Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Confirming details leaked to the Washington Post on Wednesday the US State Department said on Friday a proposed $7 billion extension of the Keystone pipeline to US Gulf Coast refineries would not likely boost the amount of crude produced from Alberta’s oil sands, suggesting it would have limited impact on the environment.
A final decision on the controversial pipeline could come as soon as the end of the year. The news comes as demonstrators in front of the White House continue being arrested in efforts to convince President Barack Obama of Keystone XL’s dangers. The price Canada can charge for crude exports to the US is falling further behind the international benchmark because of a glut in the Midwest and some hedge funds have started to bet that the spread could go as high as $50/barrel leaving Alberta producers millions of dollars out of pocket per day.
The Calgary Herald quotes a State Department official: “The conclusion was that even without pipelines the oil is going to develop and this is going to get to different refineries that are demanding it.”
The Digital Journal quotes from a letter sent to Obama on Thursday by the Sierra Club and several other environmental groups: “This is a terrible project… It risks many of our national treasures to leaks and spills. And it reduces incentives to make the transition to job-creating clean fuels. You have a clear shot to deny the permit, without any interference from Congress.”
MINING.com argues that an attention-grabbing website that attempts to draw a distinction between Alberta’s oil sands and what it calls “conflict oil” extracted by undemocratic regimes may become a victim of its own success.
MINING.com reported this month recent developments are rapidly stacking the odds against Alberta oil sands: the oil price has fallen 20% in one month, the gap between US crude and world prices hit a record above $24, the premium syncrude enjoyed in recent months is melting away and Canadian heavy oil’s discount to US crude has widened to $15.
The question now is how many of the $100 billion of oil sands projects in various stages of development will be completed or run at a profit when Canadian crude only attracts $60-$70 a barrel and could go lower. Sky-rocketing labour and equipment costs and a rising loonie could well turn out to be the proverbial last straw.
MINING.com reported in August the debate over another controversial pipeline and port project to ship Alberta crude oil to Asian markets has escalated with Canada’s politicians and business leaders advancing new support for the initiative. Slowing demand in the US is also adding to pressure for a go-ahead on the pipeline that will stretch for more than 1,100km to a new port facility at Kitimat, northern BC and will cost $5.5 billion.
Canada exports two million barrels of crude to the US per day of which 1.5m come from oil sands.
