#ShutDownCanada - Build Nothing

[suntan]

Meanwhile MEG's cost for one barrel of oil was 89 cents.

[ExtraSlow]

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100+ oil? Don’t believe this propaganda.

Sigh, I’ll be woke and try to enlighten. This isn’t directed to you, hopefully some more people can take more form this.

CNRL can produce For $20 CDN. And they quote this number for synthetic (probably higher than WCS net back)

Using backyard math I found this:

At 40billion (just a number I pulled out of my ass) of total capital to sustain the Frontier mine for 40 years at 260,000/day. No expansion.

Now, let’s use $25USD (much HIGHER than cnrl) as op cost. That means I’m 40 years it’s approx. another $12/bbl to recoup capital costs. Shit throw another $5 on there for reclamation and incidentals.

Putting us at $42 USD. Shit make it an even $50 because I’m generous.

Now, let’s assume a pipeline was In place. Is it unfeasible to pretend WCS would sell for only a $5 discount to WTI and roughly $10 to Brent? Yeah I can see it.

Is this sort of making sense now? I was very liberal with numbers and threw a bunch of extra in there. Reality would be op cost would be optimized and $15USD could be seen within 10 years.

Long/short: it’s feasible and economical at 60WTI ALL DAY.

And just in case, here’s some proof.

https://www.cnrl.com/upload/media_el...-front-end.pdf

CNRL has said they need 39WTI USD to break even with our current pipeline system.

With TM and others, they likely be breakeven at $34. See what’s happening here?

I approve of this backyard math.
For @89coupe and others, Politics means that companies now need to throw an extra 2-3 billion on the front end, and decades of delay, and about a 50% risk of not going ahead even if approvals are obtained through whatever regulatory process. Political economics are the issue, not MARKET economics.

[89coupe]

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I approve of this backyard math.
For @89coupe and others, Politics means that companies now need to throw an extra 2-3 billion on the front end, and decades of delay, and about a 50% risk of not going ahead even if approvals are obtained through whatever regulatory process. Political economics are the issue, not MARKET economics.

You are as brain washed as Greta.

[ExtraSlow]

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You are as brain washed as Greta.

I don't think you are a credible resource for information on that, or on the risks and economics of major projects. If you have knowledge in this area, you hide it well.

[killramos]

I had a long drawn out sarcastic remark written, changed my mind, just going to lol

[Buster]

Don't fuck with the #philfans

[suntan]

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You are as brain washed as Greta.

How dare you! You have stolen his dreams and his childhood with your empty words.

[revelations]

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You are as brain washed as Greta.

Nothing of substance to reply with, so here is some ad hominen for you!

[sabad66]

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100+ oil? Don’t believe this propaganda.

Sigh, I’ll be woke and try to enlighten. This isn’t directed to you, hopefully some more people can take more form this.

CNRL can produce For $20 CDN. And they quote this number for synthetic (probably higher than WCS net back)

Using backyard math I found this:

At 40billion (just a number I pulled out of my ass) of total capital to sustain the Frontier mine for 40 years at 260,000/day. No expansion.

Now, let’s use $25USD (much HIGHER than cnrl) as op cost. That means I’m 40 years it’s approx. another $12/bbl to recoup capital costs. Shit throw another $5 on there for reclamation and incidentals.

Putting us at $42 USD. Shit make it an even $50 because I’m generous.

Now, let’s assume a pipeline was In place. Is it unfeasible to pretend WCS would sell for only a $5 discount to WTI and roughly $10 to Brent? Yeah I can see it.

Is this sort of making sense now? I was very liberal with numbers and threw a bunch of extra in there. Reality would be op cost would be optimized and $15USD could be seen within 10 years.

Long/short: it’s feasible and economical at 60WTI ALL DAY.

And just in case, here’s some proof.

https://www.cnrl.com/upload/media_el...-front-end.pdf

CNRL has said they need 39WTI USD to break even with our current pipeline system.

With TM and others, they likely be breakeven at $34. See what’s happening here?

Why even waste time with your back of napkin math when experts have already done it? Here is an article from the war room that states break even on a new mine is $65:
https://www.canadianenergycentre.ca/...teck-frontier/

So now you have a project that nets you 10% return based on a forecasted price of $71USD. It’s just not enough of a margin with all the risk including political. Even in a hypothetical scenario where ther is 0 political/indigenous risk, it’s still risky because who the fuck knows how oil demand or prices will be between now and 2066.

Again I’m not saying politics had nothing to do with it, but my view is poor economics is the bigger factor

[Darkane]

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I approve of this backyard math.
For @89coupe and others, Politics means that companies now need to throw an extra 2-3 billion on the front end, and decades of delay, and about a 50% risk of not going ahead even if approvals are obtained through whatever regulatory process. Political economics are the issue, not MARKET economics.

Thanks brother. You feel that’s pretty realistic? It’s a shame the media puts these expectations out there of 100WTI. What might need to be looked at again is ROI for these projects. We’re still stuck in a fairy tale unfortunately.

Media should read project needs 100WTI for record profits and ROI of 7 years lol.

[Darkane]

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Why even waste time with your back of napkin math when experts have already done it? Here is an article from the war room that states break even on a new mine is $65:
https://www.canadianenergycentre.ca/...teck-frontier/

So now you have a project that nets you 10% return based on a forecasted price of $71USD. It’s just not enough of a margin with all the risk including political. Even in a hypothetical scenario where ther is 0 political/indigenous risk, it’s still risky because who the fuck knows how oil demand or prices will be between now and 2066.

Again I’m not saying politics had nothing to do with it, but my view is poor economics is the bigger factor

Nice link, thank you for that.

I caught this though - and it’s important:

A 2019 study by IHS Markit said that the breakeven oil price for a standalone oil sands mine to achieve a 10 per cent rate of return fell from nearly US$100 per barrel WTI in 2014 to approximately US$65 per barrel in 2018, thanks to cost deflation and re-engineering.

CNRL has dropped 12% in Op cost since 2018. My $60WTI is in the money.

Now - like we said - if we had another pipeline right now, reduce that amount by another 10-15%.

So we’re deeply into the 50’s. With a return.

Chicken or the egg, the political concern is the chicken. Can’t lay a pipeline egg to allow any projects to proceed.

Good discussions.

Edit: forgot to add in 20 years when oil is naturally inflated due to the cost of bread in Nickles, $70 WTI will be the depressed number. It’ll be the new $50.

Profitttts. All the forecasters know this, what articles in the media don’t tell you are the real life, true statements regarding projects, break even points and so forth

[never]

Not a new build but another extension:

https://www.iaac-aeic.gc.ca/050/evaluations/proj/80521

[ThePenIsMightier]

I'm just skimming so maybe I glanced over it, but are people missing that our oil is not sold at WTI and that the discount down is a fluctuating number?
That's kind of extremely relevant, non?

[Darkane]

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I'm just skimming so maybe I glanced over it, but are people missing that our oil is not sold at WTI and that the discount down is a fluctuating number?
That's kind of extremely relevant, non?

Hence - political - pipelines.

That’s why we have such a desperate need for pipelines. WCS rises and stabilizes with pipelines to the coast, but not with pipelines to the south. Big difference.

[ThePenIsMightier]

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Hence - political - pipelines.

That’s why we have such a desperate need for pipelines. WCS rises and stabilizes with pipelines to the coast, but not with pipelines to the south. Big difference.

Right. It's impacted by a variety of factors. So why is all the Marth on this page:
"Bro, if WTI is $65 we set!"
"Nah, Bro. Need WTI $82 fo real!"
"Bro - my daddy's Co. can make bank at $41 WTI."
etc

The product is sold at WCS which is not linearly tied to WTI. I'm not going to say "WTI price is as relevant as the price of a bushel of wheat" but why not base math off of the relevant index instead of Marth?

[never]

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The product is sold at WCS which is not linearly tied to WTI. I'm not going to say "WTI price is as relevant as the price of a bushel of wheat" but why not base math off of the relevant index instead of Marth?

Not all oil sands product is sold at WCS so WTI is just a consistent reference point and oil sands product prices follow WTI pretty closely so it's just the differential. And the differential is a lot smaller for the big producers (with upgraders).

Edit - couldn’t add a pic from my work computer! Have to do it from my phone...here are the recent prices for WTI, WCS and other oil sands products for reference:

[Darkane]

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Right. It's impacted by a variety of factors. So why is all the Marth on this page:
"Bro, if WTI is $65 we set!"
"Nah, Bro. Need WTI $82 fo real!"
"Bro - my daddy's Co. can make bank at $41 WTI."
etc

The product is sold at WCS which is not linearly tied to WTI. I'm not going to say "WTI price is as relevant as the price of a bushel of wheat" but why not base math off of the relevant index instead of Marth?

Historic charts, demand etc.

You can forecast pretty easily. Keep in mind WCS must have enough differential to be profitable versus WTI. What does that mean?

To sell synthetic at a profit margin. Or in a perfect world upgrade and refine at the same facility.

Then you can buy WCS at say $5 discount to WTI and still make money on the refined product.

[suntan]

Man I hope nobody's read MEG Energy's Q3 2019 report.

[dirtsniffer]

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I tend to agree with what 89coupe said. The only way it’s economical is if you consider the entire life of the mine at an average price of $95 US WTI price
https://www.nationalobserver.com/202...-frontier-mine

They would be operating a loss for multiple years until the price recovers (if it ever does at all). And that’s only IF they found a partner willing to invest in a brand new mine knowing they won’t see a profit for a long time.

You have to remember they started this thing in 2010 when mines were still economical at $100+ oil. They kept going with the project even after the 2014 price crash because they thought it would recover, and then 5 years later it still hasn’t and they realized it was not going to make sense. I think deep down they wanted liberals to deny it and then when it looked like it might happen, they withdrew to save face.

Edit: I will say that politics was definitely a contributing factor, but i still think economics was ultimately the biggest reason

I have a hard time believing the national observer on the best of days, but when they say this "...The company (Teck) took a $910-million after-tax loss on the project (Fort Hills) during the fourth quarter of 2019."

In reality it was a $910 million impairment. Fort Hills netback was $11.85/bbl and earnings before depreciation and amortization was $144 million