by John Brian Shannon | April 9, 2016
The Energy East pipeline only makes sense if global oil prices rise past $80 per barrel and there’s no guarantee we’ll see anything like that before 2020.
Meanwhile, Iran is set to add 3.5 million barrels per day by 2020 to the global oil markets which will easily meet (practically) flat demand, keeping oil prices below $80/bbl.
Not only that, Iranian crude oil is either #2 (sweet) or #3 (sweet) while Alberta’s oil ranges from #4 (sour) to off-the-scale sour. Alberta’s crude is so sour that it must be blended with #3 (sweet) or better before refineries will accept it.
Why would any refinery want to buy Canadian sour crude when they can buy Saudi #3 (sweet) or Iran #3 (sweet) for the same, or lower price? Alberta’s crude sits at an average of #4.75 (sour) with two other negatives attached — much higher extraction costs (the average Alberta extraction cost is $56.20 per barrel) along with higher refining costs.
What would capture the interest of voters, would be the Alberta government guaranteeing the financing of oil refineries located within and sized to accommodate the needs of each Canadian province.
Each province could have it’s own refining capacity sufficient to meet 100% of annual provincial demand — plus 30% (for export) to bordering U.S. states.
Existing rail links can already get the crude oil to existing refineries and to the future refineries proposed in this blog post. For those worried about oil spills when shipping by rail, they are usually limited to a few rail tanker cars and are microscopic when compared to pipeline spills.
Instead of being ‘hewers of wood and drawers of water’ how about some value-added contributions to our economy by building our Canadian refining capacity, and doing some much needed value-adding to our petroleum exports?
It’s the next logical step for the Alberta government.
Bonus Graphic courtesy of MACLEAN’S