Oil hell has broken loose

Oil surges to 23-year high

Oil prices surged past US$75 a barrel to a new record yesterday, amid predictions they could reach US$80 before the end of the year due to drum-tight supplies and rising political tensions. Crude oil jumped $1.26, or 1.7%, to $75.19 a barrel on the New York Mercantile Exchange -- the highest close since oil futures began trading on the exchange in 1983, which could make for another painful summer for drivers at the pump. Earlier, it popped to a high of $75.40, eclipsing a peak set in April as fears over the nuclear ambitions of Iran and North Korea began to escalate. "I think you're headed up on oil prices now," legendary Texas oilman T. Boone Pickens said yesterday in an interview on CNBC. Pickens, chairman of hedge fund BP Capital Management and a former oil executive, has been correctly predicting rising oil prices for the past two years. Those increases have been passed on to consumers in the form of a similar rise in the price of gasoline. Canadians were paying an average of C$1.084 a litre for gasoline across the country this week, according to MJ Ervin & Associates, just off a recent high of $1.104 in April. Increasing tensions surrounding Iran's nuclear program, the war in Iraq and sabotage in Nigeria may further spur oil prices up to US$80 a barrel, said Pickens.
(National Post 060706)

$80 by year end? I think that might even be a little pessimistic. You can estimate the price of oil now by the estimated height of Kim Jong-il's bouffant. Or how many kid's bellies Vladimir Putin kisses.

Cost of Athabasca could hit $20B

Costs to expand Shell Canada's Athabasca Oil Sands Project have soared 50% in just one year, which means the roughly $7.3-billion price tag for the first phase could rise towards $11B. The cost of the full three-stage expansion, pegged at about $13.5B last year, now might come in at more than $20B. “Intense demand for construction labour, material and supplies . . . have resulted in unprecedented increases in capital costs. This demand is further intensified in Alberta by the development of multiple oil sands projects,” said Western Oil Sands in a press release late yesterday. Western, along with Chevron, is a minority partner in Shell's Athabasca operation. The announcement is the loudest statement yet that development in the oil sands north of Fort McMurray in northeastern Alberta is coming unhinged and that the demand for steel and workers is reaching untenable levels. Pressure in the oil sands also means that initial production from the Athabasca expansion won't occur until 2010, Western Oil Sands said, a year behind schedule. Shell said the expansion plan has “great potential” but svp Brian Straub added, “In this heated marketplace, cost and schedule control is the top priority.” Every player with an oil sands project in the planning stage - including the world's largest energy companies such as Exxon Mobil - is feeling the bite, and those involved say some proposals won't hit their targets.

In other news, the Alberta Energy and Utilities Board yesterday began public hearings in Fort McMurray on the proposed expansion by long-time oil sands miner Suncor Energy. The Regional Municipality of Wood Buffalo, which includes the completely overheated town of Fort McMurray, has decided for the first time to intervene in such a hearing, arguing that the area's infrastructure is stretched to the limit and not able to handle more action north of the town in the epicentre of the oil sands. The region wants a “redefined relationship” with industry and the federal and provincial governments. Also, the Oil Sands Environmental Coalition, led by the Pembina Institute, asked that the Suncor application be denied. The coalition argued that rapidly increasing greenhouse gas emissions, the worsening air quality and the destruction of the boreal forest were major issues and said if the project is approved, stringent conditions were required.
(Globe and Mail, Calgary Herald 060706)

It appears there is still lots of O&G to be found and exploited, but not enough talented manpower to get it out of the ground and processed. The irony is crude-like thick.

Energy czar to visit oilsands

US Energy Secretary Samuel Bodman is expected to visit Alberta next week where he will meet with oilpatch leaders and politicians as well as tour the rapidly developing oilsands region in the northeast corner of the province. Bodman is expected to join a round table of ceos with several big oilsands producers and take a tour of oilsands operations before travelling to Calgary where meetings are scheduled with Alberta Premier Ralph Klein.
(Calgary Herald 060706)

Funny how they are calling Bodman an 'energy czar', like he's an Emperor or something...hey - wait a minute....isn't he? The fat-cat schmoozing is getting so thick I can't breathe. You ain't seen nothing yet.

By the way, I read this morning that Calgary's average home price has jumped another $20,000+ this month to $408,000. The headline was something to the effect that 'It's starting to scare away workers'. I'm not surprised this is finally happening, I'm just surprised it took so long!