The Oil Drum

Let's call it:

Statoil hunts for $10 billion, 2nd generation, oil sands deal

Norway's Statoil ASA is on the hunt for an oil sands project, saying it is aiming to strike a deal worth more than a billion dollars to claim a stake in Alberta's bitumen deposits.

The state-owned company -- shrugging off concerns about inflationary pressures in the sector -- said its strategy centres on building an integrated project, complete with an upgrader. Executing that strategy would eventually cost upward of $10-billion, but Statoil is looking to acquire both a project and at least one partner.

Statoil, which is among the top 10 publicly traded oil producers in the world, quietly opened an office in Calgary this spring.

There have been a flurry of oil sands deals in the past 18 months, largely involving large-scale mining efforts, and analysts have suggested the window has closed for deals to acquire that sort of project. That notion does not perturb Statoil, Mr. Sortland said.

He characterizes mining projects as the "first generation" of the oil sands; he is focusing his efforts on in situ projects -- the second generation, in his view -- that melt bitumen and pump it to the surface rather than excavating millions of tonnes of earth.

Statoil has extensive experience with Venezuela's heavy oil deposits, which pose many of the same production challenges as Alberta's oil sands -- particularly in situ projects. At the turn of the decade, Venezuela's Orinoco belt was seen as Alberta's rival for investment capital in non-conventional projects.

But the election of Hugo Chavez in that country, and a subsequent strike and abortive coup, have resulted in increasing pressure against Western oil companies operating in the region, including Statoil.

The Venezuela government is reopening operating agreements to give its state-owned firm, Petroleos de Venezuela SA, a majority stake in upstream operations. The Chavez government has also raised royalty rates, and mused about bringing criminal charges against former officials who crafted the 1990s-era policies that fostered private sector investment.

Last week, Statoil and other Western firms were shut out of the latest preliminary contract round for the Orinoco area.

The worst case is the Red Line subway in Los Angeles was stopped from moving into Beverly Hills by Henry Waxman.  Recently, as traffic gets worse, and they see that Hollywood benefits, there are signs that the rich liberals may relent and let the Red Line go through to UCLA.

Other cases in DC area, one suburb (Georgetown ?) let the subway go through but without a station.  OTOH, Arlington embraced DC Metro.

In Dallas, the light rail goes into subway just before downtown and emerges in downtown.  They go under a rich neighborhood that refused a station (but now wants one).

Money is never an afterthought, my friend! That's blasphemy.

I have no doubt that this is a temporary blip.  However, I don't think that space heating is the best use of this gas, when options for bio-mass (pellet furnaces) and ground source heat exchange are real and promise long term supply security for Canadians and possibly most Americans.  Obviously, it would be foolish to throw out still useful gas furnaces, but it is even more foolish, and selfish from an intergenerational perspective, to continue to install new gas burners.

Bio-mass fired district heating units relying on wood pellets and switchgrass pellets, are efficient and have a minimal environmental impact, especially on the GHG front.  Where district heating is not an option, individual stoves can provided household/commercial building heating. Switchgrass, unlike corn, is grown with minimal inputs and can be productively grown on marginal agriculture land and it can be grown in a regime which enhances soil quality, as well as providing wildlife habitat.  

Every effort should be made to preserve some hydro-carbons for future generations.  Canadians don't deserve them anymore than Americans.  They are humanity's endowment.