Tue, 9 Sep 2008|
Bob Tippee, Editor Oil & Gas Journal, opens the floor to questions at the start of the Oil Sands Heavy Oil Technologies Conference 2008 in Alberta, Canada.
I. Okay. Okay. As I said you do have a chance to ask questions I'll look as ask you to come to that center island have used it used it then the Mike there. And I think we've got a good really good start to our conference you've you've heard two excellent operational overview is in the and you. You've heard a social and environmental over overview from Jim -- and I think -- you see that we have a lot of questions. Both technical and narrow and non technical and broad. That need to be addressed in this industry and that will be addressed by this by this conference. As I said. We will wrap up the conference with. Video webcast where he'll have a chance to. That your your your thoughts be be known and also ask questions of -- members of Gordon advisors. So. Let's let's keep the conversation going. I'm not seeing a crowd up at the at the microphone. So I'll I'll start off ask in Bob and Tom could you. Take -- the constraints on operations. You you you mentioned some of them cost. Labor. New royalty regime. Concern about. -- greenhouse gas emissions. And kind of put them in and framework what's the what's the biggest constraint what's -- -- constraint that -- -- know this speculative but these they have these are important issues for. For oilsands work. And I guess -- -- did ask you to come to the microphone and. It's. All you get you up until lack of integrity and. I guess -- I'll start off -- guess in my view. Really that that cap that the cost issue is that number one sort of when people are facing. It's really. Tied in with the others. If it meant power's definitely on its back to cost as well yes. That's the issue of CO2 one. I think the only place we have a big chance do you overcome that is his -- through innovation and looking at things. Jim did talk about. Doing some -- -- you work in suits you and there are some companies that are doing that aren't working. There are other ones that he had on his list like Ivanhoe littered. A nice job. So people are looking for ways and -- hear that the next couple days that to work cost right. And I cuts I think coupled with the management of -- resources and then maybe from technology perspective well include project management seem to be. Cooperative manner as news that particular challenges and -- -- -- -- remote location. This -- -- the only remote location in the world is suffering the same problem. At least got tremendous -- -- some similar problems. -- struck some years. Ago when when Venezuela managed to build about four giant operators old same time men maybe there was such pressure worldwide -- that time it. We seem to think we have to do well one time. And we're lucky to get that done. The second thing on greenhouse -- that this was two things I my -- I think he's a year ago I wouldn't put -- analysts. Service showstopper. And I think at the time. Investors owners. Probably anticipate there's going to be some. You know may have been thinking of numbers in the order of when he fired fifty cents that girls are no more than a dollar. And then now depending on your assumptions -- greenhouse. -- and they've limits. You -- I've heard numbers as high is you could it be five dollars six dollars a barrel. I don't know the number and this was a 140 dollars they could afford that but some people including ourselves don't expect. Prices stayed under four dollars so it could become -- very significant. Operating costs and it it it really is something that they realize they need to do something about some company there. Little more advanced thinking others. -- you wanna take a stab at constraints token that. Gerri have a question. Yes tonight I hope I don't provoked the many people -- closer to you guys and GM is -- there. Or any in the speakers but starting with -- perhaps. There's the new royalty system that has gone through this is created. A lot of discussion turmoil. And from my perspective. Much of the cost. Of developing the oil sands currently. Falls on those entities that. Our how are trying to -- -- build -- operators in the in the north. That's because the Alberta government wants to upgrade. -- -- And when you do today you're -- -- that code you sulfur. Miles. Thousands of miles from the destination. If you look at a broader economic. Model. You could say that the idealists in the news. -- -- down to. Where the refineries are already built expand them doesn't cost as much. And from -- And we are closer to consumption points -- coat closer conception -- point for sulfur. Particularly if you go to China where both of those commodities are in. High demand. So you export to to dirty oil and they get the total package that they need. So what if the royalty system -- changed. To encourage. The sale of this type of material of -- oil sands resources. And you provide a higher royalty on. The deal it's food this country that's not processed in Canada or -- -- opera. And a lower regime. On. That material that has to be upgraded. At more expensive locations. And you look at the entire -- from production to consumption. And you adjust your royalty system on that faces. If you you started that is a question but I but I hope we captured his -- -- -- I'm gonna make an editorial lot of it. But in other words -- if you want to if you want to develop the resource. Look at that resource look at its total low value. And it because -- ten times sort of put up an operator. In the north rather than. Putting it to a refinery in China. Where they cookie cut them. And then tax. The -- bit. For that matter. Tax the the -- human values. Act higher value when it's exported this -- human. And taxes or even provide economic incentives. -- those entities that want to great that it's human to finished product. -- -- -- -- If you if you have million. I think entertain a question that that the line the Alberta government thinking they'd like to encourage value added more processing before -- word. If I I'm not not a lawyers -- back. Can't really give you a proper legal opinion but I suspect that. Under the now agreement that there'd be -- the -- in. Served by -- -- -- seasons -- that -- bird sales to the United States which is there major market. Potentially. Might be. Feasible for exports to. -- supposed. Okay. And it. That -- present opening -- they if there while real reopened up than there's a new new opportunity. I think that it -- -- looking NAFTA is one thing but I think that saying. We have problems with NAFTA. Who knows Barack Obama is is elected maybe we won't -- interest it is -- -- -- -- you know. But. I think it's one needs to look at the economics of the whole process into different ways and we have -- with crude -- And and certainly if the royalty system is one that encourages. Construction and production side. What it's costing you. A million dollars a barrel to produce gasoline at Fort McMurray it's never gonna get bill. So everybody loses. -- I guess very a couple of things that I heard out of your remarks -- -- I guess what I would agree with this is what the market. Sort of set where it should upgrade things. Rather than trying to impose. A government will upgrade -- will it. That's not natural. I think that's you get into the grave -- -- trying to out guess where things are gonna go. Other. Governments have looked at actually taxing -- -- you -- matter where it is and that's. Pretty. Problematic as well it gets very tricky and very complicated. And so know what he's done so far. There have been several attempts. Around the world but it's not not -- effective. But I think from my perspective that. If there's been quite a bit of -- movement around the world towards. Trying to do things. With local content and with local. Basis. If you look at a lot of close. There's a mixture. If you look at Brazil if you look at Venezuelan you can what the results as men. It's still too early to see what's gonna happen if -- starts. Moving forward we're you cannot. Send -- -- -- there's a huge penalty if you would use an oil well. Outside. All the operators I'm sure in -- running -- economics both ways. It clearly was a driver for those. That we're looking for an integrated play. And I think it'll continue to be for them they'll be looking at that and it it is it a major. -- -- about I guess you -- to have the full value chain. But it's very similar in some ways to. Natural gas if you would you you always have to make that decision where is it best to get off the express. At the well head or try to take it all the -- up to the consumer. -- the companies are looking at those numbers -- Community as a gentleman about -- -- that don't. Once it. Now it he was he was signaling me Osama -- And Jerry Jerry victor. Made a statement which I agree with 100%. And in fact that -- an illustration. The royalty review in Alberta and -- particularly read it with Kate and it's a long time document for an old island meeting. On -- in it it come payers. All part of oil as a whole and that includes a have you with North Sea light and Texas into the in order to establish investment attraction. On taxation. And and seasonal -- them wrong wrong wrong. These reference points -- no relevance whatever. To the -- because of a whole bunch of the points that I showed you in my presidency. The second point. The Jerry you raise questions be upgraded that I hope we will hear a great deal of discussion on in this one it's. Because if there's one rule. All business. That must not be broken it is diversified. -- market place. And while we're stuck with -- With 62%. Of all our hydrocarbon production. Mind -- that it was south who was forty ninth -- well we have to be able to ensure that the other 38% or whatever part you don't learn herself. We are free to say and two other customers in the world. And you're not going to -- build it to China the bulls cost money and they want to put. As height greed hydrocarbon in the -- ships that's awesome so we must all agree in Alberta we must -- read in Canada. And in order to keep the pipeline. This cheapest possible across the mountains the prince Rupert it'd better be ready to burn oil when it was of the -- -- Not how much you ship as -- -- and how much you upgrade is a point to be discussed in our. But the present system that we have ties us completely and totally. That the law below the forty ninth borrow I don't think about who's who business account. Sorry to -- -- American visitors and could -- the people who run this conference. But I think we -- here to discuss the pros and -- and I hope you do.