Some good news for a change. KXL to get built !!

[zabbo]

Originally Posted by MountainTi

A little lesson on oil pricing for those interested in reading. Will learn a thing or two if you take the time. It is not black and white as so many assume.

And yes, KXL is a good thing, and MUCH needed.


https://www.oilsandsmagazine.com/mar...iscount-to-wti


I spent a lifetime in the upstream/exploration side of things. Lately I'm hanging out further downstream (processing). Definitely learning all products coming out of the ground aren't created equal.

A good read MountainTI. Thanks for posting. Some interesting points regarding quality, refining capabilities and price. You checking this out Alpine?? One thing I have to point out though, it was last updated Dec.13, 2018. I think it would be fair to say, much has changed since then. Unfortunately, not for the better. Especially over the last 3 to 4 weeks. To make an investment the magnitude of KXL, especially with huge amounts Alberta Tax dollars on the line seems very risky to me. The current global economic situation says, overall demand for oil has dropped and will continue to do so for some time to come. The U S has pumped 2 trillion dollars into their economy, with more expected and the markets are still staggering! April 1st the DOW took another 900 point dive. Unfortunately that's not an April fools joke. Overall, world governments have pledged well over 5 trillion and markets are still stalled or dropping. To hear this pipeline was a go ten years ago, I would have been popping Champagne corks! Even five years ago. Today? It might prove to be good deal five years from now. Sure hope so! In the mean time we talk about all the jobs created. A quick glance at the map shows the vast majority of this pipe will be south of the 49th. I can assure you there will be very few if any Canadians working that section. There may still be hurdles to overcome. A democratic U S government in the fall will probably stomp the whole thing. I'm not positive, but I believe there are still some environmental and native issues to be settled south of the border. If all that isn't bad enough, we now have to contend with covid-19 safety issue for those who will actually build the pipe. At the moment, that alone is a formidable issue.

As my old boy scout leader used to say, "Prepare for the worst, hope for the best!"

[MountainTi]

Originally Posted by zabbo

A good read MountainTI. Thanks for posting. Some interesting points regarding quality, refining capabilities and price. You checking this out Alpine?? One thing I have to point out though, it was last updated Dec.13, 2018. I think it would be fair to say, much has changed since then. Unfortunately, not for the better. Especially over the last 3 to 4 weeks. To make an investment the magnitude of KXL, especially with huge amounts Alberta Tax dollars on the line seems very risky to me. The current global economic situation says, overall demand for oil has dropped and will continue to do so for some time to come. The U S has pumped 2 trillion dollars into their economy, with more expected and the markets are still staggering! April 1st the DOW took another 900 point dive. Unfortunately that's not an April fools joke. Overall, world governments have pledged well over 5 trillion and markets are still stalled or dropping. To hear this pipeline was a go ten years ago, I would have been popping Champagne corks! Even five years ago. Today? It might prove to be good deal five years from now. Sure hope so! In the mean time we talk about all the jobs created. A quick glance at the map shows the vast majority of this pipe will be south of the 49th. I can assure you there will be very few if any Canadians working that section. There may still be hurdles to overcome. A democratic U S government in the fall will probably stomp the whole thing. I'm not positive, but I believe there are still some environmental and native issues to be settled south of the border. If all that isn't bad enough, we now have to contend with covid-19 safety issue for those who will actually build the pipe. At the moment, that alone is a formidable issue.

As my old boy scout leader used to say, "Prepare for the worst, hope for the best!"

It will be over 2 years before there is a drop of oil that flows thru the KXL. These large projects aren't built on todays oil prices, but for the long term pricing. There is already a lot of pipe in the ground

[mac1983]

Originally Posted by MK2750

Someone help me here because I don't understand. If energy east is being held up by Quebec why don't we just go as far as Ontario. There are people starving for jobs in northern Ontario and if the polling maps are correct there would be little resistance until just north of Toronto. Build refineries in northern or even central Ontario and that market would be ours.

I know we would ideally go right to NB where the existing refineries are but we do not have to completely abandon them. They could be ( the Irvings etc.) important investors with proven experience.

The french could continue to have no appetite for a pipe line and watch their energy prices soar, while the folks of Ontario could enjoy jobs and a much needed reduction in cost of living.

The Energy East pipeline was going to extend an existing 42 inch pipeline that started in Alberta and ended roughly at the Ontario/Quebec border. It would add roughly 1600 km to the existing 3000 km of pipe. It would go through Quebec and New Brunswick and terminate at tidewater at the Irving Refinery at Saint John New Brunswick and add roughly 1.1 million barrels per day to our export capacity. But Quebec cancelled it because they prefer Saudi Oil over ours.

[NCC]

Originally Posted by ESOXangler

I would much rather see the investment going to increasing our refining capabilities. Sure refineries cost more but the end result is alot of profit. And they provide alot more man hours over their lifetime than the pipeline will.

From the Calgary Herald in regards to the Sturgeon Refinery:

"According to Alberta budget documents released last week, the province has paid about $466 million in debt-servicing costs since June 2018 tied to its commitments to the $9.9-billion refinery, located northeast of Edmonton.

The Alberta Petroleum Marketing Commission (APMC), a Crown corporation, has been making payments averaging $27 million a month related to the financing of the facility. These payments are occurring even though the refinery still is not processing the government’s bitumen at the facility — or generating revenue for the province from its refining operations — due to startup issues."

According to the article, the AB Government is due to start making another $21 million monthly payment in June, for a total payment of $48 million/month. I don't think we can afford to build any more refineries.

[MountainTi]

Originally Posted by hal53

Investors don't have the will to wait the length of time it takes to get a refinery approved, let alone get it online. I couldn't imagine the goat roping they would have to go through to get one built in Ontario

Aside from Redwater, it's been a while....

https://www.oilsandsmagazine.com/pro...ian-refineries

[ESOXangler]

Originally Posted by NCC

From the Calgary Herald in regards to the Sturgeon Refinery:

"According to Alberta budget documents released last week, the province has paid about $466 million in debt-servicing costs since June 2018 tied to its commitments to the $9.9-billion refinery, located northeast of Edmonton.

The Alberta Petroleum Marketing Commission (APMC), a Crown corporation, has been making payments averaging $27 million a month related to the financing of the facility. These payments are occurring even though the refinery still is not processing the government’s bitumen at the facility — or generating revenue for the province from its refining operations — due to startup issues."

According to the article, the AB Government is due to start making another $21 million monthly payment in June, for a total payment of $48 million/month. I don't think we can afford to build any more refineries.

Yeah what the herald doesnt take into account is the sturgeon refinery is in some regards a pilot project. Once the gasifier is proven and it will be it's going to be able to supply it's own H2 plus capture a pile of CO2 emissions. Coupled up with a LC Finer and it's going to be printing money. Its already breaking even making 40000 bbl/d using sco. Once it switches to bitumin itll be alot more productive.

[zabbo]

Originally Posted by MountainTi

It will be over 2 years before there is a drop of oil that flows thru the KXL. These large projects aren't built on todays oil prices, but for the long term pricing. There is already a lot of pipe in the ground

Yes, I understand this is looking into the future for pricing. Two years from now I have serious doubts the global economic situation will have improved. Virtually every country on the planet is in hock up past their ears. With that in mind I doubt the price of oil will improve a whole bunch. Any country that has oil to export is starving for cash and they will sell at any price they can get. Think Venezuela, Iran, other OPEC countries. Saudi and Russia are currently in a price war. The Saudis are threatening to open the taps even more. Who knows how or where that will end up. The Chinese economy is slowing as is their demand for oil. That was happening before corona. The economic / financial damage done buy Corona is a wild card, but I'm guessing it will take at least 5 years and probably many more to get over that hump. In the last couple weeks over 2 million Canadians have filed for E I! It will take a long time for that bubble to work it's way through the system. I have said before this "bust" is like no other we have ever seen. The tourist industry, even on a local scale is non existent. It will be a long time before people start regularly jumping on airplanes for a holiday. The cruise ship industry will probably never be what it was 5 weeks ago. If this pipe does in fact proceed, I sure hope the good folks of Alberta don't get burned. That's something we really can't afford right now.

JMHO

[hal53]

Originally Posted by zabbo

Yes, I understand this is looking into the future for pricing. Two years from now I have serious doubts the global economic situation will have improved. Virtually every country on the planet is in hock up past their ears. With that in mind I doubt the price of oil will improve a whole bunch. Any country that has oil to export is starving for cash and they will sell at any price they can get. Think Venezuela, Iran, other OPEC countries. Saudi and Russia are currently in a price war. The Saudis are threatening to open the taps even more. Who knows how or where that will end up. The Chinese economy is slowing as is their demand for oil. That was happening before corona. The economic / financial damage done buy Corona is a wild card, but I'm guessing it will take at least 5 years and probably many more to get over that hump. In the last couple weeks over 2 million Canadians have filed for E I! It will take a long time for that bubble to work it's way through the system. I have said before this "bust" is like no other we have ever seen. The tourist industry, even on a local scale is non existent. It will be a long time before people start regularly jumping on airplanes for a holiday. The cruise ship industry will probably never be what it was 5 weeks ago. If this pipe does in fact proceed, I sure hope the good folks of Alberta don't get burned. That's something we really can't afford right now.

JMHO

Inspite of your ongoing doom and gloom I can tell you that what ever happens to Alberta in the next few years , we will be a heckuva lot worse off if we don't have the pipelines

[zabbo]

Originally Posted by hal53

Inspite of your ongoing doom and gloom I can tell you that what ever happens to Alberta in the next few years , we will be a heckuva lot worse off if we don't have the pipelines

Yes, at the moment I do see things as very bad. Maybe I watch too many news and financial reports. 14 days of isolation get pretty boring. Hope for all our sake that I am wrong all the way. That said, pipelines that carry oil nobody can afford or wants to buy are not an asset, They are a liability.

[alpinebeers]

Originally Posted by zabbo

A good read MountainTI. Thanks for posting. Some interesting points regarding quality, refining capabilities and price. You checking this out Alpine?? One thing I have to point out though, it was last updated Dec.13, 2018. I think it would be fair to say, much has changed since then. Unfortunately, not for the better. Especially over the last 3 to 4 weeks. To make an investment the magnitude of KXL, especially with huge amounts Alberta Tax dollars on the line seems very risky to me. The current global economic situation says, overall demand for oil has dropped and will continue to do so for some time to come. The U S has pumped 2 trillion dollars into their economy, with more expected and the markets are still staggering! April 1st the DOW took another 900 point dive. Unfortunately that's not an April fools joke. Overall, world governments have pledged well over 5 trillion and markets are still stalled or dropping. To hear this pipeline was a go ten years ago, I would have been popping Champagne corks! Even five years ago. Today? It might prove to be good deal five years from now. Sure hope so! In the mean time we talk about all the jobs created. A quick glance at the map shows the vast majority of this pipe will be south of the 49th. I can assure you there will be very few if any Canadians working that section. There may still be hurdles to overcome. A democratic U S government in the fall will probably stomp the whole thing. I'm not positive, but I believe there are still some environmental and native issues to be settled south of the border. If all that isn't bad enough, we now have to contend with covid-19 safety issue for those who will actually build the pipe. At the moment, that alone is a formidable issue.

As my old boy scout leader used to say, "Prepare for the worst, hope for the best!"

Im glad we can at least agree it will be a good thing for us all when its built

[zabbo]

Originally Posted by alpinebeers

Im glad we can at least agree it will be a good thing for us all when its built

Thinking the jury will be out for 2 or 3 years on that.


As I have said in a few posts, sure hope you're right! This is one humble pie I'd be very happy to eat all of!

[MountainTi]

102% jump in WCS price today (along with climbs in most other blends as well). Interesting. Will it hold?

I try to be more optimistic than many, but not sure on this one. Could go either way. Hoping the panic bottomed it out and is on the rise

[zabbo]

Originally Posted by MountainTi

102% jump in WCS price today (along with climbs in most other blends as well). Interesting. Will it hold?

I try to be more optimistic than many, but not sure on this one. Could go either way. Hoping the panic bottomed it out and is on the rise

Me too! Haven't look at my investment portfolio for a few days.

[Big Grey Wolf]

Very simple solution, put 30% duty on All foreign oil including US product. Quebec would get the message very quickly and build last phase of pipeline.
We could also wave a few barrels of $5 oil in front of them.

[MountainTi]

Some of todays closing prices

oil prices.jpg

[NCC]

Originally Posted by ESOXangler

Yeah what the herald doesnt take into account is the sturgeon refinery is in some regards a pilot project. Once the gasifier is proven and it will be it's going to be able to supply it's own H2 plus capture a pile of CO2 emissions. Coupled up with a LC Finer and it's going to be printing money. Its already breaking even making 40000 bbl/d using sco. Once it switches to bitumin itll be alot more productive.

I hope you’re right. As soon as they start printing money there will be other investors building refineries and the government can sell their share of the refinery.

[flyrodfisher]

Originally Posted by ESOXangler

Yeah what the herald doesnt take into account is the sturgeon refinery is in some regards a pilot project. Once the gasifier is proven and it will be it's going to be able to supply it's own H2 plus capture a pile of CO2 emissions. Coupled up with a LC Finer and it's going to be printing money. Its already breaking even making 40000 bbl/d using sco. Once it switches to bitumin itll be alot more productive.

Initial estimated capital cost was $4 Billion
Capital cost to date is $9.9 Billion..... a 148% cost over run....
Add to that county & provincial tax concessions and funding,

They have NOT yet processed one drop of bitumen.
They are not breaking even processing the SCO

It will take a while till this baby pays for itself.…..

[ESOXangler]

Originally Posted by flyrodfisher

Initial estimated capital cost was $4 Billion
Capital cost to date is $9.9 Billion..... a 148% cost over run....
Add to that county & provincial tax concessions and funding,

They have NOT yet processed one drop of bitumen.
They are not breaking even processing the SCO

It will take a while till this baby pays for itself.…..

How do you know it's not breaking even? Would love to hear.

[flyrodfisher]

From the Calgary Herald article;

“In an ideal world, you would be processing bitumen, making a margin and that would cover the debt payments. But since we’re not doing that, we still are having to pay the debt and that’s racking up losses on APMC’s books,” said Richard Masson, former chief executive of the Crown corporation.

In other words they are NOT making a margin at all and are unable to make the debt principal payments that start this summer.

[ESOXangler]

Originally Posted by flyrodfisher

From the Calgary Herald article;

“In an ideal world, you would be processing bitumen, making a margin and that would cover the debt payments. But since we’re not doing that, we still are having to pay the debt and that’s racking up losses on APMC’s books,” said Richard Masson, former chief executive of the Crown corporation.

In other words they are NOT making a margin at all and are unable to make the debt principal payments that start this summer.

Bah I thought you meant something other than the same article.

Shes keeping the lights on this I know for certain.

[flyrodfisher]

Originally Posted by ESOXangler

Bah I thought you meant something other than the same article.

Shes keeping the lights on this I know for certain.

From the Herald;
https://calgaryherald.com/opinion/co...der-nightmare/

"NWR Sturgeon refinery has been processing synthetic crude oil into diesel and other products since November 2017. It has used the net income from the proceeds of this to pay the operating costs as well as the commissioning costs for the still not operating gasifier. But none of this net income has been paid to the government of Alberta or CNRL"


From the Herald;
https://calgaryherald.com/business/e...geon-refinery/

“The money has been flowing all one way — it’s all going in and to date, there’s been nothing coming out.”

[zabbo]

Originally Posted by flyrodfisher

Initial estimated capital cost was $4 Billion
Capital cost to date is $9.9 Billion..... a 148% cost over run....
Add to that county & provincial tax concessions and funding,

They have NOT yet processed one drop of bitumen.
They are not breaking even processing the SCO

It will take a while till this baby pays for itself.…..

This! One of my biggest concerns regarding government involvement in any project. Business invests money to make money. Government generally invests money to spend money. If this is such a good deal right now, why is there a need for the taxpayers of Alberta to put up 1.5 billion tax dollars. On top of that 6 billion in loan guarantees?

[ESOXangler]

Originally Posted by zabbo

This! One of my biggest concerns regarding government involvement in any project. Business invests money to make money. Government generally invests money to spend money. If this is such a good deal right now, why is there a need for the taxpayers of Alberta to put up 1.5 billion tax dollars. On top of that 6 billion in loan guarantees?

Why does everyone always think businesses run things effectively? So many of our major corporations demand at some point and time government welfare of some type.

I'm not opposed to using tax payers dollars to "help out" occasionally but chippin' in 1.5 to start and then guaranteeing loans is kind of crazy. Especially giving that we are scaling but education and slowly privatizing health care.

We are witnessing an oligarchy take advantage of us. If a person was truly an Alberta they should be absolutely disgusted with what's been going on. We should be focusing on our future. Education, small business incentives, hell we should be throwing money in to nuclear technology, and working like hell to diversify. Not throwing 7 billion into a pipe that slurries away raw product.

[zabbo]

Originally Posted by ESOXangler

Why does everyone always think businesses run things effectively? So many of our major corporations demand at some point and time government welfare of some type.

I'm not opposed to using tax payers dollars to "help out" occasionally but chippin' in 1.5 to start and then guaranteeing loans is kind of crazy. Especially giving that we are scaling but education and slowly privatizing health care.

We are witnessing an oligarchy take advantage of us. If a person was truly an Alberta they should be absolutely disgusted with what's been going on. We should be focusing on our future. Education, small business incentives, hell we should be throwing money in to nuclear technology, and working like hell to diversify. Not throwing 7 billion into a pipe that slurries away raw product.

Businesses that don't run things efficiently usually aren't around very long. Survival of the fittest. Some, maybe even many businesses ask for government assistance. Some, bombardier, snc lavalin, air canada, cbc, auto manufacturers, get that assistance. Others not so much. Can you say canadian oil business? Funny how the geographic location seems to be the common denominator regarding which businesses get assistance and which ones don't.

[ESOXangler]

Originally Posted by zabbo

Businesses that don't run things efficiently usually aren't around very long. Survival of the fittest. Some, maybe even many businesses ask for government assistance. Some, bombardier, snc lavalin, air canada, cbc, auto manufacturers, get that assistance. Others not so much. Can you say canadian oil business? Funny how the geographic location seems to be the common denominator regarding which businesses get assistance and which ones don't.

Look up ExxonMobil, shell's, apple, or any major corporation. Its across the world they get help. Capitalism is gone.

[zabbo]

Originally Posted by ESOXangler

Look up ExxonMobil, shell's, apple, or any major corporation. Its across the world they get help. Capitalism is gone.

Yes, I wouldn't doubt the corporations named may have received government aid of some sort. I have to say though, none of the ones you mention are canadian. I freely agree many corporations get assistance. As posted even canadian ones. Just seems odd that other than the fact the turd purchased TMX, it seems he has done everything in his power to destroy the canadian oil industry. Carbon tax, driving away investment with never ending environmental challenges, First Nations issues and on and on. The apple doesn't fall far from the tree.

[flyrodfisher]

Just a few numbers....a simplistic calculation

Using $9,700,000,000 capital cost
Interest payments are approx $300,000,000 per year equals $25,000,000 per month equals $800,000 per day equals $20 per refined barrel

Paying off the principal over 30 years equals about $323,000,000 per year equals $27,000,000 per month equals $900,000 per day equals $22.50 per refined barrel


Paying off the principal over 10 years equals about $970,000,000 per year equals $81,000,000 per month equals $2,700,000 per day equals $67.50 per barrel


So....just to pay off the debt on this refinery will cost;
$42.50 per refined barrel over 30 years or
$87.50 per refined barrel over 10 years

add to that the operating costs to refine
add to that the raw bitumen or SCO input costs
add to that royalties
add to that transportation costs
add to that taxes
add to that other infrastructure costs...roads, powerline, pipelines, etc


Don't think I will live long enough to see this baby make money...

PS...I'm not going to get into nit picking the numbers....just trying to show how large the debt servicing costs on this project are.
BTW...at $200,000+ per refined barrel, this is one of the most expensive refineries ever built

[pikeman06]

Ive worked on big pipeline projects my whole life and I was always blown away by the cost and money associated with such projects till I got in the position to actually see projected revenues etc. The 42 inch alliance line put in in the 90's was paid for (line installation costs) on 22 days they told me. This transmountain I'm working on right now at 800000 barrels a day at let's realistically say 40 dollars a barrel is 36 million dollars a day. Per day. Don't think anyone is gonna let the Saudis and russians get away with what they are doing to the world's oil supply and value it's akin to dropping a bomb in the western world's wallets and economies. When it's all said and done there will be boycotts and possibly bloodshed over the move they made at such a time. You just don't hear much about it because of the enormity of the current situation in the world. But to pick such a time to flood the market and screw with the western world's economy at present and moving forward is what I would call a war. Government ain't gonna be selling no transmountain to the first nations and gonna slam the keystone in too while the rest of the world is lookin somewhere else. Smart for alberta and Kenney and tc energy. Pure dumb luck for Trudeau but it's the only thing that's gonna pay big enough to recover the money he is throwing around. Just my 2 cents, i got more.

[flyrodfisher]

Originally Posted by pikeman06

Ive worked on big pipeline projects my whole life and I was always blown away by the cost and money associated with such projects till I got in the position to actually see projected revenues etc. The 42 inch alliance line put in in the 90's was paid for (line installation costs) on 22 days they told me. This transmountain I'm working on right now at 800000 barrels a day at let's realistically say 40 dollars a barrel is 36 million dollars a day.

All I will say is that I too have spent my career on big pipeline projects.
The numbers you quote are for the value of the product being transported...it is NOT the time it takes to pay off the pipeline.
And, NO Alliance was NOT paid for in 22 days

[pikeman06]

Maybe not in alliances books it wasn't of course, but in commodity shipped at those volumes at that time theoretically it was it's been in the ground whistling away huge volumes for how long? I know where you coming from bud. But the numbers I see are installation costs versus commodity costs plain and simple not shipping costs, royalties etc. Cost to get a pipeline built that operates for 30 years at 800000 barrels a day is so minor in comparison to lifespan value of said line it isn't even worth arguing. But if you wanna we can, all day long. Please just agree that these pipelines are a good thing for Canada and alberta. Maybe one week out of 30 years they appear to be unprofitable on paper so don't dwell on that or I'll pull out my thinking touque and calculator and make my point based on facts that will boggle the mind.