• About
    • Which Energy Mix is this?
  • Climate News Network Archive
  • Contact
The climate news that makes a difference.
No Result
View All Result
The Energy Mix
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities
SUBSCRIBE
DONATE
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities
SUBSCRIBE
DONATE
No Result
View All Result
The Energy Mix
No Result
View All Result
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities
  FEATURED
BP Predicts Faster Oil and Gas Decline as Clean Energy Spending Hits $1.1T in 2022 January 31, 2023
Canada Needs Oil and Gas Emissions Cap to Hit 2030 Goal: NZAB January 31, 2023
Ecuador’s Amazon Drilling Plan Shows Need for Fossil Non-Proliferation Treaty January 31, 2023
Rainforest Carbon Credits from World’s Biggest Provider are ‘Largely Worthless’, Investigation Finds January 31, 2023
Danske Bank Quits New Fossil Fuel Financing January 23, 2023
Next
Prev

Alberta’s oil exports face ocean of trouble

March 12, 2018
Reading time: 6 minutes
Primary Author: Paul McKay

 

Canadians hoping Alberta’s oil exports from its tar and oil sands will expand may be disappointed. One supertanker port has turned the economics upside down.

OTTAWA, 12 March, 2018 – Alberta’s oil exports are at serious risk. Last month the first supertanker capable of holding two million barrels of oil sailed for the first time from America’s newly upgraded – and only – terminal able to handle crude-carrying giants of this size: the Louisiana Offshore Oil Port (LOOP).

  • The climate news you need. Subscribe now to our engaging new weekly digest.
  • You’ll receive exclusive, never-before-seen-content, distilled and delivered to your inbox every weekend.
  • The Weekender: Succinct, solutions-focused, and designed with the discerning reader in mind.
New!
Subscribe

She was bound for China, and her maiden voyage signals a major shift in global oil shipping patterns, economics, and the highly competitive oil refinery business.

The LOOP terminal is deep in the Mississippi Delta. A 29-kilometre pipeline stretches across the shallow Gulf of Mexico coastal shelf to a point deep enough to allow similar Very Large Crude Carriers (VLCCs) to unload their vast tonnages. Nearby a complex of salt caverns and surface tanks stores both oil imports headed for US 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 two-way 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 years hence.

Two cargoes at once

Any VLCC from any country can now unload or load oil at the LOOP. They can carry it – two million barrels at a time – to ports across the globe, at a price lower than smaller tankers.

And because the LOOP bi-directional pipeline can pump oil at a mind-bending 100,000 barrels an hour, supertankers can arrive with one load for refining and sail with another, barely dropping anchor.

That will probably prove fatal to the plans of the Canadian province of Alberta to expand unrefined bitumen exports by either the proposed Trans-Mountain pipeline to the British Columbia coast or the planned Keystone XL pipeline to Texas.

Bitumen, or asphalt, is the feedstock which tar sands and oil sands producers remove from the ground, thick enough to require mining, not pumping. It then has to be diluted with light crude oil or other chemicals before it can go through a pipeline (hence the term diluted bitumen).

Multiple snags

The LOOP threatens Alberta’s export plans for several reasons:

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

• For safety reasons, the maximum oil tanker cargo allowed into British Columbia’s ports is an Aframax class ship, at 80% capacity, carrying 550,000 barrels – only about a quarter of the load of a VLCC. So a refiner in Asia would need to charter 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 the LOOP has access to from US formations in the Dakotas and Texas, or OPEC countries, or the North Sea. 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.

Long build-up

In fact, the bad news for Alberta’s oil patch has been building up 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 British Columbia’s 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 quit.

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 US Geological Survey. It also has a much lower ratio of hydrogen to carbon, which degrades combustion efficiency.

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

No refiners will pay the same price to process sweet light crude and bitumen

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 destabilisation of the 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 compounds in Alberta bitumen so that its quality matches export oil being produced at high-grade, low-cost US shale formations like the Bakken, Permian, and Eagle Ford.

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, make up the hydrogen deficit of bitumen, then dispose of the mountains of carbonised crud (petcoke) left over. So refiners – anywhere on the planet – will charge Alberta producers more to process each barrel of bitumen.

Alberta’s huge deposits cost too much to dig up, refine, and ship. They are in the wrong place. 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 a lower price than oil shipped from Texas and the North Sea. The LOOP terminal will magnify that spread.

Output to rise

Such details are apparently irrelevant to Alberta premier Rachel Notley and her federal tar sands/oil sands ally, prime minister Justin Trudeau. Instead, they support almost doubling oil production (causing GHGs to rise from 70 to 100 megatonnes per year) – roughly equal to the annual greenhouse gas emissions from all the cars, trucks, buses and boats currently used by 14 million people in Ontario.

About 20 months ago, many of the Big Oil players began to cut their losses and quietly stampede away from Alberta’s oil. Many bought into US shale oil plays.

Then Washington repealed a 40-year ban on the export of oil drilled by producers within the US. 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 refineries on the Gulf Coast.

By the end of 2017 US oil production was at an historic high, vast 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 US customers.

Some buyers are storing high-quality, low-cost oil 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.)

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

Some American shale oil producers, who can drill deposits quickly and cheaply and then tap or cap them depending on the transient price of oil, can survive at US$20 a barrel. Most producers need $40 to justify pumping and selling for a profit. Alberta’s proposed new projects may need $80 to 100 per barrel to permit such huge capital investments. That 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 couldn’t.

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. – Climate News Network

 

Originally published exclusively on The Energy Mix, and republished by permission. The Mix is a thrice-weekly e-digest on climate, energy and post-carbon solutions.

Paul McKay – paul@paulmckay.com – is an award-winning investigative reporter and author. His reports have appeared in the Ottawa Citizen, Toronto Star, Globe and Mail, and Vancouver Sun.



in Climate News Network

The latest climate news and analysis, direct to your inbox

Subscribe

Related Posts

U.S. Geological Survey/wikimedia commons
Biodiversity & Habitat

Climate Change Amplifies Risk of ‘Insect Apocalypse’

December 1, 2022
43
Alaa Abd El-Fatah/wikimedia commons
COP Conferences

Rights Abuses, Intrusive Conference App Put Egypt Under Spotlight as COP 27 Host

November 14, 2022
26
Western Arctic National Parklands/wikimedia commons
Arctic & Antarctica

Arctic Wildfires Show Approach of New Climate Feedback Loop

January 2, 2023
28

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

Trending Stories

Mike Mozart/Flickr

BP Predicts Faster Oil and Gas Decline as Clean Energy Spending Hits $1.1T in 2022

January 31, 2023
322
Ken Teegardin www.SeniorLiving.Org/flickr

Virtual Power Plants Hit an ‘Inflection Point’

January 31, 2023
125
RL0919/wikimedia commons

Danske Bank Quits New Fossil Fuel Financing

January 23, 2023
2.4k
Doc Searls/Twitter

Guilbeault Could Intervene on Ontario Greenbelt Development

January 31, 2023
132
/snappy goat

Rainforest Carbon Credits from World’s Biggest Provider are ‘Largely Worthless’, Investigation Finds

January 31, 2023
94
Gina Dittmer/PublicDomainPictures

Canada Needs Oil and Gas Emissions Cap to Hit 2030 Goal: NZAB

January 31, 2023
196

Recent Posts

CONFENIAE

Ecuador’s Amazon Drilling Plan Shows Need for Fossil Non-Proliferation Treaty

January 31, 2023
61
Victorgrigas/wikimedia commons

World Bank Climate Reforms Too ‘Timid and Slow,’ Critics Warn

January 31, 2023
42
United Nations

Salvage of $20B ‘Floating Time Bomb’ Delayed by Rising Cost of Oil Tankers

January 27, 2023
121
@tongbingxue/Twitter

Extreme Warming Ahead Even as Worst-Case Scenarios Grow ‘Obsolete’

January 23, 2023
341
Rachel Notley/Facebook

Notley Scorches Federal Just Transition Bill as Fossil CEO Calls for Oilsands Boom

January 23, 2023
313
EcoAnalytics

Albertans Want a Just Transition, Despite Premier’s Grumbling

January 23, 2023
323
Next Post

New Zealand's wildlife feels the heat

The Energy Mix - The climate news you need

Copyright 2023 © Energy Mix Productions Inc. All rights reserved.

  • About
  • Contact
  • Privacy Policy and Copyright
  • Cookie Policy

Proudly partnering with…

scf_withtagline
No Result
View All Result
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities

Copyright 2022 © Smarter Shift Inc. and Energy Mix Productions Inc. All rights reserved.

Manage Cookie Consent
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behaviour or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage vendors Read more about these purposes
View preferences
{title} {title} {title}