138 comments on Update on Megaproject Megaproject
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138 comments on Update on Megaproject Megaproject
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Stuart,
It never ceases to amaze me the commitment that you guys show to rooting out titbits of info and pulling it all together into useful arguments and articles!
So isn't the increase in output seen exactly what an economist would argue would happen given the increased cost of the extracted product?
I think we may see the same happening with some other commodities that have seen huge rises -such as Uranium. There's loads of Uranium in the ground the economically extractable amount goes up exponentially with the underlying asset price.
Regards, Nick.
There's no question that there's more supply coming on line. The question is at what point will it not be enough to overcome declines (of various kinds) since we know production has been more-or-less flat the last couple of years.
The staged nature of production growth, in the emerging Oil Sands megaprojects, presents a few questions imo for the Wiki page. That said, I have done the work, so far, on the Long Lake Project which is a JV between Nexen and OPTI. And I'm happy to do more, as this is an area where I've invested capital for several years, and I spend most my time reading all this stuff anyway.
What's happening is that the speed by which these projects will bring on subsequent stages is getting tossed and turned on a sea of wage inflation and labor shortages. And more recently, the new royalty regime from Alberta has already caused Canadian Natural Resources, for example, to suggest their staged buildout of the enormous Horizon project may slow down.
Alot of the charts investors were offered back in 2003-2006, therefore, showing production growth at Syncrude, Horizon, Long Lake out to 2015 (not to mention the junior projects), are going to have to be revised.
One wonders, in this context, how useful or even possible it becomes to enter a Peak Capacity/Peak Production number on the Wiki page. Some of these projects now might get stretched out now to 2018. No guidance specifically has been offered yet on this from the companies involved. But it's coming.
Best,
Gregor
In answering my own question, my hunch would be, that the nature of oil sands projects might suggest that the Wiki Page should have not only a column for Peak Production, but, also a column for each stage. Nexen's Long Lake comes on next year (6 month delay) at 60kbd, but, the peak will only come more than several years from now. Contrast this with Nexen's North Sea Project, Buzzard, which although it had a few problems ramped towards peak production pretty quickly after first coming on line.
Gregor
I agree that tar sands projects represent the "long tail" of the composite ramp-up project - I've been amazed at the slow ramp-up of the ones I've looked at. But ramp-up is a more general issue - tar-sands is just a small (albeit extreme) case of it. My feeling is that we are going to have to have to try to get the largest sample we can manage of projects where we know both the first oil date and the date at which we reach plateau, construct a suitable estimated convolution function out of that sample, and then apply it to the new capacity estimates we have.
It's an important issue on which I will focus once I have some confidence that the lists are reasonably complete and correct. At the moment, the gross totals are still changing enough that I'm not ready to worry about the ramp-up issues.
Thanks for your help btw! Feel free to create an account over there so we can see your name in the history.
I prefer your use of "tar" sands rather than the preceeding designation as "oil" sands.
Thanks for the reply, Stuart. When doing further work therefore on the tar sands projects, I will enter the expected peak production rate in the "Peak" column. As opposed to entering merely the expected production rate from the intial stage. (Wiki instructions: "Peak: maximum production expected (thousand barrels/day)."). Based on your remarks, you can then figure out how to handle the Long Tail, as you call it, of these staged projects in the sands.
So for example, I have Long Lake coming on next year with the figure of 60Kb/d entered in the "Peak" column, as their initial stage. I will change that therefore to the expected Peak rate, which, according to Nexen will eventually be about 240Kb/d.
Gregor
If the company breaks the overall development into separate phases with dates and production rates for each, we generally put each phase in as a separate project.
Without meaning to harp on about it - Longlake won't actually be getting 60 kpd of upgraded crude until mid 2009 according to its website (www.opticanada.com). 2.5 Years from first steam through to full capacity of upgraded product.
It is a long wait but I am in for the long run :)
Hi O.K,
I'm not sure that I understand your post completely, but, all guidance from both Nexen and OPTI now has Long Lake producing fully upgraded Synthetic Crude sometime starting in the back-half of 2008. Bitumen production has already started though at a very minimal level. The central problem with the Long Lake project so far has been the shortage of labor to complete the Upgrader. In my opinion there will be a final hurdle for this project to overcome next year: and that is their unique gassification/recycling process, aka "OrCrude." What I imply here is that we have not seen this process actually work, yet.
Fingers crossed.
Gregor
Some collateral damage from the mortgage meltdown.
Apparently several tar sands companies that raised tons of money stuck it in short term institutional money market funds that were heavily invested in US mortgage bonds.
The Canadian Tar Sands...where Finance and Peak Oil meet. Would be a heck of a title for a book!! How many other high-priced extraction/exploration operations have done the same thing with spare dollars...invested in high interest funds to try to help with increasing costs.
Can you point me to any sources regarding oilsands/failed short term deposits? I would be keen to find out who has lost what.
An investor in Canadian oil stocks told me about the money market situation. I don't have any specifics.
Optimistic Kiwi,
If you find out would you E-mail me at billvon@windstream.net I have been investing in tar sand companies for 2-3 years
Gregor
I have been investing in OPTI for several years also. Have you compared OPTI with Suncor and Uts?
I also see that Suncor and Imperial Oil are left out of the above referenced List
I guess the best way to answer is that I have been researching all these companies and their myriad projects for several years. Imperial, which you asked about, is both the largest shareholder in the Syncrude project, and now, is the operator. It's probably wise for the Wiki Megaproject page to follow the Syncrude project as a standalone, rather than break it apart company by company, from Imperial, to COS, to Nexen, and COP. Imperial also sits on the Cold Lake Project.
The four companies you mentioned are quite different from each other. Imperial and Suncor are giants. UTS and OPTI are juniors, really. I either have been, or remain invested, in all of these. They don't really make for good comparisons,imo.
HTH.
Gregor
Gregor:
Thanks for the reply BTW my E-mail address is owvon@windstream.net. Would love to compare notes sometime
Using the Texas and North Sea models and just looking at the initial production declines out for about 8 years after their respective peaks, one could argue that higher oil prices and increased drilling activity result in lower crude oil production.
In the alternative, one could argue that the smaller fields that we tend to find post-peak can't offset the declines from the older larger oil fields, e.g., East Texas & Brent, that we tend to find pre-peak.