My point is that doing 1) does not imply that 2) will happen (although it will improve cost structures for it) and that doing 2) will lead to higher costs, so in-so-doing might lead to less primary extraction, but not in the way you envision.

b) yes Albertans always confuse their geography

c) Maritimers are the ones with the ‘culture of defeatism’ according to Albertans

Not necessarily. Depends on how it is implemented. Could be just shifting capital from primary to secondary if you control primary dev’nt through regulation.

If you think the numbers are off by more than that, how about providing some analysis to pass your wealth of knowledge on to readers?
 
Andrew

Do your homework.  Go ahead, look at the Maya-WCS spread to see what it really costs Alberta.  Forget the Cdn 40 API-LLS spread.  As you noted, grade counts and the bulk of exports are heavy. Maybe use the NEB export data for PADD 2.  Dil-bit future production is known years in advance.  Just add up the projects & expansions.  They all have to be permitted years ahead of production.  This isn’t rocket science. 

Hey Alberta!  When are you gonna figure out you’ve been punked to the tune of $10~$20 billion just in 2011?  Gee, isn’t that about the same size as the trade decitit for the entire country?  Gee, isn’t Ottawa running a deficit? 

Are you going to get punked again on Gateway? And an Eastern line? 
Help Wanted: Location: Alberta, Qualifications: Oil business savy, planning aptitude and cahones. 

It seems to me just a few yrs ago, 3 mmBbl/d by 2030 was optimistic – and we’ve since seen an economic recession and heightened opposition to this type of dev int’lly

Q: You win the lottery. $1.5 million.  Do you accept the lump sum of $1 million today, or $150k over the next 10 yrs (I’m assuming NPVs are same)?

A: If you are prone to blow the money on fast cars, fast life, today’s pleasures I’d suggest a 10 yr annuity. Otherwise – boom/bust.

Same with capital projects. Too many short term – boom. When completed, if nothing else to do, move on, or bust.

Interesting choice of word. But if the “tight labour market” is a result of capital projects out of control, that are relatively short term, arguably you’re subsidizing today’s capital jobs with tomorrow’s operating jobs.

First, 3.5 million bpd by 2020 is the ERCB’s current forecast, consistent w CAPP’s. When he was energy minister, Ron Liepert was regularly quoting 3-4 mbpd by 2020, and occasionally higher.  Second, you are correct that JVs like those of Cenovus in WoodRiver insulate them from the effects of the depressed WTI as they earn higher refinery profits.  However, both the Albertan and Canadian governments do not share in that hedge as they collect royalties based on WTI, and taxes based on profits earned in Canada. Finally, vertical integration has a role to play, but the heavy-to-light differential is not markedly different in Edmonton vs. Chicago vs. Port Arthur.  At the end of the day, upgraders in Alberta will be competing with brownfield capacity in the US, and we’ll still be looking to ship most of the production into their markets. I can see some advantages of the BRIK program, but at the end of the day if you are subsidizing jobs with bitumen in a tight labour market, you’re costing yourself on royalties from other projects due to cost inflation.

Andrew

Could be explained, more properly, as a result of Ralph Klein’s/Alberta’s out-of-control development of the primary extraction of oil sands bitumen. Properly control oil sands development, and the rush to build pipelines, with significant longterm implications, suddenly diminishes.

Nice piece. But, I would like to take issue with one thing we discussed previously on twitter. You state here:

This price spread has been hurting Canada in two ways. On the production side, since most of the export capacity leaving Alberta goes to the Midwest, our producers have been receiving significantly less value for their oil than they would if that oil were shipped to the Gulf Coast, or to any other port where it would sell at world prices. With Canadian oil exports to the Midwest at over 1.6 million barrels per day, a discount of $25 per barrel translates into about $15 billion per year of lost value to producers. And because these lower revenues mean lower royalty payments and income taxes, these costs are felt by all Canadians and in particular Albertans.

As I indicated earlier http://twitter.com/#!/JvfM1/status/137568098143318016 ” The obvious sol’n is vertical integration”  (wiki def’n here: http://en.wikipedia.org/wiki/Vertical_integration )

In other words, the producer also owns the refinery, so that any excess profits (diff between crude price and sales of refined gasoline etc) are captured by the same company. The issue then becomes one of accounting (ie transfer pricing and where do you report profits – which province/state/country?)

It seems to me a few years ago, some oil sands companies and O&G companies that owned refineries were entering into joint ventures on this basis (EnCana?)  And this recent G&M piece suggests the same situation exists for some Gulf Coast refineries:

 As Texas-bound crude shipments from Mexico and Venezuela shrink, these American refineries – some owned by the same companies with operations in the oil sands – are running under capacity.
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/from-oil-sands-to-gas-pump-alberta-looks-to-its-energy-future/article2242155/

So, a couple of questions.

Jim Prentice was reported as saying in Edmonton:  ”He pointed to the planned C$15 billion North West Upgrader, which will process the royalty oil from the Alberta government, as an important step in that process.”
http://www.calgaryherald.com/business/Canada+sector+must+keep+cleaning+Prentice/5744967/story.html?utm_source=dlvr.it&utm_medium=twitter#ixzz1eNG3ME7z

What say you to this approach, and also, where do you get the 3.5 million barrel/d by 2020. Seems like one hell of a lot of “oilseeds”?

-Dot

You’re just confused about it.

Mind you, this is a province that figured it should have nuclear subs.  LOL

Alberta forgets it is land-locked….the only route left is east

And yes, the profit motive can be overridden by a lot of things.

That decision had some path-dependent effects, in terms of where refineries clustered, and where pipelines were built. Because Albertan oil wasn’t sold east of the Ottawa river, you got an industry that was integrated in a north-south direction. 

Not sure why more upgrading capacity would put a project like KXL off for decades.  More upgrading capacity would still mean you want to ship out upgraded product. Depending on the upgrading technology (carbon removal vs. hydrogen addition) you are likely +/- 15% on the volumes.  See my blog at andrewleach.ca for some numbers on current capacity vs. growth forecasts.  You’d perhaps change the timing of a crunch by 1-2 years, but you’d further exacerbate cost inflation in Alberta, so the net value effect would be negligible.

Andrew