Thursday, December 6, 2007

Husky BP partnership unsettles Alberta

If Albertans are unsettled by the natural operations of international capitalism why don't they get off their fannies and do something about it? They don't because the Alberta government basically accepts the system and believe that if they threaten the international capitalist power brokers they will be doomed since investment will flow out from the province. And this will actually happen if nothing is done to counteract it.
However, if the province itself invested in refineries and also controlled the production facilities the big capitalists would have to deal on Alberta's terms instead of Albertans begging for investment. Even the most right wing of governments those in the middle east Sheikdoms aren't stupid enough to sell out their resources for a pittance. They do so well from their system that the US and now Canada complain about "state companies" purchases of Canadian and US companies!
I can remember ages ago that a Conservative Alberta government bought an airline when it thought it was not well served by existing carriers. It built up the airline and later of course when it was making money sold it off just to show it was not a bad government ideologically! Of course it helped the budget too.

Husky, BP partnership unsettles Alberta
US$11.7B Deal

Jon Harding, Financial Post
Published: Thursday, December 06, 2007

CALGARY - Husky Energy Inc. and BPPLC struck a deal yesterday that integrates the upstream and downstream parts of the oilsands business, following a trend that emerged last year when EnCana Corp. and U.S. refiner ConocoPhillips Ltd. hooked up in a similar fashion.

But the US$11.7-billion partnership, which combines 3.2 billion barrels of Husky Energy's oilsands reserves with BP's refinery in Toledo, Ohio, while applauded by investors, may also prove unsettling to many Albertans because it means billions in downstream spending will flow south of the border to refining hubs that are closer to key markets in the United States and where expansion projects -- largely adding coking capacity to existing refineries -- cost far less than new-build projects in Alberta.

"This is another layer of companies indicating they're not comfortable investing in Alberta with the returns they're seeing," said Chris Feltin, vice-president of institutional research at Tristone Capital Inc.

"Husky, while not explicitly saying that, is indicating with its actions they think their returns will be higher investing in the downstream in United States," Mr. Feltin added.

Royal Dutch Shell PLC and Marathon Oil Co. also made moves this year to link oilsands production in Alberta with retooled U.S. refineries, sidestepping the need to build expensive upgrading facilities in Canada's highest-cost province.

Jason Chance, a spokesman with the Alberta Department of Energy, said the province would look closely at the Husky-BP deal before commenting, but added Albertans still benefit from expanding production of bitumen.

"As capacity for taking our bitumen grows in North America -- either inside Alberta or in other markets -- then that demand for bitumen grows, which increases the sale price and results in increased royalties," he said.

Yesterday's deal with BP, a stubborn holdout that until this year refused to recognize Alberta's burgeoning oilsands basin due to its high cost and risk relative to conventional fields, will let Husky shelve a $2.3-billion plan to expand its heavy-oil upgrader in Lloydminster, where Husky had recently completed engineering work to boost capacity from 82,000 barrels a day to 150,000.

Husky bought a refinery in Lima, Ohio, for US$1.9-billion from Valero Energy Corp. in May, and yesterday John Lau, Husky chief executive, said that facility will be reconfigured at a cost of nearly US$2-billion to take Husky's growing output from heavy-oil projects near Lloydminster. Husky and the London-based super-major say they will invest US$3-billion between now and 2012 developing Husky's Sunrise oilsands project to produce 60,000 barrels of bitumen a day. Further investments will be required to boost Sunrise production to 200,000 barrels per day between 2015 and 2020.

Meanwhile, the partners will spend US$2.5-billion at BP's Toledo refinery by 2015, expanding the facility's bitumen processing capacity to 120,000 barrels per day, with total refinery throughput of about 170,000 barrels a day by 2015.


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