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Taking their place in the oil sands line-up Marathon and BP might be ready to play in the sands, while Japan steps up contacts with Alberta government and industry Gary Park For Petroleum News
The oil sands mania, driven partly by forecasts of US$50-plus oil prices over the foreseeable future and partly by the industry’s bandwagon fixation, shows no signs of let up.
In a year when China and India are both talking about multi-billion dollar investments through state-owned companies, Talisman Energy says it hopes to “expose the value” of its leases and Chevron is thinking about spending billions to become a big-league operator, you might think the sector is ready for a breather.
Not quite.
Now Marathon Oil has expressed interest in using some of its seven refineries in the United States to support a stake in the oil sands, speculation persists that BP could shed its doubts and join its peers in northern Alberta and the prospect of Japanese refiners importing synthetic crude is picking up pace.
Marathon Executive Vice President Gary Heminger said his company is pondering an “integrated” deal by commercially leveraging its refinery position in PADD 2 into a possible equity stake in the upstream oil sands.
He said Marathon’s strong selling point is that it leads market share in Michigan, Ohio, Kentucky, Indiana and West Virginia and is No. 2 in Minnesota and the Chicago marketplace.
Beyond saying that Marathon’s strategy is under wraps, Heminger did not indicate whether any talks are taking place with those holding oil sands properties. BP has said nothing BP has said nothing about its intentions — if any — leaving observers to suggest that the world’s second largest oil company may be hard pressed to ignore the oil sands when the industry is short of exploration prospects.
Shut out of the most attractive acreage in the Middle East and replacing only 95 percent of its 2005 production, BP — like Chevron and ConocoPhillips — is faced with having to buy reserves.
But BP has always downplayed the size of the oil sands deposit, accepting only the 11 billion barrels that are “under active development,” not the 174 billion barrels that are widely seen as recoverable using known technologies.
It wasn’t until last year that BP included unconventional deposits in the annual statistical review of world energy that it has published for more than 50 years.
That passing nod to the oil sands could be expanded as non-conventional oil gains significance, company officials have said.
However, there is a school of thought that BP may not be able to delay indefinitely an entry into the oil sands, despite a rate of return of about 13 percent compared with the 33.4 percent attached to the deepwater Gulf of Mexico, including BP’s own Mad Dog project.
Ian Henderson, who managed US$680 million at the JP Morgan Fleming Natural Resources Fund in London, is one of many observers to argue that bypassing the oil sands is a mistake. Consumption far outpacing discoveries The pressure to join the oil sands is reflected in statistics compiled by Raymond James analyst John Mawdsley, who estimates the world has found only 16 billion barrels of oil in the past five years while consuming 170 billion barrels.
Bank of Nova Scotia economist Patricia Mohr told the Canada-China Business Council earlier in March that she has no doubt the oil sands will be the “single most positive development in Canada we’ll see in the current decade.”
But that will only be possible if Canada opens new United States markets such as California for synthetic crude, or extends its reach to China and Japan.
China is already a contender to take half of the 400,000 barrels per day Enbridge hopes to ship from Alberta to British Columbia’s deepwater port at Kitimat, but Japanese interest in the Gateway pipeline has been piqued this year.
A delegation of government and refining industry leaders from Japan spent a week in Canada in January talking with oil and pipeline companies.
That was followed up in early March when Alberta government officials and representatives from Enbridge and Petro-Canada visited Tokyo.
Petro-Canada’s manager of oil sands market development, Don Goodrow, told a conference that we are “here to hear your needs.”
Duke du Plessis, from Alberta Economic Development and the Alberta Energy Research Institute, said that not only can the oil sands offer stable supply they should be a source of gas, oil and petrochemical products by 2020 when output should comprise 1.3 million bpd of raw bitumen, 1.66 million bpd of oil products and 400,000 bpd of petrochemical products, including diesel oil and ethylene.
For now, Japan’s Ministry of Economy, Trade and Industry is weighing the possibility of importing synthetic crude, which could become an economic proposition when the Kitimat port is able to receive VLCCs, very large crude carriers.
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