China buys Canada oil sands

[Mega]

Zapta was right:-
http://news.bbc.co.uk/1/hi/business/8231006.stm
Mike

[Starving Steve]

Re: China buys Canada oil sands

So far there is no help in developing the Alberta oil sands from the U.S. Department of Energy, and that tells me plenty about what the future of the U.S. is going to be, as far as energy is concerned. And I don't see any real recovery in the U.S. economy until energy is made plentiful and moderately priced.

Windmills and solar are a cruel joke. While China invests in the Alberta oil sands, the U.S. Dept. of Energy is betting-the-farm on wind and solar.

[thedanimal]

Re: China buys Canada oil sands

Is this kind of thing poom-y? Are they buying with USD and putting that currency into circulation?

[mesyn191]

Re: China buys Canada oil sands

Windmills and solar are a cruel joke. While China invests in the Alberta oil sands, the U.S. Dept. of Energy is betting-the-farm on wind and solar.

To be fair tar sands are a cruel joke too, you can certainly get oil from them, but it won't be high volume and it won't be cheap either. AFAIK this is why some of the tar sands, shale oil, and coal-to-oil set ups have been abandoned here in the US.

We don't really have any sort of good short term supply of cheap and large amounts of energy, well other than perhaps nuclear that is. Too much red tape around nuclear ATM to make that feasible for now either of course, but that is just a matter of passing a few laws, which can be done quickly if they really want to.

[Starving Steve]

Re: China buys Canada oil sands

You can get a high volume of oil from tar sands by cooking the tar sands. That cooking takes energy, but there is so much natural gas around North America that the continent is floating on it, literally. I look for nat. gas prices to actually drop in future, not rise in North America..... But the cheap nat. gas makes oil sands an ever better bet.

I'm just a geographer, not a geologist. But I have bet a tonne of money on Alberta's oil sands along with atomic energy as being the money-makers of the future.

The dividends from Alberta's oil and gas projects pay for my retirement. And I have Duke Energy and GE for my atomic power bet. (Sad to say, my GE has been a big loser so far.)

[Glenn Black]

Energy Return on Investment

For every ton of oil sands dug up and processed, 3/4 of that ton is the energy equivalency of the cost to run the processing plant, producing only 1/4 of a ton of equiv. energy for sale.

It is the worst deal of all energy sources available today. Tar sands are bad for the environment, bad economics, and bad energy yields.

In spite of this, we proceed ahead.

Why?

Here is a graph showing energy consumption in US (green dot) for the average energy ROI (Return on Investment) vs. quadrillion joules of energy consumed. Note "Tarsands" is is the thick black line in the bottom left corner; the worst deal going for energy sources.

Energy ROI is the amount of energy required to be input to extract or produce 1 unit of energy output. For example, flying around the world with your chainsaw to reach forest, cut down trees to make firewood, then ship firewood and yourself home by air freight would consume more energy than you create, and would be the most expensive way to create firewood. Really bad Energy ROI (probably negative).

Note that King Coal is the best deal going, but has significant pollution and GHG (Green House Gasses) impact. Scrubbers can create "Clean Coal" but the energy picture gets a little worse. non-GHG is firewood, and hydro-electric. Wind is equally good and is non-polluting and non-GHG. That's why governments are going big time into wind.

PV (photo-voltaic) solar electric costs about $0.75/kW-hr to generate (grid tie, no batteries).

Green Energy Act in Ontario Canada will now pay homeowners $0.82/kW-hr to put PV panels on their home roof so they can generate green power for the grid. At that price, homeowners make 9% to 13% on their 20 year investment in PV panels.

Most homeowners in Ontario Canada buy grid power at $0.0925/kW-hr plus numerous taxes & charges for a total of $0.16/kW-hr, just 11% of the new price that the government will buy the green PV power.

Will the government buy green power and sell it as a "loss leader"? I don't think so. Guess where electricity prices are headed in Ontario?

[Starving Steve]

Re: China buys Canada oil sands

Dear Glenn:

While spending 3 units of energy to retrieve 1 unit of gross energy may seem like a poor investment, may I remind you that the 3 units of energy that we spend are CHEAP CHEAP CHEAP energy from natural gas. The natural gas is so cheap that it is often was flared-off, because it didn't pay to recover it in the past.

The 1 unit of energy that we do recover is LIGHT SWEET OIL, exactly the energy that the world is short of.

I hear this lame gross energy accounting argument often from the eco-bunch, especially on the West Coast. For example, they argue against using atomic energy to purify sea water and pump that purified water to replenish California's aquifers.

While it is true that de-salinated sea water is expensive to produce and pump during the day, de-salinated sea water can be produced late at night when there is no other market or use for surplus energy, especially surplus atomic energy from reactors.

The dividends from atomic energy therefore are not only cheap energy during the daytime, but also de-salinated and delivered fresh water from the sea at night. That sounds good to me, and it should sound great to you too.

What the eco-bunch (Greenpeace, the Sierra Club, the U.S. Dept. of Energy, the BBC, and all of the rest) need to understand is that the world is short of cheap light oil, and the world is also short of fresh clean water for its aquifers. But the world is NOT short of gross energy supplies.

For tar sands, we have at least 200 years of supply in Alberta. We can easily replace the Middle East NOW. And for fresh clean water, there is no end in sight to that either, provided that we have plentiful and cheap electric power.

Gross energy accounting schemes mis-lead the public. Carbon accounting schemes and carbon markets mis-lead the public. Grants by government to off-set real-world economics also mis-leads the public. This is bogus accounting which I call "pot-head economics".

China is clear-thinking and sober about solving its development problems.... It is moving ahead of America now to really plan for the future with atomic energy NOW and tar sand investments NOW in Alberta.

China's standard of living is about to surpass America's standard of living. China is solving its growth and development problems while America flounders and slips backward.... I wonder why?

[mesyn191]

Re: China buys Canada oil sands

You can get a high volume of oil from tar sands by cooking the tar sands.

Not really, all the methods that involve heating don't scale very well. They can only produce around 1.2 million barrels per day right now, with a projected max of somewhere around 5 million barrels per day in a couple of decades. The US consumes about 20 million barrels of oil a day right now, and that need is expected to grow to considerably over the next couple of decades too.

Tar sands are a dead end as a national energy strategy.

I look for nat. gas prices to actually drop in future, not rise in North America..... But the cheap nat. gas makes oil sands an ever better bet.

Its still not cheap enough to make tar sand oil extraction cheap, if its not cheap it doesn't matter.

But I have bet a tonne of money on Alberta's oil sands along with atomic energy as being the money-makers of the future.

Making money is a whole other thing, I'm sure they'll make money.

I hear this lame gross energy accounting argument often from the eco-bunch, especially on the West Coast.

Come on now, lets keep things on topic, we're discussing energy tar sands in particular, not politics...

China's standard of living is about to surpass America's standard of living.

Their per capita income is something like $1700...

[blazespinnaker]

Re: China buys Canada oil sands

A lot of it depends who is in power.

If it's Harper, he'll push nuclearization of the tar sands and let them go hog wild.

If it's the liberals, then they might slow things down (though probably not that much, this is after all Canada's golden egg laying goose.)

[GRG55]

Re: China buys Canada oil sands

A lot of it depends who is in power.

If it's Harper, he'll push nuclearization of the tar sands and let them go hog wild.

If it's the liberals, then they might slow things down (though probably not that much, this is after all Canada's golden egg laying goose.)

The "hog wild" phase of Canadian oil sands development ended recently, regardless of which of the two completely "indistinguishable-from-one-another" parties is in power in Ottawa.

The Canadian oil sands will never see the same level of insane capital investment intensity [real, inflation-adjusted spending], that it saw in 2006/2007, ever again - that was the peak - in no small part due to the same global "cheap credit" liquidity glut that gave us housing bubbles, junk bonds, and far too many private equity firms. Cheap money isn't coming back, and neither are any of the numerous outcomes from it.

Ottawa is going to introduce some sort of carbon taxation targeting petroleum producers as part of future deficit reduction efforts...and clothe it in "green". Canadians will love the fiction that they can save the planet without individually having to bear any of the costs [since that will have been laid off on those dastardly oil companies in the West ].

From a post on October 28, 2007 [coincidentally the 27th anniversary of the ill-fated National Energy Program]:

...I am quite certain that the year of absolute maximum oil patch capital investment commitment in Alberta history will be seen in hindsight to be 2006. Yes Virginia, this boom is over...

[jk]

Re: China buys Canada oil sands

The "hog wild" phase of Canadian oil sands development ended recently, regardless of which of the two completely "indistinguishable-from-one-another" parties is in power in Ottawa.

The Canadian oil sands will never see the same level of insane capital investment intensity [real, inflation-adjusted spending], that it saw in 2006/2007, ever again - that was the peak - in no small part due to the same global "cheap credit" liquidity glut that gave us housing bubbles, junk bonds, and far too many private equity firms. Cheap money isn't coming back, and neither are any of the numerous outcomes from it.

Ottawa is going to introduce some sort of carbon taxation targeting petroleum producers as part of future deficit reduction efforts...and clothe it in "green". Canadians will love the fiction that they can save the planet without individually having to bear any of the costs [since that will have been laid off on those dastardly oil companies in the West ].

From a post on October 28, 2007 [coincidentally the 27th anniversary of the ill-fated National Energy Program]:

do you think that will be true even if oil hits $200u.s./barrel [in 2009 dollars]?

[GRG55]

Re: China buys Canada oil sands

do you think that will be true even if oil hits $200u.s./barrel [in 2009 dollars]?

Yes.

Contrary to some opinions expressed here, I believe the oil sands will be a critical asset for the Canadian economy and balance-of-payments for decades to come. But I do not think the confluence of circumstances that led to the frenzied levels of activity this decade will be repeated.

High nominal oil prices were part of it. Cheap credit and stock markets that "over-rewarded" companies in the oil sands [there was a serious disconnect in 2007 between the stock price run in those companies with oil sands exposure compared to those without] and some other factors all conspired to create what I regard as insane levels of capital flowing into Fort McMurray.

The people that are selling undeveloped oil sands assets to the Chinese are not stupid. Taking on Chinese partners in the oil sands is not something new. MEG Energy and Synenco sold parts of their projects to Chinese interests earlier this decade. Total, who took over Synenco, sold a further interest to their existing Chinese partner in April this year. The Chinese have a reputation for being "the partners from hell" around the Canadian oil patch. I don't expect any of these projects to move very quickly, and bringing in Chinese partners doesn't do anything to help that situation. Future development is likely to be slower, steadier, and more deliberate than the recent past. The historical major oil sands players and largest current producers, Suncor & Syncrude, are still the best bet for anyone contemplating investing in the sector.

[ThePythonicCow]

Re: China buys Canada oil sands

The Chinese have a reputation for being "the partners from hell"

Could you elaborate a little on this?

[GRG55]

Re: China buys Canada oil sands

Could you elaborate a little on this?

At the risk of sounding impolite, the Chinese pay top dollar, but then seem to expect that entry fee should allow them to behave as they would back home. As one example, they sometimes seem...um...amused at the very idea that anybody would take seriously such things as corporate governance regulations for publicly traded companies in Canada.