Price of oil drops 24% in 2 months

[Gatekeeper]

Originally posted by Brachy-Pride
What about bio diesel?

Palm Oil Economy?

I do believe that falls under the "(or other, non-oil energy economy)" I mentioned in a prior post. Bio-diesel fuel is starting to catch on in my neck of the woods (along with ethanol), but I haven't heard much regarding palm oil.

Gatekeeper

[Gatekeeper]

Originally posted by Flubber
I doubt those estimates are still accurate. Most of the major oil sands developers have markedly revised their cost estimates upwards about 6 weeks ago. A perice drop may actually help to cool the labour market here. If it cooled sufficiently, we could see the ironic situation where an oil development is more profitable when oil prices are a little lower

What's the latest estimates on costs? I assume it's still well below the current per-barrel price of oil? And, yes, I've read here and there about how crazy it is up in the oil sands region. Last I heard, there were environmental concerns from some of the folks in the area, including indigenous people. Hmm. Retrieving oil from sands ... isn't the process similar to strip mining?

Gatekeeper

[Victor Galis]

Yes

[Dinner]

Originally posted by Flubber
Most of the oil companies do think long term. Thats why long projects like oilsands development will continue onward.

Overall lessened prices may be a good thing as it might slow the frantic pace of drilling and development to something a little more measured and reasonable

The largest single field in the world will be coming on line in Russia in 2008.

[Spec]

At 18L/100km, I can tell you i'm glad....for now....

Zoom Zoom Zoom.

Spec.

[Dis]

gas prices are still pretty high in Vegas. $2.75 a gallon.

[Dis]

Originally posted by Oerdin


The largest single field in the world will be coming on line in Russia in 2008.

sweet, sweet oil. I'm not ready to give up my car just yet.

[Flubber]

Originally posted by Gatekeeper


What's the latest estimates on costs? I assume it's still well below the current per-barrel price of oil? And, yes, I've read here and there about how crazy it is up in the oil sands region. Last I heard, there were environmental concerns from some of the folks in the area, including indigenous people. Hmm. Retrieving oil from sands ... isn't the process similar to strip mining?

Gatekeeper

They still see it as doable but the rate of cost increases has caught everyone by surprise. A 75% increase when talkig billions is not exactly chicken feed

Fri Jul 28, 7:45 PM



By James Stevenson

CALGARY (CP) - Shell Canada (TSX:SHC) will proceed with the first expansion of its Athabasca oilsands project, despite costs as high as $12.8 billion amid soaring prices for materials and labour.


Calgary-based Shell issued a formal proposal Friday to its partners in Athabasca, including Western Oil Sands (TSX:WTO) and Chevron Canada (NYSE:CVX), with its plan to proceed. The move came even though top-cost estimates are 75 per cent higher than earlier projections of $7.3 billion and more than twice what the original plant cost only four years ago.


Chevron and Western, which each own 20 per cent of Athabasca, have 90 days to respond to Shell's expansion plans.


"We have to believe, with some confidence, that it is right to continue the path established by the base project and to develop this resource," Shell's chief executive Clive Mather said in a conference call.


"It will require much larger levels of capital than would be traditional with conventional oil production, but that's the way the world is.


"Unconventional oil, typified by the resources in Athabasca, are clearly now capturing the attention of the investment community and the international . . . oil and gas producers."


Assuming regulatory approvals, Shell hopes to give the final go-ahead to the project before the end of the year, which would involve a new mine starting up by 2009 and a major expansion of its Edmonton-area refining upgrader completed by 2010.


The company also confirmed that after this first expansion of Athabasca, it will leave Western and Chevron to find their own upgrading solutions, while Shell focuses purely on its own rapidly escalating oilsands production.


For future upgrading, Shell said it is studying the potential of three options that include: pipelining bitumen across Canada to its existing Canadian refineries in Montreal and Sarnia, Ont.; further expansions to its Edmonton-area refinery; or a new upgrader in the Peace River region of northwestern Alberta.


But for the first expansion, Shell said that following a "rigorous cost estimate and assurance review process," the capital intensity of the expansion is now estimated at between $275 and $350 per annual flowing barrel.


On a total project basis, that equates to between $10 billion and $12.8 billion.


Shell's decision to proceed with the 100,000-barrels-per-day expansion despite the soaring costs will be closely watched throughout the oilsands industry, where all other companies building mega-projects face the same pressures from the overheated northern Alberta economy.


Mather said Shell's decision to proceed is "a key milestone" in the company's strategy to grow Athabasca production from its current 160,000 barrels a day to 550,000 barrels.


In a separate release, Western said "the heated market for labour, materials and equipment has impacted all facets" of the project. But it also added that the construction will include building common upstream infrastructure that will be used to support further mine expansions as it undergoes a "continuous construction strategy."


Western said it will make a final investment decision on the first expansion later this year pending regulatory approvals.


Shell said the first expansion will require about 7,000 workers, with costs split evenly between developing the new mine in northern Alberta and the Edmonton upgrader expansion.


The Athabasca project is not Shell's only exposure to the oilsands either. Earlier this week, the company revealed plans to rapidly develop its own in-situ oilsands projects that have come as a result of its recent $2.4-billion acquisition of BlackRock Ventures.

Shell hopes that the in-situ plants, which use a variety of newer technologies to access oilsands reserves that are too deep for conventional open-pit mining, will produce 50,000 barrels per day within the next two years and 150,000 barrels a day in the longer term.

Shell Canada, which is owned 78 per cent by Europe's Royal Dutch Shell PLC (NYSE:RDS.A) said that it would rely on the technical expertise of the parent company to help with the Athabasca expansion.

It also said that it would need to bring in foreign labour to help build the project - a controversial subject within Alberta.

"I don't know from where, I don't know how many at this stage, and I don't know exactly when," said Mather.

"But if we look at the demand for construction labour and trades across the province, then I think it's pretty clear that there will have to be some injection of foreign resources to make this work."

On Thursday, the parent company said its second-quarter earnings jumped 40 per cent to $7.32 billion US, from $5.24 billion a year earlier despite production difficulties in Nigeria and the Gulf of Mexico.


On the Toronto stock market, Shell Canada's shares rose 66 cents to close at $39.29 on Friday. Western shares fell 45 cents to $25.59.

[DanS]

I'm impressed by the huge amounts of capital that is being spent on an energy source that a couple of years ago was considered fringe -- sort of like a technology demonstration project.

[Flubber]

Originally posted by DanS
I'm impressed by the huge amounts of capital that is being spent on an energy source that a couple of years ago was considered fringe -- sort of like a technology demonstration project.

If by a "couple of years" you mean 2-3 years , oilsands are far from fringe. Pretty much every oil company that has operations in North America have some involvement and two project have been in production for that time period.

The interesting part comes when we move from the mining projects into the deeper oilsands that use steam extraction methods

[VetLegion]

Re: Price of oil drops 24% in 2 months

Originally posted by DanS
The fears that the producers don't have enough oil to satisfy demand are gone, so it's tough for OPEC to stop the slide. It can cut supplies, but that would reinforce the perception that there is plenty of oil available.

OPEC have grown in population very much, and continue to do so, so I believe we won't see them cutting supplies much.

BTW., can you give the link to the article you cited?

[mrmitchell]

gas in el dorado - $1.83/gal
gas in camden - $2.33/gal
Camden is 30 minutes from El Dorado. As long as cars have been driven, gas has been more expensive here than there. By 10 cents for a while, but now thirty cents usually.

There is no possible reason other than a conspiracy amongst the station owners. My family all works out of town so we never have to fill up in Camden. And never will again. The difference has always been there, but $0.50 is crazy.

And it's not just El Dorado. Gas is cheaper everywhere else in Arkansas, although the disparity's always greatest for El Do because of their refineries.

[One_more_turn]

$40 oil will do wonder to Iran and Venezuela's economy.

[GePap]

Originally posted by One_more_turn
$40 oil will do wonder to Iran and Venezuela's economy.

Given that price is much higher than in 2002, it certainly will.

[SlowwHand]

So is everything else.