Another Blow To KeystoneXL Pipeline; Shell Withdraws From Massive Tar Sand Oil Project!

[Think Progress] Keystone XL is not the only deciding factor in the future of tar sands extraction.

 

The outsized debate over the Keystone XL pipeline, which entered a new era yesterday after Obama wielded his veto pen against legislation approving its construction, is not the only element in the debate over whether the greenhouse gas-intensive tar sands get developed. Oil supply, demand, and cost are pulling some major levers too: with oil prices at rock-bottom lows, on Monday Royal Dutch Shell announced it was shelving plans to build a new tar sands mine in northern Alberta — the largest such project to be deferred.

 

Shell withdrew its applications for the Pierre River project, which would have produced 200,000 barrels-per-day (bpd), to focus on maintaining profitability for its existing 255,000-bpd tar sands operations, according to the company.

 

“The Pierre River Mine (PRM) remains a very long term opportunity for us but it’s not currently a priority,” said Lorraine Mitchelmore, Shell Canada President and Executive Vice President of Heavy Oil. “Our current focus is on making our heavy oil business as economically and environmentally competitive as possible.

  

Shell was one of the earliest tar sands producers to cut staff due to low oil prices, laying off around 300 workers at its Albian tar sands project in Alberta starting last month.

 

Instability makes it hard for most companies to do business, and unreliable oil prices are no different. Crude oil prices have fallen more than 50 percent over the last six months, hovering between $50 and $60 per barrel of late. Last August, Mitchelmore said Shell Canada’s tar sands business met profitability markers when crude traded above $70 per barrel.

  

Shell originally halted work on the Pierre River project a year ago, stating the need to re-evaluate the timing as a heated environmental review process was taking longer than anticipated. The project was first proposed in 2007.

 

Tar sands are extremely GHG intensive, and the shelving of the Pierre River project along with two other tar sands endeavors — Total’s Joslyn North and Statoil’s Corner Project — has helped avoid the emissions of 2.8 billion metric tons of carbon dioxide, which is equivalent to stopping the construction of 18 new coal plants with a lifespan of four decades. Tar sands oil produces as much as three times the greenhouse gas emissions of conventionally produced oil. The government of Alberta, where the mines are sited, expects to lose $5.5 billion in revenue this year because of low oil prices.

 

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http://thinkprogress.org/climate/2015/02/25/3626863/shell-shelves-tar-sands-project/

 

11,000,000 Barrels Per Day, United States Is Now The Largest Oil Producer In The World; Surpassing Saudi Arabia And Russia

No More War Over Middle East Oil

 

The U.S. will remain the world’s biggest oil producer this year after overtaking Saudi Arabia and Russia as extraction of energy from shale rock spurs the nation’s economic recovery, Bank of America Corp. said.

 

 

U.S. production of crude oil, along with liquids separated from natural gas, surpassed all other countries this year with daily output exceeding 11 million barrels in the first quarter, the bank said in a report today. The country became the world’s largest natural gas producer in 2010. TheInternational Energy Agency said in June that the U.S. was the biggest producer of oil and natural gas liquids.

 

 

“The U.S. increase in supply is a very meaningful chunk of oil,” Francisco Blanch, the bank’s head of commodities research, said by phone fromNew York. “The shale boom is playing a key role in the U.S. recovery. If the U.S. didn’t have this energy supply, prices at the pump would be completely unaffordable.”

 

 

Oil extraction is soaring at shale formations in Texas and North Dakota as companies split rocks using high-pressure liquid, a process known as hydraulic fracturing, or fracking. The surge in supply combined with restrictions on exporting crude is curbing the price of West Texas Intermediate, America’s oil benchmark. The U.S., the world’s largest oil consumer, still imported an average of 7.5 million barrels a day of crude in April, according to the Department of Energy’s statistical arm.

Surpassing Saudi

U.S. oil output will surge to 13.1 million barrels a day in 2019 and plateau thereafter, according to the IEA, a Paris-based adviser to 29 nations. The country will lose its top-producer ranking at the start of the 2030s, the agency said in its World Energy Outlook in November.

 

“It’s very likely the U.S. stays as No. 1 producer for the rest of the year” as output is set to increase in the second half, Blanch said. Production growth outside the U.S. has been lower than the bank anticipated, keeping global oil prices high, he said.

Partly as a result of the shale boom, WTI futures on the New York Mercantile Exchange remain at a discount of about $7 a barrel to their European counterpart, the Brent contract on ICE Futures Europe’s London-based exchange. WTI was at $103.74 a barrel as of 4:13 p.m. London time.

Islamist Insurgency

“The shale production story is bigger than Iraqi production, but it hasn’t made the impact on prices you would expect,” said Blanch. “Typically such a large energy supply growth should bring prices lower, but in fact we’re not seeing that because the whole geopolitical situation outside the U.S. is dreadful.”

 

Territorial gains in northern Iraq by a group calling itself the Islamic State has spurred concerns that oil flows could be disrupted in the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia. Exports from Libya have been reduced by protests, while Nigeria’s production is crimped by oil theft and sabotage.

 

 

Libya will resume exports as soon as possible from two oil ports in the country’s east after taking back control from rebels who blocked crude shipments for the past year, Mohamed Elharari, spokesman for the state-run National Oil Corp., said by phone yesterday from Tripoli.

 

The U.S. will consolidate its position as the world’s biggest producer in the coming months if returning Libyan supply limits the need for Saudi barrels, said Julian Lee, an oil strategist who writes for Bloomberg News First Word. The observations he makes are his own.

 

Record Investment

“There’s a very strong linkage between oil production growth, economic growth and wage growth across a range of U.S. states,” Blanch said. Annual investment in oil and gas in the country is at a record $200 billion, reaching 20 percent of the country’s total private fixed-structure spending for the first time, he said.

 

A U.S. Commerce Department decision to allow the overseas shipment of processed ultra-light oil called condensate has fanned speculation the nation may ease its four-decade ban on most crude exports. Pioneer Natural Resources Co. and Enterprise Products Partners LP will be allowed to export condensate, provided it is first subject to preliminary distillation, the companies said June 25.

 

The decision was “a positive first step” to dispersing the build-up of crude supply in North America, Bank of America said in a report on June 27. The U.S. could potentially have daily exports of 1 million barrels of crude, including 300,000 of condensate, by the end of the year, according to a June 25 report from Citigroup Inc. [Bloomberg]

 

 

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