We Need That Pipeline Why Again?

So a guy from a brokerage came by to pitch my Dad, Richard, on pipeline bonds the other day. To his credit he was dead against it on environmental grounds, but as I told him flat out- even if they’re paying 11% today they’re nothing but a Ponzi scheme because we don’t need them.

Exxon to Leave Up to 3.6 Billion Barrels of Tar Sands/Oil Sands in the Ground
by Sarah Kent, Bradley Olson, and Georgi Kantchev, Energy Mix
February 22, 2017

ExxonMobil Corporation will admit this week that it can no longer profitably develop up to 3.6 billion barrels of its Alberta tar sands/oil sands reserves unless oil prices rise, the Wall Street Journal reports.

The formal acknowledgement, forced on Exxon by the U.S. Securities and Exchange Commission, followed a quarterly report last fall in which Secretary of State Rex Tillerson’s former employer admitted that up to 4.6 billion barrels of its reserves might have to stay in the ground.

The move comes after Exxon burned through $20 billion to “put the oil sands at the centre of its growth plans” through its Kearl project, about 70 kilometres north of Fort McMurray, and “highlights how dramatically the prospects of the region have dimmed,” the Journal reports [sub req’d]. “Once considered a safe bet, Canada’s vast deposits are emerging as a prominent case of reserves being stranded by a combination of high costs, low prices, and tough new environmental rules.”

“For a lot of reasons the oil sands look like a prime candidate for eventual abandonment,” Baker Institute energy fellow Jim Krane told the WSJ. “One problem is that costs are persistently higher. The high carbon content only makes it worse.” The uniquely carbon-intensive process for extracting Alberta heavy oil and bitumen, the Journal acknowledges, has prompted the federal and provincial governments to introduce an (not necessarily foolproof) emissions cap and a carbon levy, on top of the already-high cost of tar sands/oil sands production.

The Journal points to continuing low oil prices as the central factor that has “altered investment priorities” for fossil producers, drawing emphasis away from expensive (and acutely environmentally sensitive) Arctic, ultra-deep, and tar sands/oil sands deposits. “Such projects can require billions of dollars in up-front investment and seven to 10 years, or even more, to bring returns. Now companies are turning to new sources of crude oil, such as shale, that don’t require the same massive investment of time and money to bring to production,” the paper states.

Oil Prices Fall As Gasoline Glut Takes Its Toll
By Matt Smith, Oil Price Watch
Feb 22, 2017

U.S. refiners are starting to cut refinery runs amid record high gasoline inventories and slumping profit margins. At least three refineries have made cuts, and more seem set to follow.

While this will help to de-stock product inventories, this turns into a game of whack-a-mole for the crude complex. As product stocks ease due to lower refining activity, this is only going to encourage already-swollen crude inventories higher still. Refinery runs have just dropped below last year’s level for the first time this year.
…
U.S. waterborne crude imports this month are above both last year and February 2015, although lagging 2014’s level by nearly 400,000 bpd.

This lag makes sense given that domestic production and pipeline flows from Canada combined were about 10.5mn bpd in February 2014, while they have been around 12.5mn bpd for 2015, 2016, and now 2017 too.

This is confirmation not insight. Storage capacity is maxed out for both gasoline and crude with large quantities being held in obsolete Tankers saved from the scrapyards to which they will return if and only if the Global surplus is ever reduced.

It may not be, Solar is growing by leaps and bounds-

Total installation of solar power last year was up a whopping 95 percent on the year prior, led by the build-out of large solar arrays (as opposed to rooftop panels). While this trend of nearly doubling is not set to persist, total installed solar capacity is set to reach 105 gigawatts by 2021, up from ~38 gigawatts now.

Calling Doctor Brown. Doctor Emmett Brown.