.S. formations in the Dakotas and Texas, or OPEC countries, or North Sea producers. Tar sands/oil sands bitumen can be upgraded and refined, but that adds significant costs and requires dedicated facilities.

• The terminus of the Keystone XL will be refineries on the Texas Gulf Coast near Houston which are not connected to the LOOP. Even if future Alberta bitumen were to be refined there, it would take three fully-loaded Aframax tankers leaving Texas for ship-to-ship transfers to each VLCC.

These important changes in tanker and terminal technology and scale are no secret in the oil industry outside Canada. Nor is the dirty chemical composition of tar sands/oil sands bitumen. Nor is the cutthroat competition among global oil producers, refiners, shippers, and speculators, in which nickels per barrel of oil delivered are fought over fiercely.

In fact, the bad news for Alberta’s oilpatch has been building for a decade. That’s when shipbuilders in South Korea, China and Japan began constructing what has become a global fleet of about 750 VLCCs (with 50 more ordered for 2018), and the scrapping of Aframax class tankers began accelerating. This in turn drove down the benchmark price for ocean oil shipping, triggered the LOOP terminal upgrade, effectively consigned oil terminals like those in Burnaby, B.C. to minor league status, and left oil deposits far from deep port tidewater at a significant cost disadvantage.

When the undeniably dirty content of Alberta’s bitumen deposits is added into these negative cost equations, global oil players know when to cut and run. Compared to conventional heavy crude, bitumen contains 102 times more copper, 21 times more vanadium, 11 times more sulphur, 11 times more nickel, six times more nitrogen, and five times more lead, according to the U.S. Geological Survey. It also has a much lower ratio of hydrogen to carbon, which degrades combustion efficiency.

This helps explain why, in the recent past, oil giants such as Exxon-Mobil, Conoco-Phillips, Royal Dutch Shell, Total S.A., and Norwegian oil company Statoil have abandoned gargantuan bitumen deposits in western Canada and/or taken billion-dollar write-downs, to the howls of shareholders.

For environmentalists and climate scientists, the chemical composition of Alberta bitumen is cause for deep worry about toxic air emissions, potential spills into waterways and aquifers, and further destabilizing the Earth’s precarious climate. Together with First Nations, they have vowed to fight long and hard for ecological reasons.

But for potential foreign purchasers of that oil, the key question is how much extra it will cost to extract the dirty chemical compounds in Alberta bitumen so that the quality is on par with export oil being produced at high-grade, low-cost shale formations like the Bakken, Permian, and Eagle Ford in the United States.

No refiners will pay the same price to process sweet light crude and bitumen because they have to make costly capital outlays to configure their refineries to extract higher sulphur and heavy metals like copper and lead, make up the hydrogen deficit of bitumen, then dispose of the mountains of chemical crud left over. So refiners—anywhere on the planet—will charge Alberta producers more to process each barrel of bitumen.

These facts are readily evident to those at the back end of the global oil supply chain. Alberta’s huge tar sands/oil sands deposits cost too much to dig up, refine, and ship. They are in the wrong place, far from tidewater. And they rank among the dirtiest to refine into gasoline, aviation fuel, or home heating oil.

These are the reasons—hiding in plain sight—why Western Canada bitumen fetches the infamous “discount” price per barrel compared to oil supplies shipped from Texas and the North Sea. The LOOP terminal for VLCCs will magnify that spread, and no mythical Asian refiner, trader, or nation is likely to purchase for long a dirtier product that costs more and arrives on slower, smaller boats.

*******

Such details are apparently irrelevant to Alberta Premier Rachel Notley and her federal tar sands/oil sands ally, Prime Minister Justin Trudeau. Instead, they seem to be choreographing a long con political gambit premised on blithe assurances that the optimal way to cut Alberta carbon emissions is to increase tar sands/oil sands output by 40% in the next 12 years.

You read that right. The oft-repeated “hard cap” the premier and prime minister publicly promote is a con. Alberta’s official energy plan is to increase tar sands/oil sands emissions from 70 to 100 megatonnes per year by 2030.

That 30-megatonne increase is roughly equal to the annual greenhouse gas emissions from all the cars, trucks, buses, and boats currently used by 14 million people in Ontario. Put another way, by 2030 Alberta’s annual extra tar sands/oil sands emissions will be equal to importing an Ontario’s worth of vehicle GHGs each year thereafter. For decades.

The Notley/Trudeau tag team, of course, would not put it this way. They’ve deployed a sly lexicon of euphemisms to help sell what can likely never be sold to actual foreign oil purchasers. A 40% tar sands/oil sands expansion is solemnly christened a “hard cap”, in the manner of two drunks who vow to stay sober once their annual booze binge hits that higher limit.

Dirty bitumen becomes a “product” or a “resource”. How sanitary. Blowing a hole in Canada’s national carbon budget as pledged under the Paris climate agreement becomes a “nation-building” crusade. A tax to help cut carbon pollution is a brave, virtuous policy—but only if tar sands/oil sands output can accelerate, and the tax rate is carefully calibrated to not put a dent in that. Fossil producers must pay royalties to help a debt-laden province—but are allowed to pay in barrels of raw bitumen instead of cash.

Perhaps this is normal political chicanery. It echoes Donald Trump’s campaign vow to bring back “clean” coal. That con may have garnered enough key electoral college votes to win the U.S. presidency, but major U.S. coal producers are now going bankrupt because the world price has plunged and utilities in the U.S. and elsewhere have found cheaper, cleaner ways to generate power.

Recently, Notley and Trudeau have begun to publicly warn that the very fate of Canada rests on future tar sands/oil sands output; that the pending national carbon plan might be shattered if Alberta is not allowed to export billions more barrels of bitumen via two pending export pipelines; and that the Constitution would be sabotaged by any premier who failed to deliver unquestioned fealty to their grand vision.

But what if that’s all just a fiscal fantasy? Or worse, a fraud?

That question may seem unthinkable—even treasonous—in the political capitals of Ottawa and Edmonton. But it is being asked in Big Oil boardrooms in Houston and Paris, by national oil entities like Norway’s Statoil, by oil traders in London and New York, and by refinery operators in the U.S. and Asia. By people who, for better or worse, know how and where global oil will be made, bought, sold, and shipped in the next decade, and where a buck will best be made.

About 20 months ago, many of the Big Oil players began to cut their losses and quietly stampede away from the Alberta tar sands/oil sands. Many bought into shale oil plays in the Dakotas and Texas.

Then Washington repealed a 40-year ban on the export of oil drilled by producers within the United States. Suddenly, Americans could sell to Asia and Europe. Countless more shale wells were drilled, American pipelines began filling to capacity, and high-quality crude began flowing faster to Texas and Louisiana refineries on the Gulf Coast.

U.S. Crude Oil Production/U.S. Department of Energy

By the end of 2017, U.S. oil production was at an historic high (see graph), vast storage tank farms were full, and even major OPEC countries—reeling from the tsunami of oil coming from their new American competitor—tried to shore up world prices by cutting production and selling premium blends at deeply discounted prices to Asian and U.S. customers.

Iran, Iraq, and Venezuela undercut that by increasing oil exports at rock bottom prices. China, oil traders, and hedge funds swooped in to buy unprecedented volumes of high-quality, low-cost oil to build inventories or store in VLCCs hunkered down in harbours across the globe. (That fleet of 750 supertankers could collectively store some 1.5 billion barrels of oil at any given time.)

That created a new normal which is likely to last for the foreseeable future, and spell disaster for any future Alberta tar sands/oil sands expansion. Like their competitors in the Persian Gulf, American shale oil producers can drill deposits quickly and cheaply, then tap or cap them depending on the transient price of oil. Some can survive at US$20 per barrel. Most need $40 to justify pumping and selling for a profit.

Projected Alberta tar sands/oil sands production to 2030/Office of the Auditor General of Canada

That has made American shale producers arch rivals of the Alberta oilpatch, where anticipated new projects (see graph) require huge capital investments that can only be recouped over decades of unrelenting and profitable oil production. A consensus estimate of the world oil price needed to make that happen is US$80 to 100 per barrel. It is nowhere on the horizon.

By contrast, a minor swing in oil prices can cause a VLCC to change course mid-ocean and head for a new customer offering a better price. How could a new tar sands/oil sands project be bankrolled when such price volatility is the new normal, and decades-long contracts are ancient history? It can’t.

This brings us back to the question of whether Premier Notley and Prime Minister Trudeau are merrily tripping the light fantastic upon hopes of a fossil revival, or practicing the darker art of deception. If serial failures to conduct even basic due diligence on global oil trends is a decisive clue, it is the latter.

There is no business case for an expansion of Alberta’s tar sands/oil sands on the scale needed to justify the Keystone XL and Trans Mountain export pipelines because of one bare fact: there are zero foreign buyers who today will commit to decades-long purchase contracts for unrefined bitumen at a fixed price near US$80 per barrel. Instead, global traders will literally buy future oil by the boatload, then book terminal time at any deepwater ocean port like the LOOP, anywhere in the world, to embark with two million barrels in a single cargo.

Vancouver will never be one of those ports. No VLCC will ever arrive to offload foreign oil, then upload Alberta bitumen for a backhaul trip to foreign refineries. So the pending Trans Mountain pipeline plan to triple tar sands/oil sands exports, and increase oil tanker traffic under the Lions Gate Bridge up to seven-fold, is doomed. So is the plan to expand tar sands/oil sands output by 40%. No amount of cheerleading, or demonizing, or pixie dust will change the raw laws of global oil economics.

Down deep in the Mississippi Delta, near the LOOP oil terminal which will likely never transfer a barrel of Alberta bitumen for export, Bayou bar parlance might sum up that fate with the laconic one-liner: “That dog won’t hunt.”

If only Premier Notley and Prime Minister Trudeau could match such penetrating clarity.

Paul McKay is an award-winning investigative reporter and author. His reports have been published by the Ottawa Citizen, Toronto Star, Globe and Mail, and Vancouver Sun. He can be reached at [email protected].

42 Comments (Open | Close)

42 Comments To "EXCLUSIVE: Out of the LOOP: The Fatal Flaw of Alberta’s Oil Export Expansion"

#1 Comment By Reynold On March 5, 2018 @ 10:49 AM

This is reassuring for those of us who oppose pipelines full of dilbit. But not very reassuring from the climate perspective because those big tanker loads of sweet crude will contribute to the climate crises.
Markets can be capricious things. The climate crises is a perfect example of why we can’t afford to leave decisions to “the market”. We need the signatories to the Paris accord to act on their promises. In many cases that will require legislation that over rules markets.

#2 Comment By Rocdoc On March 5, 2018 @ 11:55 AM

A very simplistic analysis that ignores the implications of oil type. LOOP generally handles the LLS benchmark (Louisiana Light Sweet) and tight oil production in the US, which is the main source of production growth, is even lighter. The refining complex on the US Gulf Coast, on the other hand, is the world’s largest concentration of coking refineries designed to optimally handle heavy oil, such as the Maya benchmark (Mexico) or the WCS benchmark (Canada). Canadian oil moved south via Keystone XL would not be exported – it would be refined on the Gulf Coast and would replace falling imports of heavy oil from the traditional sources of Venezuela and Mexico. As oil is a globally priced commodity, once it is on the coast it commands the global price – ie. WCS at Houston would be priced the same as Maya at Houston, given their similar quality.

#3 Comment By Laurie Parkinson On March 6, 2018 @ 12:57 PM

OK, ROCDOC I see it’s a more complex world than painted in the article. However WCS bitumen is more complex to refine than LLS. This must cost someone some money. How does that work? Thx for replying.

#4 Comment By Rocdoc On March 7, 2018 @ 9:05 PM

Yes Laurie, WCS sells at a discount as it is more costly to refine. But when you sell the refined products it is a wash given that the feedstock was cheaper. Same thing with Maya. WCS exported via Keystone XL will not be exported as dilbit hence VLCCs are irrelevant – it will be refined on the Gulf Coast. WCS can replace declining production of Mexican and Venezuela heavy oil. There is no business case for exporting dilbit to Asia or from the Gulf Coast as Paul says.

#5 Comment By Kevin D Brown On March 9, 2018 @ 10:44 AM

What is odd about oil boosting plans is their steadfast refusal to confront climate change.
If the governments of Alberta and Canada – and the rest of the provincial governments as well – were to actually do this, it would render 80% of the worlds oil deposits useless, right away. What politician wants to take that on? Nobody. Not here, where we persist with fantasies about revenues from resource development, not in Norway, where they are planning to drill in the Arctic. Only in flooding, low-lying islands.
As we watch the costs of climate change mount, we simply burn more, pushing the blind faith that exponential growth can continue forever in a finite planet…

#6 Comment By Lo On June 1, 2018 @ 5:00 PM

In the context of TMX, this extra cost to refine and ship (with the use of VLCCs etc) would imply any future owner of the former Kinder Morgan pipeline will have a hard time finding a market for their crude, no?

#7 Comment By Mitchell Beer On June 2, 2018 @ 8:52 AM

Yes, that’s right. And whether or not they said so in public, they would presumably do their due diligence and reach that conclusion before making (or not making) an investment decision. It’s unfathomable that Morneau, Carr, and their advisors didn’t factor this into their own…well, given the givens, I have trouble calling it a “strategy”.

#8 Comment By Paul Armstrong On March 5, 2018 @ 12:57 PM

Great article and another dagger in the hot air balloon of Alberta politicians.

#9 Comment By Chris O’Brien On March 5, 2018 @ 1:28 PM

I’ve been wondering whether there are any actual lined-up buyers for the additional bitumen that will flow through the expanded Kinder Morgan pipeline. It seems there aren’t any, and likely won’t ever be. I assume however that the bitumen now flowing through the pipeline has at least one buyer, but for how much longer? Who is it and does anyone know what their plans are? Will there continue to be a need for even the present Trans Mountain pipeline?

Whatever the case, it would appear that Trudeau, Notley and the Alberta tar sands industry are basically lying to us, trying to expand the development of a product that eventually nobody will buy, and get a pipeline built that will never carry triple the volume of bitumen. I hope all this will become obvious and Canadians will come to their senses before these projects actually get going and we end up with a collection of huge (and in the case of the tar sands, vast) white elephants.

Nation-building projects? More likely they will be nation-degrading projects.

#10 Comment By Reynold Reimer On March 6, 2018 @ 12:56 PM

I think the dilbit now flowing through the KM pipeline goes to refineries on the U.S. gulf coast.
This pipeline can carry a variety of petroleum products. I wonder whether K.M. reasons that if they don’t have a market for more tar from the sands they’ll fill the pipe with more conventional products.

#11 Comment By David Huntley On March 6, 2018 @ 9:14 PM

The stuff flowing down the present Trans Mountain pipeline is going to one of three places:
– the Chevron refinery in Burnaby
– Washington State via pipeline
– California (or occasionally elsewhere in the USA) by tanker from the Kinder Morgan dock in Burnaby; currently there are about 15 tankers per year.

None is going across the Pacific Ocean.
This information is gleaned from the Marine Traffic and Vessel Finder websites, with occasional visual verification from my house.

#12 Comment By Rob On March 7, 2018 @ 6:16 PM

Appreciate the info David, it clarifies what I’ve been reading in that China, Asia has little interest in this bitumen or its refined form.

#13 Comment By Steve Grant On March 14, 2018 @ 5:57 PM

I’ve seen a list of buyers for yhe dilbit from the expanded KM Trans Mountain line. How much of a commitment that list indicates is hard to say. Right now about 40% of the KM line’s flow is finished products like gasoline for BC. The other 60% is cruder stuff that gets divided between a refinery in Kamloops, refineries in Washington State, and shipped offshore.

#14 Comment By Geoff Smith On March 5, 2018 @ 3:39 PM

Thanks for the details Paul. Why would Kinder Morgan finance a Trans Mountain pipeline expansion when (1) there is no market for Alberta tar sands, (2) Kinder Morgan will not have the ability to compete with VLCC’s, (3) the economy and the environment are anti-thetical. Trudeau and Notley just don’t understand. And the Other is publishing articles that confirm the lack of a market for Alberta crude.

#15 Comment By rick hudson On March 11, 2018 @ 12:43 PM

Perhaps this is a double play. Under NAFTA, if they are refused permission to expand, they can sue Canada (in secret) for the loss of profit – a much surer way of making money than taking chances in the global oil market.

#16 Comment By Mitchell Beer On March 11, 2018 @ 7:24 PM

Which might be one reason for Canada to allow them to expand, then let them take their chances with that market…and with their Aframax tankers!

#17 Comment By Mike Fletcher On March 18, 2018 @ 8:05 AM

Don’t they have to have 60 percent of the pipeline’s capacity booked before they start construction? (NEB rules) Some construction has started now.
If KM is “allowed”, in all senses of the term, to proceed with their project and they decide not to do so (because they were just playing us), can’t they be sued by their customers?

#18 Comment By Steve On March 5, 2018 @ 7:35 PM

can these VLCC go through the Panama Canal
the argument will be that is too far to take product from Louisiana and the Pacific Coast is much closer

#19 Comment By Mitchell Beer On March 6, 2018 @ 7:06 AM

Can any of the fossil shipping watchers on the list answer this?

#20 Comment By Steve Grant On March 14, 2018 @ 6:01 PM

Panamax tankers are called panamax because they are the largest that can transit the Panama Canal. The VLCC’s can’t.

#21 Comment By John Foster On May 12, 2018 @ 8:31 PM

The VLCC ship via the Indian Ocean

#22 Comment By Earl Richards On March 6, 2018 @ 9:23 AM

The TMX is a stupid business case from the get-go, because there is no equipment to clean-up a dirty, tar sands spill. Remember the Kalamazoo. This stupid notion is an insult to the intelligence of thinking British Columbians. A spill from the TMX down into the Fraser River watershed will kill most of BC’s sport and commercial salmon industries, which will cause the oracs to die of starvation. Dump KM, to save beautiful BC.

#23 Comment By Dubya On April 17, 2018 @ 10:45 PM

I think this is what makes it a brilliant business plan. The company has no need to spend any money on prevention – cleanup of pipeline ruptures is a federal problem. BC has no say in the matter – cleanup is a federal issue.
It’s going to enrich the executives and subsidized by the governments; and if it is held up the company can sue Canada for loss of profits.
Why would a company not be all over this?

#24 Comment By David Laidlaw On March 6, 2018 @ 10:40 AM

VLCC ships cannot go through the Panama canal, the maximum size is ,
Length– 294 M or 965 ft
Width– 32 M or 106 ft
Depth — 12 M 0r 40 ft

#25 Comment By Ewan M Quirk On March 6, 2018 @ 12:03 PM

The obvious answerto why km would finance such an expansion is devious. They have made a lot of acquisitions and expansions if the pipeline here is quashed by regulators they can redirect the capital to finance their other projects. I suspect that is their long game.

#26 Comment By Ingamarie On March 6, 2018 @ 12:55 PM

Good news and bad news arrive by the same post. While this suggests the Kindermorgan won’t be built, it also paints a picture of oil supplies willing to play the free marketeering game to the end of the world.

What we need as a bookend companion piece to this article, is some clarity talk about the current and projected CO2 drifting about our atmosphere…and guaranteed to bring our cliimate to a tipping point of no return.

Rachel and Trudeau may be thinking inside a bubble; but so are these global oil speculators, with their tank ‘farms’, their deep sea LOOPs, and their giant carriers. We all ready know pipedreams make people greedy. What’s worse is it looks like those petro dollars make them stark raving mad.

Everyone needs a remedial course in global warming and what it is doing…and is going to do….to the climate.

#27 Comment By Laurie Parkinson On March 6, 2018 @ 1:00 PM

Thanks a lot for the great article.
I would ask:
1. Same q as Chris above: Are there buyers for KM expansion oil? If there aren’t buyers, I assume no bank would loan money.
2. If the economic situation for Canadian bitumen is that grim, why would KM be able to borrow $ to build the KM pipeline?
3. Or is KM using its own funds to build the pipeline?
4. Is Canadian taxpayer $ helping KM?

#28 Comment By Conde Brown On March 7, 2018 @ 10:07 PM

Aren’t different grades of oil used to make different products
Heavy oil/bitumen tend to be used for plastics etc
Lighter oil refined into fuels/cleaners etc
Who knows bitumen might even be worth more one day
I remember when gas was king and now look….

#29 Comment By Chris O’Brien On March 6, 2018 @ 3:28 PM

Okay, so there will continue to be a market for Alberta dilbit in the Gulf coast where there are refineries to handle it (and that’s what the Keystone XL is all about), but who will be buying the diblit going via the Trans Mountain pipeline? If those tankers actually end up taking it to the Gulf coast, how crazy and unnecessarily dangerous would that be given that Keystone will be in place? Obviously we don’t want to see any dilbit being shipped anywhere, but if the politicians force us to do so to “save the country”/”build the nation”, then shipping it through a pipeline or even by rail is a much safer solution for Canada, especially when most of the distance the dilbit will travel will be across American territory. I’d really like to know who the supposed Asian buyer(s) of the Trans Mountain dilbit will be.

#30 Comment By René Ebaher On March 6, 2018 @ 5:57 PM

Another port facility in the U.S. can accommodate VLCCCs: Valdez, Alaska. Before removing legislation limiting exports of U.S. crude oil to foreign countries (other than Canada), Alaska oil producers had to use U.S. based tankers to ship their products that was going almost entirely to U.S. west coast refineries. Now that restrictions to exports have been eliminated, they can use tankers operating under other countries courtesy flag. The result means a cheaper cost of shipping, and the possibility to compete on the world markets.
The Kinder Morgan TransMountain pipeline expansion (if built…) will carry more Alberta crude oil that will be shipped to refineries in California replacing heavy crude oil coming from Mexico and Venezuela (tankers that can access the Burrard Inlet terminal are to small to make it economical shipping oil to Asia). Kinder Morgan also carries crude oil from Alberta by pipeline to refineries in Washington state through its Pudget Sound pipeline which connects with the TransMountain pipeline. Kinder Morgan is planning to more than double the size of the Pudget Sound pipeline, boosting its capacity from 240,000 to 500,000 barrels per day (it is subject to a lot of opposition in Washington state).
If those projects goes ahead, it will allow Alaskan oil producers to divert more oil from the U.S. to more lucrative markets in Asia. It takes half the time for tankers leaving Valdez to reach Asian markets than the ones leaving from the LOOP.
The only market for Alberta heavy crude oil is the U.S. which hold the largest refining capacity in the world that can process this type of oil. This capacity is mainly concentrated in the U.S. Golf Coast. That’s why TransCanada dumped Energy East and is trying to get enough suppliers that will commit 20 years supply to its Keystone XL project (the Alberta government which received royalties payment in oil has committed some of it to help TransCanada). Enbridge is pushing ahead expanding capacity of old pipelines, and building new pipeline capacity here and in the U.S. The competition is fierce between pipeline companies to secure oil shipments as the only reliable market for the Alberta heavy crude oil is the U.S.

#31 Comment By Laurie Parkinson On March 6, 2018 @ 11:36 PM

OK, perhaps you can answer this, Rene – does KM have buyers for the KM expansion bitumen?

#32 Comment By Laurie Parkinson On March 7, 2018 @ 12:22 PM

Talked to a knowledgeable friend last night about the Kinder Morgan expansion.

KM builds/owns pipelines and oil storage facilities; they don’t own the bitumen. KM charges companies who own the bitumen (Husky, Canadian Natural Resources, etc) for use of the pipeline. These companies pay over time for pipeline access, whether or not they move bitumen through the pipeline all the time. My friend assumes Husky, CNR have buyers for the bitumen planned to move through the KM expansion. (I read a recent article that CNR is extracting less bitumen from the ground because the price is so low.)

Is public money being used for the KM pipeline? None comes from taxpayers directly. However there are significant Federal subsidies for oil companies. This means the Federal government receives less taxes, so public pays more taxes (or lacks services that the lost taxes would pay for). A recent petition says each of us pays $234 more taxes than we would if these subsidies didn’t exist.

Fossil fuel companies have received subsidies for about 100 years – started with coal. These are dependable long term subsidies; these companies can plan financially expecting these subsidies. Solar/wind get short term undependable subsidies, can’t expect them long term. Very uneven playing field.

#33 Comment By René Ebacher On April 11, 2018 @ 4:39 PM

I never heard any Alberta oil producers, or Kinder Morgan, say that they were actually exporting, or actually being in the process to secure delivery of crude oil from the Alberta bitumen oil sands to Asia, or anywhere else except United States.
According to Clipper Data, an industry firm that tracks crude oil tanker movements, more than two million barrels in “total” of mostly heavy oil from Canada were exported from the U.S. Gulf Coast between May 2014 and May 2015 (U.S.law allows for exports of Canadian oil as long as they aren’t mingled with U.S. products). In comparison, Canadian oil producers exports more than 3 million barrels of crude oil “every day” to the U.S.
Suncor exported 700,000 barrels of heavy Alberta oil from Sorel-Tracy, Que. in September 2014. It was the first time the company had exported Western Canadian oil to Europe (it was before the price of oil collapsed).
Since then, statistics from the National Energy Board shows that no heavy crude oil, or any other kind of oil, produced in Western Canada has been exported to foreign countries other than the U.S.
The only crude oil exported to foreign countries is light crude oil produced in Eastern Canada. The total volume of these exports represent around 0.8% of Canada’s total oil production.

#34 Comment By Brian Hayward On March 11, 2018 @ 11:42 PM

And, in support of this excellent analysis … let us not forget that @ K.M.’s Westridge Terminal, an Aframax tanker can only be loaded to 80 percent capacity (something less than 600,000 bbl.s!), and of this … 30 percent is not even the oil producers’ bitumen, but is condensate diluent (which frequently must itself be purchased!). So an Aframax, charging, naturally, it’s full charter rate
is only shipping 80 percent load of 70 percent product!
As well, the five recently developed oil basins Russia has brought on in eastern Siberia are now putting a light, sweet crude via dedicated pipeline, into northern China (Heilongjiang Prov.), as well as Russia now putting this same product into the Pacific Basin out of their oil export port at Kozmino Bay, east of Vladavostoc. East Asia will only take Alta. bitumen crude if the price is right – like … really, really cheap!!!

#35 Comment By Grandmother On March 12, 2018 @ 7:20 AM

Climate Change is real and it is now. I look at the faces of my grandchildren and know they are doomed to a disastrous future if this oil madness doesn’t stop. The fossil fuel subsidy of Three Billion Dollars, which our government is continuing, if transferred to clean, sustainable energy could put solar panels on millions of roofs, or provide clean water to all the First Nations reserves in Canada. Expansion of the Tar sands means more loss of Boreal forest and valuable wet lands that presently mitigate climate change, to replace them with dead earth and toxic pools that threaten or already pollute the Athabaska river. The cost of cleaning up this mess is more than any profit Canada may get, and we are not being paid in money but in dilbit ! That is the stupidest deal of all. Our government has betrayed us.

#36 Comment By Laurie Parkinson On March 18, 2018 @ 3:47 AM

ROCDOC, I have been communicating with my federal representative re KM. The Canadian government really hopes to export KM dilbit to Asia, to get a better price than they get in the US.

From what you say that won’t work financially. Why? Is it too expensive to export to Asia in the smaller Aframax tankers? Are there many dilbit refineries in Asia? Are there cheaper sources of oil in Asia?

Was the KM expansion idea developed before all the fracking for better quality oil than dilbit, and US oil export started? So the original idea was to sell Canadian dilbit to the US for a far better price than WCS gets now. Or?

Thanks a lot for your info.

#37 Comment By MattyJ On March 19, 2018 @ 4:08 PM

Why complain about all this stuff, as you sit on your plastic chair, with your oil based computer sending 10101101 down teliphone/optical cables made from plastic. Drinking from a coffee maker made from plastic just before you get in to your plastic car to pick up your grandchildren from their plastic schools with their plastic backpacks and shoes to bring them back to their plastic home !
Doesnt anyone get it? The reason they sell oil is because there is a demand.
WE DEMAND IT.
The alternatives?
Use wood? Logged with oil sucking machines shipped on highways paved in oil the we can complain about the clear cutting. Which posses a greater effect on “climate change”
Oh jeez I could go on forever about the foolishness of Aniti everything protesters.
Start this way……
get rid of everything linked to oil…. even your electric car, bicycle , TV, phone, roof, driveway, furniture, and on goes the list. And when your standing in the feild or forest naked and trying to protest with nothing but a rock and a piece of wood, don’t be surprised when the tree huggers come along and take that away from you too….

#38 Comment By Mitchell Beer On March 23, 2018 @ 3:32 PM

MattyJ, that’s a nice, pat stereotype, but it doesn’t fit anyone I know who’s working hard and diligently to move the economy past the exact dilemmas you lay out.
Yes–as a society, as a culture, we’ve got ourselves into a very tough space where pretty much all the material items we depend on are choking the only planet available to us. Alternatives are taking shape. They aren’t perfect. The pace of change is accelerating. It isn’t fast enough, deep enough yet. As you point out, though you aren’t saying it this way, once we’ve got liquid fuels on the decline — a day many fossils can see coming soon, BTW, with the rise of affordable storage — petrochemicals will be the next big, vicious problem, both because their production carries heavy greenhouse gas emissions and disposal feeds a Pacific Ocean garbage patch that is now twice the size of Texas. (Or was it Florida? I’d have to scroll back and find that headline.)
And through it all, we have to get the change done in a way that doesn’t leave behind the fossil workers and communities that have brought us the comfort and convenience we count on as consumers of fossil fuels.
Heh. As far as I can recall, no one said it was going to be easy. Unfortunately, the climate science tells us it needs to be a fast, wide-ranging transition. And the climate devastation we can already see in many parts of the world, from Houston and Puerto Rico to the Horn of Africa and Syria, tell us that we *absolutely* want to avoid the impacts of not taking action.
Please don’t take my word for it. We’ve spent nearly four years assembling a cache of almost 9,500 stories, all with the goal of giving people the mix of credible, evidence-based content to reach their own conclusions on the extent of the climate crisis and what to do about it. In our archive, you’ll see lots of stories on the elements of a wider solution, including smart options for Alberta and Saskatchewan (I’m assuming that’s where you’re from) that just make good economic sense, even if they weren’t also climate solutions. And you should find at least a handful of stories from parts of the U.S. where people would never embrace climate action, but are taking steps that have the effect of decarbonizing their grids because they want cheaper energy, or more hands-on control over their electricity supply.
So you don’t have to be a climate hawk (or, for that matter, feel resentful of climate hawks) to be a part of this. If you want your community or household to run smarter, better, cheaper, that’s more than a good enough place to start.
Let us know what you think….

#39 Comment By oldtimer On April 8, 2018 @ 11:12 PM

Kitimat would have worked as it could easily handle VLCC’s, but Truduau in his wisdom killed it. Typical gov’t interference strikes again.

#40 Comment By René Ebacher On April 11, 2018 @ 3:57 PM

How easily you think a VLCC tanker would be able to maneuver the Douglass Channel? Was it ever attempted or studied seriously? It would be a terrible disaster if a VLCC tanker carrying 2 million barrels of heavy crude oil had an accident at the entrance or along the Douglass Channel (the Exxon Valdez was carrying only 270,000 barrels of light crude). It’s not worth the risk.

#41 Comment By paul Hodgson On April 16, 2018 @ 2:35 PM

Thanks Rene, My father in law was the worlds first supertanker captain, he rewrote much of Canada’s marine oil transport rules under the Martin and Cretien governments, all tha work was destroyed by the Conservatives. He told me that the ocean conditions in Dixon entrance and Hecate strait due to a combination of shallow ocean, intense Pacific low pressure cells and some of the highest tides in the world, confirm this area as a ships graveyard.