Wednesday, May 18, 2016

Bitumen's Days Are Over

These are hard days for Fort McMurray. But, Andrew Nikiforuk writes, there is another fire burning -- a slow burning one -- that will eventually bring the place to its knees. And Murray Edwards, the head of Canadian Natural Resources, has seen the future:

Murray Edwards, the billionaire tycoon behind Canadian Natural Resources, one of the largest bitumen extractors, has decamped from Alberta to London, England.

Edwards and company slashed $2.4-billion from CNRL's budget in 2015.
Since the oil price crash, by some accounts, Murray's company has lost 50 per cent of its market value.

(Cenovus, another oilsands player, got cursed with junk bond status.)
Edwards likely has read the tea leaves and understands that bitumen might not play a significant role in the secular age of stagnation.

Former CIBC chief economist Jeff Rubin has also seen the future:
Last but not least comes a pithy analysis by Jeff Rubin, CIBC's former chief economist. Rubin warns that contraction is the only future for the oilsands unless Canada wishes its economy to become "obsolete and non-competitive."

He correctly notes that 80 per cent of the increase in new global oil did not come from OPEC but from high cost bitumen mines and fracked U.S. shale deposits.
North American corporations, in other words, engineered the global oil glut.

Encouraged by easy credit, Big Oil flooded the market with difficult and largely uneconomic hydrocarbons.

The Saudis, the world's number one and cheapest producers, refused to scale back production or give up market share. Instead they precipitated a price free-fall.

When oil prices stood at $100, rash bitumen development made some sense. But when prices fell below $45 the gamble turned into Russian roulette.

Most of our movers and shakers haven't figured it out yet. But bitumen's days are over.



Steve said...

Does anyone know how many billions of dollars in subsidy we give this fossil industry? GM Oshawa faces a shutdown. How about giving GM a new robotic factory to make volts out of alumimum processed in Que.

Owen Gray said...

It's all about influence, Steve. The oil barons are still in charge.

Anonymous said...

I have always wondered Owen if the good Mr. Edwards could be linked to the Panama Papers, the Isle of Man, or some other tax avoidance scheme. He does have back scratching beneficiaries and elite contacts. He also did a very fine job raising $1 million in Calgary for Christy Clark's last election campaign, and Christy and company were very generous in not holding him to account for the Mount Polley disaster. Compelling BC Hydro to install transmission lines to his Red Chris mine was another mega freebie for this billionaire.

Owen Gray said...

And he now appears to have caught the last train out of town, Anon -- before the station burns down.

The Mound of Sound said...

@ Steve. The IMF worked out the value of Canadian government subsidies, federal and provincial, direct and indirect, and came up with $34 billion a year. The feds admit to just $2.7 billion that speaks more to their honesty than anything factual.

"In comparison to other countries, Canada provides more subsidies to petroleum as a proportion of government revenue than any developed nation on Earth besides the United States and Luxembourg."

When we get stuck with the bill for a major tanker disaster or for cleaning up the Athabasca tailings ponds with the fossil energy giants pull up stakes and split that $34 billion may wind up looking like chump change.