China, not U.S., will be tar sands’ market

Jeff Rubin, PUB
I suppose it’s only natural that the nation that’s soon to be the world’s largest consumer of oil should seek access to what will soon be the world’s largest source of new oil supply (which will happen even sooner if deep-water oil production is about to get nuked).

The acquisition of a nine per cent share of the Athabasca tar sands’ marquee Syncrude operation by Sinopec (which is owned by the Chinese government) signals a new willingness on China’s part to sink billions into the future development of high-cost oil from tar sands. It coincides with the granting of a $20-billion soft loan by China to the Chávez regime in Venezuela, which will at least in part be repaid in oil from that country’s Orinoco tar sands.

Unlike Canada, however, Venezuela is not too fussed about whether they will export raw bitumen or processed synthetic oil to their Chinese customers. In Canada, of course, final approval of the Sinopec deal by the country’s Foreign Investment Review Agency hinges at least in part on compliance with Stephen Harper’s pledge not to export raw bitumen to countries with laxer carbon standards than North America’s…
(19 May 2010)

Tar Sands in Your Tank-excerpts

Greenpeace UK

Executive summary
Extracting tar sands bitumen from the forest wilderness in Alberta, Canada has major environmental impacts. Not least of these is the significant increase in greenhouse gases (GHG) produced by extracting and processing the bitumen into a usable product. On average the extraction process is thought to produce three times the GHGs than average conventional oil production.

Oil produced from tar sands is generally consumed only in Canada and the USA, but public concern in Europe has been growing, particularly around the financial links between European financial institutions and the tar sands industry.

Greenpeace can now reveal that petroleum products containing tar sands crude oil have been regularly entering the EU’s petroleum supply chain for some time, primarily through imports of diesel from the US Gulf Coast (USGC). A significant rise in the trade in diesel fuel between the USGC and the EU since 2008 is likely to continue to provide crucial support for the struggling refinery industry in the region. The trade is supported by a structural diesel deficit in the EU market and a similar surplus in the US.

While the level of contamination with tar sands crude in the diesel reaching Europe from the USGC is currently low, the construction of the Keystone XL pipeline could change this significantly. The proposed pipeline could deliver up to 500,000 barrels per day (b/d) of tar sands crude directly from Alberta to Texas by 2013. Currently only around 100,000 b/d enters the region.

Tar Sands in Europe Research Findings
This report reveals for the first time that petroleum products, in part derived from Canadian tar sands crude, are being regularly imported into the EU from the US. It also explains that unless we regulate against this, the trade will grow and could become one of a number of drivers leading to an expansion in tar sands production. This is primarily due to the growing importance of transatlantic trade to some of the same refineries that are planning to increase their commitment to tar sands processing.

Our analysis of US government and industry data for petroleum imports and exports revealed that at least seven refineries located in the US Gulf Coast region (USGC) – primarily Texas and Louisiana – imported Canadian tar sands crude oil in the 12 month period from 1 November 2008 to 31 October 2009.

Similarly, we identified 13 refineries in this same region that exported diesel and other distillates to Europe in the 12 month period from 1 December 2009 to 30 November 2009.10 The one month time lag allows for the crude to travel through the pipeline and refinery system.

By cross referencing these two lists, we found that there are at least three refineries which both source from the Alberta tar sands and export products to Europe. These are dominated by Valero Energy’s Port Arthur refinery, which since at least June 2009, has regularly processed tar sands crude while exporting diesel to Europe…

Where does it go?
We tracked a sample of vessels that shipped diesel from Valero’s Port Arthur refinery to Europe. Most of this (130,000 mt) was delivered to Eurotank Amsterdam (owned by the Dutch trader Vitol Inc.). Another offload point was Vesta Terminal Antwerp (owned by the Swiss-based Mercuria Energy Group).

Some 60,000 mt of diesel that BP shipped from Valero’s Port Arthur refinery was delivered to the BP Terminal in Amsterdam and elsewhere in Europe.28 Shortly after BP’s Texas City refinery received its one tar sands crude consignment, it shipped diesel to Vopak’s terminal in London.

It should be noted that this search is far from exhaustive; we tracked only a small number of shipments that are clearly identifiable as having originated at Valero Port Arthur. We were not able to investigate the refinery source of an additional 1.4 million tons of deliveries from Port Arthur by third party shippers such as Vitol Inc., Morgan Stanley Capital and Merrill Lynch Commodities…

A trickle now but a future flood
Only around 100,000 b/d of tar sands crude reaches USGC today, a small amount of the region’s total refining capacity, which at 8.4 million b/d is the most concentrated in the world. With seven refineries currently sharing that supply, the level of contamination of the region’s diesel exports to Europe is relatively low. But the potential demand in the region for Canada’s tar sands crude is in fact much greater. Valero Energy in particular is heavily committed to a proposed tar sands pipeline called Keystone XL, which could potentially ship 500,000 b/d of tar sands crude direct to USGC. Additionally, many USGC refiners including Valero are planning to expand their diesel trade with Europe in order to gain some advantage in a future that many predict will be increasingly treacherous for refiners…

i) Implement changes to the EU Fuel Quality Directive European legislators must seize the opportunity provided by this directive and:
* introduce and implement a set of conservative default values for the GHG intensity of different sources of crude oil, including tar sands
* establish a GHG intensity ceiling at the earliest opportunity in the review of the Directive in 2012. This would guarantee that the most polluting fuels do not contaminate the European supply chain
* introduce the opportunity to take into account improvements in refinery efficiency
* Enable fuel suppliers to prove that they are performing better than the default values by investing in better technology, reducing flaring and switching to cleaner fuels; and
* introduce, with immediate effect, accurate and robust reporting of the carbon intensity of oil. This is necessary to create transparency for future reviews of the law.

ii) Reduce oil demand
While reducing the GHG content in transport fuels is helpful, much more can also be done to reduce oil demand. This will not only help tackle climate change and reduce the environmental impacts of extracting and refining petroleum products, but can also increase the resilience of the EU economy and its transportation system.

To reduce emissions and increase energy security, Greenpeace advocates the following hierarchy of principles for the transport sector:
* localise services and reduce the need to travel
* use fuel more wisely; and
* harness and develop clean technologies

These principles can be applied to both passenger transport and freight.

Read full report
Pdf – 869Kb
(10 May 2010)

Financial Hazards Seen in Oil Sands

Elisabeth Rosenthal, New York Times
An article in Wednesday’s paper weighs the risks and benefits of a leading source of oil for the United States, the oil sands of Canada, whose growth will probably accelerate if deepwater drilling is restricted in response to the Deepwater Horizon accident.

But a new report this week from RiskMetrics Group and Ceres, an investment adviser that incorporates sustainability issues into its recommendations, urges caution in buying into oil sands.

“Oil comes from many places, and none of them are very clean and all have risks. We need to be far more open about the tradeoffs,” said Andrew Logan, Ceres’ director of oil and insurance programs. “We’re not saying don’t invest in oil sands. We’re saying there are lot of short-term and long-term risks, and you need to address them up front.”

Ceres advises some of the country’s largest banks and pension funds.
(19 May 2009)

Investors reject Royal Dutch Shell oil sands review

Robin Pagnamenta, The Times
Shareholders in Royal Dutch Shell overwhelmingly rejected a resolution challenging the oil group’s investments in Canadian oil sands yesterday. Executives were also repeatedly criticised at a stormy annual meeting over the group’s operations in Nigeria.

About 11 per cent of shareholders either supported or abstained on the special resolution, which requested that Shell provide more information on its oil sands activities, including the financial, social and environmental impacts…
(19 May 2010)