[GHung]

$this->bbcode_second_pass_quote('', ' ')http://www.bloomberg.com/news/2014-12-0 ... -rout.html

Canadian drillers cut the number of rigs used to the lowest for this time of year since 2009 as margins were squeezed by plunging prices.

Rigs targeting oil fell by 17 to 212, Baker Hughes Inc. said today on its website. Oil prices have plummeted since the Organization of Petroleum Exporting Countries decided to keep production limits unchanged at a meeting in Vienna last week as the group fought to maintain market share amid rising North American production.

“These Canadian oil rigs are coming under a lot of pressure because of prices and the lack of pipelines to export that crude to refineries in the U.S.,” James Williams, president of WTRG Economics, said by telephone from London, Arkansas, today.

Drilling activity in western Canada may drop by 15 percent next year amid oil price declines, Patricia Mohr, an economist at Bank of Nova Scotia in Toronto, said in a note Nov. 28.

Western Canadian Select traded at $49.68 a barrel today after falling to $48.40 on Nov. 28, the lowest since December 2012, according to data compiled by Bloomberg. The grade trades at a discount to U.S. benchmark West Texas Intermediate due to high production costs and a shortage of pipeline capacity to move the fuel to the coast.

Canada’s main oil producing province of Alberta has some of the most expensive crude in the world to produce. Most comes from oil sands, which must be dug or pumped out of the ground and upgraded into a lighter synthetic crude.

The lowest-cost oil sands producers, who use steam to loosen and pull bitumen from the ground, extract the fuel for about $51 a barrel, according to a July report by the Canadian Energy Research Institute. Profitability of most companies will be squeezed, Scotiabank’s Mohr said in her report.

A shortage of pipelines out of Alberta has prompted producers to rely on railways with 182,059 barrels a day sent this way in the third quarter, the most in records dating back three years, the National Energy Board said in data posted on its website Nov. 28.

“Moving by rail means you get less of the price at the wellhead because your transportation costs to refineries are so high,” Williams said.

[Paulo1]

Hi Ghung,

Yeah, we have been watching this unfold and I am not surprised at all. As soon as Putin announced the 'deal' I told my son that would be the end of our Province's 'hail mary' hope for a LNG cash cow. It must be so embarrassing for our witch Premiere, Christy Clark, and I am looking forward to see how she spins it. So far, silence from Victoria and only reassuring grunts from Ottawa as there is a federal election looming and the budget will/must be balanced for Harper to have a farts hope of getting in.

I have always felt that the rapid ramp up of FF extraction was shortsighted and wrong. I would rather see most of it stay in the ground and see it used domestically as much as possible as opposed to raw product exports. With our vast supplies of Hydro electricity, ample supplies of transportable energy in NG and (at home refined) petroleum products for domestic use, a nation-wide focus on secondary manufacturing would promote a long term rosy prospect, indeed. Instead, we have knuckle headed politicians knuckling under to pressure to ramp up every means of export and cheap sales as soon as possible. Boom and bust with little stability seems to be the only thing we know.

I wish the truth about PO was common knowledge and that politicians would have the jam to look further down the road instead of only working the GD election cycle. How encouraging it would be to be part of a nation-wide effort of conservation and planning for limited FF extraction and use. Not only is there absolutely no conversation out there except for loons like ourselves who are PO aware, the meme of more more more and consume/buy everything you desire is pretty much all we hear.

On a personal note, my son the industrial electrician (who has worked for 10 years in construction and maintenance in northern Alberta Oil Sands on a commuting basis), coincidentally switched out of that industry about 4 months ago and is now contracting with his buddy doing both electrical and drywall. He is actually doing better than before, financially. He must have stuck some horseshoes, somewhere. His work rate is higher, his taxes are lower, and he has company tax deductions as opposed to the blood sucking deductions of middle class payroll employment. I think he also enjoys the freedom of sometimes working 7 days/wk or taking several days off at his own choosing. Choice is a wonderful thing even if it means to work most of the time.

His friends still in Oil Sands construction still seem to be working as of now, but I assume new contracts will come to a screeching halt in the next few weeks.

regards...Paulo

[ROCKMAN]

"These Canadian oil rigs are coming under a lot of pressure because of...the lack of pipelines to export that crude to refineries in the U.S.,” And yet Canadians shipped more out of their country last month then ever before in history. Also good to remember that the main choke point wasn't at the US border but at Cushing, OK. A choke point that next month will have almost 1 million bopd added capacity to move oil from Cushing to Texas refineries compared to the days when Canadians were forced to sell to US midcontinent refineries at a big discount.

And I've seen numbers on the order of $3 to $6 more per bbl to ship oil by rail vs pipeline. I doubt that difference would push many projects over the line into uneconomical territory. But $20 to $30 dope in oil prices? Now you talking a serious economic hit.

It will be interesting to see how SAGD projects fair vs the remaining surface mining operations. I've no idea of the nature of the remaining oil sands vs those developed over 15 years ago. They might have been more productive back then...or maybe not. But I recently found an interesting stat: even adjusting for inflation the first million bbls of production from the oil sands was accomplished with prices between $25 to $35 per bbl.

[BobInget]

I'll bet it's warmer putting up drywall then working a rig in Northern Alberta.

[Antaris]

G. Christy won't be embarrassed , that is more of an NDP trait in this Province. I don't agree with her LNG ideas but at least she shows optimism unlike her sour faced opposition. I would leave the gas in the ground. To pay the bills now, borrow and default later just like every other government is doing.

[ROCKMAN]

Bob - Yep... money isn't everything. Last winter a fellow up in the Bakken that owned an oil transport company (just hauled oil from the well sites to the local oil terminals) told me he paid his best drivers $100k+ per year. But come winter he still had some quite. Having a lot of bucks in the bank and facing a typical harsh N Dakota winters it was an easy decision for many.

[Synapsid]

ROCKMAN,

What is up for next month to boost moving oil from Cushing to the Gulf Coast? Flanagan South is already operational; I believe Seaway Twin is too, so there's 600 000 bopd heading south. What's next?

[dissident]

Why all the doom and gloom over LNG exports. Just send them to the EU.

[EarthAbides]

$this->bbcode_second_pass_quote('dissident', 'W')hy all the doom and gloom over LNG exports. Just send them to the EU.

[Paulo1]

@Bob Inget,

Yep, 15 degrees C inside working in shorts sure beats -30 outside doing 12 hour days. However, there is outside work coming up which requires the dreaded 'rain gear'.

Rockman, I would be astounded if any existing plants actually shut down above $50 oil.

[Paulo1]

@Antaris,

You have to excuse my political cynicism as I worked 17 years trying to teach construction and other shop courses in the BC public school system. Chisty Clark cut the education budget in 2002 by 250 million dollars per year. I retired/quit 2 years ago after running out of patience. (I was going to say, vaseline). Money for stadium roofs and 8 lane bridge financing, though. Screw it...glad to be done. When I taught metalwork I was given $1,000 per semester course to teach 30 kids to run lathes, milling machines, weld, forge etc. Do you know what you can buy in the way of metal for 1,000 dollars? Not much. It worked out to 40 cents per day per student for tools and materials. I had to go by the scrap dealer almost every other day on the way home and scrounge from business. Oh yeah, we did sheet metal too. Mechanics was worse. Woodwork/construction was the worst financed of all. Hey, when I quit I left a surplus in dinero and materials.

That is why I hate Christy Clark. She screwed me since 2001 and I didn't enjoy it once. Not one damn time.

[toolpush]

http://phx.corporate-ir.net/phoenix.zht ... portsother

Funny, Canada has had a quick reaction to the drop in oil price, but the US count is actually up by 3.
Is this due to the US shale plays are so economical at these prices? Or their creditors basically force them to continue drilling, until the company fails and they all come tumbling down?

I suspect the latter rather than the former.

[ROCKMAN]

Syn - Here's the latest break down from the EIA. Operational: Seaway expansion - 250,000 bopd. TransCanada Gulf Coast Pipeline (aka southern leg of KXL) - 600,000 bopd. Seaway Twin - 450,000 bopd.

The Seaway Twin was finished a hole back but isn't expected to try deliveries until this month or next. Been filing it and preping pump stations. So that's 1.3 million bopd. But according to the EIA there's more oil heading to Cushing soon: "In anticipation of the new pipeline take‐away capacity from Cushing, 1,225,000 to 1,315,000 bbl/d of new pipeline capacity to deliver crude oil into the Cushing hub is also planned." That includes oil from Plains and SemGroup from the Anadarko Basin: 315,000 bopd; White Cliffs - 80,000 bopd; Flanagan South - 600,000 bopd and Tall Grass Pony Express conversion from the Bakken and Denver-Julesburg Basins - about 300,000 bopd.

And it's not just Canadian and Bakken production competing for transport out of Cushing. From the EIA: "Crude oil production in the Permian Basin faces the same transportation constraints as Canadian imports and producers in the mid‐continent. Two pipelines currently transport crude oil from the Permian Basin to Cushing: the Plains All American Basin pipeline, which was expanded from 400,000 to 450,000 bbl/d in early 2012; and the 175,000 bbl/d Oxy Centurion pipeline. A third pipeline, the Sunoco Logistics West Texas Gulf pipeline, has the capacity to transport 300,000 bbl/d from the Permian Basin to Longview, Texas, where it connects with the Mid‐Valley pipeline to Samaria, Michigan."

[Synapsid]

ROCKMAN,

Thanks.

Adding to the fun, I saw on Downstreamtoday that interest in the Freedom pipeline (Permian Basin to California) is being pushed. There's to be a mixing facility that would allow PB stuff to be adjusted to lower API so it will be welcome to California's refineries, which are used to gunk.