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Situation Analysis - The Canadian Oilsands (2012)

After almost two decades of relative stagnation in the 1980’s and 1990’s, the Alberta oilsands industry has grown rapidly, so that Canada is now the 6th largest oil producing country in the world, and the largest foreign supplier of oil to the USA.

However, the oilsands industry is now encountering difficulties, including:

  • Inappropriate changes to oilsands royalties and taxes by the Alberta and federal governments.

  • The high Canadian dollar.

  • Ever-increasing capital and operating costs.

  • Deterioration in global economies, and uncertainties about future oil prices.

Due to transportation (pipeline) limitations, the price differential of crude oil in Western Canada has increased to historic highs compared to oil sold in the USA and Europe. For example, at certain times in 2012, similar quality crude oil was selling in Europe at approximately $120 per barrel (Brent), $100 per barrel in the USA (WTI) and $80 in Western Canada (Edmonton Light). Eastern Canadian refineries import expensive crude oil at Brent prices, whereas Western Canadian refineries pay much lower prices. This situation will be partially alleviated as pipelines are reversed, moving Western Canadian crude oil from Sarnia to refineries in Nanticoke, Ontario and Montreal, Quebec. Further eastward pipeline expansion to refineries at Quebec City and St. John, New Brunswick are contemplated, which should reduce fuel prices to consumers in Eastern Canada.

Inappropriate opposition to an oil export pipeline to the Pacific Coast continues, at considerable cost and risk to the Canadian economy.  

As the remarkable technical and economic success in natural gas fracking in gassy shales is extended into the oil shales, some analysts project much lower oil prices in the future, which could cause many oilsands projects to become uneconomic.  

Very low natural gas prices, much less than the energy-equivalent of oil, are also masking the poor fundamentals of some in-situ oilsands projects.

The sale of the OPTI Canada Inc. oilsands company is evidence of growing problems in the oilsands industry …

                                                  ... but where there are significant problems, there are significant opportunities.

Other Successes in Canadian and International Oil and Gas, Mining, and Turnarounds

In CanadianOxy's Canadian Oil and Gas Division, as General Manager, Business Development, I led the 1992-93 Strategic Planning team and began the implementation of the successful turnaround of the Division. This resulted in a move from 4th Quartile performance in 1986-1992 to top of 1st Quartile performance in 1994.

At the same time I was General Manager, New Ventures, responsible for our 50:50 joint venture exploration program with INCO in northern Argentina, which discovered an economic borate deposit in the high Andes, now the Loma Blanca Mine.

My final post with CanadianOxy was Project Manager of the Turan Project, which later became PetroKazakstan, the largest petroleum marketer in Kazakstan. In 2005, PetroKazakstan was sold to China National Petroleum Company for US$4.2 billion. 

In 1996 I left CanadianOxy and joined Texaco in New York and Houston in the Middle-East-Far East acquisitions team. The team succeeded in two of three major acquisitions in Kazakstan, including a one-third share in the super-giant Karachaganak gas-condensate field. 

In 1998 I left Texaco to become President of Odyssey Petroleum Corporation, a public company that was in severe financial difficulty and had assets in the Former Soviet Union. I disposed of the FSU assets one week before Russia defaulted on its national debt, and acquired a 50% working interest in high-quality petroleum concessions in Egypt. I was unable to finance the drilling of these Egyptian assets as oil dropped below $10 per barrel, so I sold the company and paid all its debts. These Egyptian properties are now producing ~38,000 barrels of oil equivalent per day.

I entered the energy investment banking business with COSCO Capital Management, now Rodman and Renshaw, New York and continue this business through my company FIRSST Inc. One of my more interesting transactions was the sale of a new Compressed Natural Gas shipping technology (now Sea NG Corporation) to the Williams company of Tulsa Oklahoma. 

For one year in 2004 and 2005, I served Antrim Energy as Vice-President of Business Development and farmed out ~$40 million in exploratory wells and initiated the acquisition of the Causeway assets in the UK North Sea. First oil production from Causeway commenced in 2012.

I continue to be involved in the energy business, internationally and in Canada. 

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