What Is The Remainder

[DonAndersen]

After listening to Charles Adler this afternoon, I thought I'd best get the facts on some of the stuff about the Oil/Tar Sands.

 

Was looking for info and I found this from the NEB energy report http://www.neb.gc.ca/clf-nsi/rnrgynfmtn/nr...152004-eng.html

 

And from the above report I found:

 

What are the (i) operating costs, and (ii) the supply cost of producing a barrel of oil from the oil sands?

 

The estimated operating costs range from 4 to 14 dollars for bitumen and 12 to 18 dollars for synthetic crude oil. The estimated supply costs ranges from 10 to 19 dollars for bitumen and from 22 to 28 dollars for synthetic crude oil*.

 

* Supply costs include operating costs, capital costs, taxes, royalties and the rate of return on investment.

 

 

 

So....the real question: If the Supply costs are $28.00 and the sale price is <>$100. Where did the $72 go? Profit?

 

regards,

 

Don

 

 

 

 

[bigbowtrout]

I think a good chunk goes back into research. If there was zero profit know one would do it.

 

Over C$60 billion in oil sands related projects have been proposed. Approximately C$20 billion has been invested to-date in completed projects.

 

They need to work on ways to tap into all the reserves. Most of it is still to costly to access.

 

The Board has adopted the estimates of the Alberta and Energy Utilities Board and, according to it; the ultimate volume of crude bitumen in place is estimated to be approximately 260 billion cubic metres (1.6 trillion barrels).

 

1.6 trillion barrels is reason why none of the big players will ever leave the Oil Sands.

 

 

[DonAndersen]

BBT,

 

Research you say. But what is new in the Oil Sands? Great Canadian Oilsands [became Syncrude] used the Froth Process which was invented in 1869. Still using it today. Huff & Puff and Fire Floods have been around for 30+ years. Moving product from mineface>process plants via things with wheels has been going on since man invented the wheel.

So what has the $78/bbl. in research uncovered?

And I truly recognize a profit when it see it!

 

regards,

 

 

Don

 

 

[Guest 420FLYFISHIN]

how much is it to refine the 1 drum of oil? or is that in the supply cost?

[Ricinus]

Somethings missing... the last time the Province raised royalties, they were all going bankrupt, laying off all employees and leaving the Province.

 

Mike

[DonAndersen]

Wished I could find something from a CDN site but this was the best I can do.

 

Don

 

 

the U.S. Government” the average cost at the pump for a gallon of gasoline is broken down as follows:

 

74% - Cost of the crude oil

11% - Taxes

10% - Refining costs

5% - Distribution and marketing

 

In a simple illustration, let’s assume an oil company is paying $100 for a barrel (42 gallons) of basic crude oil. Their cost for a gallon will be about $2.38. At a gasoline-pump price of $4.00 per gallon, 44 cents has to pay for taxes and 20 cents for distribution and marketing expenses. This leaves $3.36 for the oil companies. Out of that total they have to pay for the cost of the gallon of crude oil itself which was $2.38 and also the 40 cents to refine it into gasoline. This leaves $0.58 profit per gallon of gasoline. As noted, however, depending on which report one looks at, this profit-margin can range anywhere between an estimated 30 to 60 cents per gallon. Remember this is in US Gallons. You do the math.

 

And just for ricinus,

 

Oil Companies have been crying about royalties since 1920 in Alberta. Are the companies still here?

100 years of continuous tears. Now if that was my kid, a spanking may be in order.

 

 

Don

 

[bigbowtrout]

BBT,

 

Research you say. But what is new in the Oil Sands? Great Canadian Oilsands [became Syncrude] used the Froth Process which was invented in 1869. Still using it today. Huff & Puff and Fire Floods have been around for 30+ years. Moving product from mineface>process plants via things with wheels has been going on since man invented the wheel.

So what has the $78/bbl. in research uncovered?

And I truly recognize a profit when it see it!

 

regards,

 

 

Don

 

 

There is more than one way to skin the oil sands cat. This link will give you a lot more links. http://www.capp.ca/canadaindustry/oilsands...px#M174OyORnBGP

 

Surface mining

 

Combustion Overhead Gravity Drainage (COGD)

 

Cold flow

 

Toe to Heel Air Injection (THAI)

 

Cyclic Steam Stimulation (CSS)

 

Vapor Extraction Process (VAPEX)

 

Steam Assisted Gravity Drainage (SAGD)

 

90% of the Alberta oil sands are too far below the surface to use open-pit mining so I see tech buck going here to find ways to tap into that 90%.

 

http://en.wikipedia.org/wiki/Oil_sands

 

 

 

One way to get more Oil Sands money back into Canada would be for Canada itself to become a big player (Owner/Producer) in the Oil Sands. The Government of Norway is the largest shareholder in Statoil with 67% of the shares and they seem to make a good go of it.

[Ricinus]

Shades of Alberta Energy!!!

 

Mike

 

[bigbowtrout]

Shades of Alberta Energy!!!

 

Mike

 

Or PetroCanada

 

It just needs to be done right or at least a 1000x better.

 

Or you can roll out another Alberta Royalty program but do it when we are on the upswing LOL

[ginger]

Oilsands investments can be very profitable but they are also very risky. The NEB figures are from around 2004 and are out of date. Although producers try to keep this secret, cost per bbl (including a capital cost component) for the existing developments probably varies between $35 and $65. Don't forget oil was $26 in 2003 and below $40 in 2009(not to mention that in 1998 the price went below$11) In other words some multi billion dollar operations were under water very recently. In addition to the oil price risk enormous construction cost overuns have been the norm,fires and other calamities commonplace and there is even technological risk--see Nexen/Opti Long Lake. Finding and producing oil,conventional or otherwise, is an entrepreneurial activity that demands levels of investment and assumption of risk which are unheard of in other industries. On the conventional side, when Ed launched his "Our Fair Share" review(gee,how was that going to turn out!) and jacked royalties oilpatch entrepreneurs headed for the hills of Northern BC and SE Saskatchewan. Ed's constituents noticed no one was hiring their excavators and water trucks or staying in their motels and some of them got it--EVERYONE IN THIS PROVINCE OWES THEIR PROSPERITY TO THE OIL INDUSTRY. Although he doesn't say it I gather Don is advocating increased royalties, taxes or price controls. Wildly excess profits are distasteful but can we agree that if you take a huge risk you might be entitled to a jackpot and can we also agree that if you are an Albertan high oil, gasoline, and natural gas prices are A GOOD THING.

[DonAndersen]

Ginger,

 

Ya got it wrong.

 

I'm not advocating jack shite - just getting tired of guys like Charles Adler thumping his bird like chest and spouting BS and advertising it as fact.

 

What I'd really like to know is the truth.

 

You've helped.

 

regards,

 

Don

 

 

[Taco]

Wildly excess profits are distasteful but can we agree that if you take a huge risk you might be entitled to a jackpot and can we also agree that if you are an Albertan high oil, gasoline, and natural gas prices are A GOOD THING.

 

Wish I could get some wildly lucky other than me Albertan to pay my 1500 Lt/month diesel fuel bill, $1.30 a litre if you can find a place that has some...

[ginger]

Fair enough Don, you may have guessed I have a hard time resisting this debate. Taco,ouch,good point but I'm guessing with that fuel burn you have a job and the success of the oilpatch is clearly the reason we currently have one of the lowest unemployment rates anywhere. Cheers.

[Ricinus]

Back In the lean years, Oil sand companies were given all sorts of tax breaks and incentives for development so I don't think they lost a great deal of monies if any at all. No one is advocating bankrupting O&G companies with taxes and royalties, just trying to ensure we as Albertans are getting fair value for OUR resources. As for packing up and leaving the Province, I wish we would have had a Premier like say Danny Williams to call the bluff.

 

Mike

[TerryH]

A few comments:

1. A lot of money has gone into research. Much of that research has been done at universities although funded by the oilsands companies. If you look into it, you will find that in fact a great deal has changed as far as the process is concerned.

2. We are all free to get a piece of the action. Simply call your broker and buy some shares in Canadian Oilsands (ticker symbol COS). The current yield is around 5.7% -- try and find that in a GIC. However, if that sounds too good to be true, don't forget that there is something called "risk" involved -- and therein lies an element of our capitalistic economy that the lefties choose to forget. When you buy shares, you are providing capital for the company, but you could lose on the deal, if the share price goes down. The shares in COS are currently trading at around $21. They peaked in 2008 at around $45.

3. If investors didn't risk their money by buying shares in companies like COS, we would have a long wait at the pumps -- anyone here old enough to remember what happened in the 70's (Don, you don't need to answer, I know you were there)?

 

Terry

[vhawk12]

Ok, so here's a couple things I can shed some light on....Don, I can't answer your question as far as where the $72 goes, but what I can tell you is that the Oilsands is far from being "figured out". Sure the big surface-mineable deposits are largely discovered, but it is the SAGD (and other thermal recovery methods) that companies are alotting research dollars towards. First of all, I believe at the current time, a 'profitable' SAGD project takes 3 barrels of water (to make steam) to produce on barrel of bitumen. Let me also qualify that this water is sourced from deep water, ancient aquifers, not the Athabasca river or surrounding lakes. Companies are researching ways to reduce the Steam to Oil Ratio (SOR), which means less water is needed per barrel of oil produced, thus maximizing profit (takes money to find the water too). Also, underlying the oil"sands" are heavy-oil carbonates. These formations have vugs (read holes like swiss cheese) that are filled with essentially pure bitumen. Currently there is an estimated 400 billion barrels of oil in the Grosmont formation (you will hear a lot about this in the next 5-10 years) which is not currently included in Alberta's 170 billion barrels of reserves. This is because at the moment, commercial production of this zone is non-economic at the moment due to reservoir properties of the rock. The carbonates are where the oilsands were 15-20 years ago...how do you get the bitumen out effieciently? Well the techies have come up with solutions for the sands, so we think that research will allow us to economically extract the bitumen from this formation as well. We will never get all of the bitumen, but even at a recovery factor of 50%, that would add 200 billion barrels of reserves to Alberta, putting us up there with Saudi Arabia.

 

So I'm not going to sit here and say that oil companies don't make a lot of money, they do, but I HATE the sentiment "where are the companies going to go? It's all here". Well first of all, it isn't 'all here', but the political and economic stability of Canada make it a desireable place to do business; however, if companies can not maximize their profits, they will go elsewhere, and have. All you have to do is look at the last Royalty fiasco...did the companies pack up and leave? Nope, they just scale back their activity to pretty much nil while still holding the leases until things become economic for them to operate again. In the meantime, people downtown lose jobs, businesses that support the oilfield service industry go broke, and that trickles down to home-builders and car dealerships, etc. All the while, companies are buying up land in BC and Sask. like you wouldn't believe. Also, just because Gov'ts increase royalties doesn't mean that you're going to see any of it...assumably, the money will go to roads and infrastructure, etc. but at the same time, there is an entire wing of the Children's Hospital that was largely funded by Encana. The point is that just because the oil companies don't have to pay huge royalties doesn't mean that they don't help support infrastructure on their own...hell it's a tax break right? Anyway, if you live in Alberta, you are affected by the oil industry, from rural motels to professionals downtown, it's a fact of life, if you don't like it, then I suggest you move somewhere else.

[megalops]

Two additional things to keep in mind:

 

1) Bitumen and Sythentic Crude Oil (also known as heavy crude) do not sell at WTI prices. WTI is a reference price for light sweet oil, which oil sands production certainly is not. Bitumen typically sells at a 40% discount to WTI and SCO at around a 30% discount (the Alberta government posts reference pricing on their website); and

 

2) the costs in the study are 2004 costs and updated to 2006 (the amounts you posted were the 2004 figures). A lot has happened to costs since then, like a royalty change. CAPP provides more updated supply cost information on their website.

 

A supply cost analysis generally shows the breakeven price needed to go ahead with oilsands projects. A $36 supply cost in 2006 for SCO implied a ~$50 constant WTI price for a project to be economic. The latest analysis I have heard implies a $90+ WTI price for projects to go ahead. A little different than a $72 profit that your post would suggest.

[Ricinus]

vhawk12

Anybody who questions the O&G Industry should get out of the Province?? Pretty sad commentary...

 

Mike

[Taco]

Taco,ouch,good point but I'm guessing with that fuel burn you have a job and the success of the oilpatch is clearly the reason we currently have one of the lowest unemployment rates anywhere. Cheers.

 

Actually ginger the reality is my job would still exist in one form or another even if energy industry went "away". The only real contact I have with the "Industry"as it were, is at the pumps, the rock chips in my windshield and the elevated prices I get to pay goods and services in Western Canada. BUT it is what it is and life goes on.

[Harps]

Can somebody tell me if I'm reading this right?

 

http://www.capp.ca/library/statistics/hand...px#wkGDLnNxs3E1

 

 

Looking at CAPPs data: In Alberta O&G spent +$37,000 million in 2010, $3,500 in royalties, $5,800 in exploration, $15,600 in development and $12,100 in operations. ($10,000 Million increase from 2009 with only $300 mil increase in royalties paid?!?) Sales= $74,623,072,000,000 in 2010 a $10,000,000,000,000 increase in sales from 2009)

 

Same data... that's $176,000 million paid in royalties to Alberta over 60 years ($702,000 mil spent total). In the same time over $1,200,000,000 million was the value of the producers sales.

 

That's:

$1,211,122,012,000,000 Revenue from 1947 to 2010 for $702,877,800,000 Spent (only $176,249,300,000 in Royalties).

 

 

Oilsands spent $34,216,000,000 total with $3,747,000,000 in Royalties...

 

Made????

 

 

 

Shell only made a $7.2 BILLION profit in the last quarter, (only 2x last year) and BP only made $4.9 BILLION, and Exxon only $10.F'n3 BILLION (not Alberta but whole companies).

 

Where does the money go?

 

 

Anyway, if you live in Alberta, you are affected by the oil industry, from rural motels to professionals downtown, it's a fact of life, if you don't like it, then I suggest you move somewhere else.

This line is offensive to any Alberta landowner that has been trying to make a profit despite having O&G companies demand the right to put pipelines under every quarter section, and having to be evacuated due to sour gas leaks, and having now explosive well water, and etc, etc.

Seems the standard original conservative values of Rights don't apply when a corporation wants to take them... right to property, right to clean water... and now they are discussing bringing a sales tax to Alberta?!? How is that fair when we still subsidize O&G?

 

 

This makes my head spin...

[megalops]

Can somebody tell me if I'm reading this right?

 

In short, no.

 

The CAPP revenue and expenditure tables are for 1) different time periods and 2) in different units. The revenue tables are in thousands and the expenditure tables are in millions.

 

Converting to common time period (1947 - 2010) and common units (billions), revenues were $1,237 billion and expenditures were $702.9 billion. So, bluntly $522 billion in profit over a 63 year investment horizon. The vast majority of revenues were earned and expenditures made were over the past 25 years, so you could likely call the investment horizon 25 years. If you gave the industry credit for the fact that if they cut off drilling now and just produced the wells they drilled at no cost and doubled their revenues, it represents about a 10% per annum return on capital on a pre-tax basis. Not a great return for the risk associated with drilling and producing oil and gas.

 

And, for Exxon earning $10 billion in profit...they earned that on $302 billion of capital employed, a 3.3% return on assets. Or the equivalent of earning $33 on a $1,000 bond for the year. Pretty shitty returns. Profit isn't an absolute number. You have to consider what they spent to earn it.

 

For oil sand royalties - they are set low until the project has paid back the initial investment. Royalties will be disproportionate in the early years of projects.

[Guest bobjones]

Can somebody tell me if I'm reading this right?

 

http://www.capp.ca/library/statistics/hand...px#wkGDLnNxs3E1

 

 

Looking at CAPPs data: In Alberta O&G spent +$37,000 million in 2010, $3,500 in royalties, $5,800 in exploration, $15,600 in development and $12,100 in operations. ($10,000 Million increase from 2009 with only $300 mil increase in royalties paid?!?) Sales= $74,623,072,000,000 in 2010 a $10,000,000,000,000 increase in sales from 2009)

 

Same data... that's $176,000 million paid in royalties to Alberta over 60 years ($702,000 mil spent total). In the same time over $1,200,000,000 million was the value of the producers sales.

 

That's:

$1,211,122,012,000,000 Revenue from 1947 to 2010 for $702,877,800,000 Spent (only $176,249,300,000 in Royalties).

 

 

Oilsands spent $34,216,000,000 total with $3,747,000,000 in Royalties...

 

Made????

 

 

 

Shell only made a $7.2 BILLION profit in the last quarter, (only 2x last year) and BP only made $4.9 BILLION, and Exxon only $10.F'n3 BILLION (not Alberta but whole companies).

 

Where does the money go?

 

 

 

This line is offensive to any Alberta landowner that has been trying to make a profit despite having O&G companies demand the right to put pipelines under every quarter section, and having to be evacuated due to sour gas leaks, and having now explosive well water, and etc, etc.

Seems the standard original conservative values of Rights don't apply when a corporation wants to take them... right to property, right to clean water... and now they are discussing bringing a sales tax to Alberta?!? How is that fair when we still subsidize O&G?

 

 

This makes my head spin...

 

Do you get free wi fi in your occupy calgary tent?

[DonAndersen]

Folks,

 

I think that with the posts here a lot of my questions have been answered + I've got pointers of where to look for other answers.

 

What I would really like is some truths out there. I've heard more BS in the past 2 weeks than I thought possible. Is it truly possible to get true information . Seems like ones viewpoint certainly shades reality.

 

Further, Harps comments seems to have hit a soft spot.

 

This is exactly what confounds me. Comments like: "if you don't like it leave". Well, Harps family have been here a long time as has mine. We certainly recognize changes that have happened. Whether or not you see them as good depends on your perspective.

 

My thanx to all for the help and insight.

 

regards,

 

 

Don

[vhawk12]

Ok, so my "if you don't like it leave comment" obviously hit a nerve, and I get it. However, I am sick of people complaining about how much oil companies make and thinking that said companies should be shelling out more money just because they make so much. This is a Capitalist nation still isn't it? or did I miss something? If you sell someone a flyrod and they start catching tons of fish, do you expect them to give some to you (assuming we are not on a C&R stream and you primarily eat fish for food)? Or maybe we could all catch fish and share them equally among the guys that do well and the guys that get skunked (Socialism?) or we can catch fish, give them all to the government and let them decide who gets what (Communism?) If you're going to start chirping about how much oil companies make, you'd better make sure all your facts are straight on both profits and expenditures, which I think is what Don is looking to do in this post.

 

What I am not saying is that these companies should not be held accountable for the environmental impact they have while they are exploiting any resource (Forestry and Agriculture included). As far as the "Alberta landowner", it's not like they're forced into signing their names on leases, they have to feel that they are getting fairly paid for what they are giving up, which is essentially surface access because very few people have mineral rights anymore. I am not saying that companies should be allowed to run rampant on our soil, but that is a tricky line to walk (as proven by Ed's Royalty debacle). In the future, I would like to see some increased Protectionism policies in place (for all resource industries) that charge a premium for international companies to do business here. Although it sounds a bit contradictory to what I'm saying about companies being able to maximize profits, it would allow homegrown businesses a bit of a break (ie. Nexen, CNRL, Canadian Oilsands, etc.) meaning their profits increase and we hopefully see returns in these companies employing Canadians and building infrastructure. Again, a fine line between companies hungry to do business here and us taxing them to the point that it's not worth it.

 

The reason that we subsidize O&G is to have the gov't shoulder some of the risk involved in exploration. Do you think that oil companies should take all the risk and then pay out royalties to the gov't when they do hit pay? What about the 5 dry holes they drilled to find that one producing well? The costs to drill a deep basin well can be upwards of $20 million, so 5 dry holes @ $20 million is $100 million, plus the $20 million it cost to drill the successful well, so when they hit a pay zone, it better have at least $120 million worth of reserves just to offset the cost of exploration. BUT the gov't takes royalties on what they find so say they take so say 15% of $120 million is $18 million, so actually just to break even the reservoir better hold upwards of $140 million of reserves....anything above that and they make money, but there are operating/shipping/refining costs as well. So Don, maybe this answers some of your question is that I would speculate that those numbers you put up do not account for the general cost of exploration, the costs you've listed are taken from the time that the reserves are actually booked, thus not taking into account the cost of exploration to find the stuff.

 

For the record, I am a born and bred rural Albertan, so is my father and his father before him. I've seen changes in this Province/Country too, some good, some bad, like you said Don, it just depends on your perspective.

 

[DonAndersen]

Good Morning all,

 

Doing my homework and looking up info here and there.

 

Got some questions:

 

1] one writer says synthetic crude oil [ SCO] is discounted 40% and yet I see graphs that say the sales price may be either @ or greater than Texas. Did I miss something here?

2] Have looked over EUB and Govt of Alberta site and be damned if I can find a daily quote.

3] Is SCO sales price set @ what delivery point? Would make a lot of difference w/o 3,000 miles of pipeline

4] Looked over the various recovery methods - basically they are all heat and flow or heat, mix with solvent and flow. Is there really anything new? I certainly figured out years ago to clean a stove, you heated it slightly and used a solvent. Damn, does that mean a I get research grant.

5] And from several articles I got oil sands companies either made bags of money @ $70.00/bbl or barely broke even @ $80/bbl. Anybody know the truth. Nobody suggested that it took $100/bbl. to really make money.

 

And I wonder about a lot of stuff from CAPP. One guy says we recycle the water. Well, that's nothing new. Cost effective - why wouldn't you.

 

 

A bunch of questions remain:

 

 

1] What is the line that says we make a buck?

2] What is the daily selling price?

3] What is really new in technology?

4] And I'll get to the environmental questions later.

 

 

Don