The following (paraphrased and summarized) is taken from today’s report from Oilwatch Monthly.  Information will next be updated July 15.  ‘Non-OPEC countries produce 60% of world oil production, but the output of those countries is going to ‘fall off its plateau’ in 2010.  More importantly, there currently is an overall decline in investment in oil projects in non-OPEC countries resulting from both suspension and postponement of planned projects.  The results of these things will be large as OPEC gains increasing control and influence over the world’s economy resulting from OPEC, within ‘a couple of years’ being the only group left that can increase oil exports’.  If the commentary in the referenced report is accurate (and I have not independently checked it) it seems to me the implications for the Canadian Oil Sands and natural gas (among other energy sources) may be significant.  The referenced report is replete with charts and data, and I recommend that all readers sign up to this free newsletter and read the report in its entirety.

‘Oilwatch Monthly’ is a free newsletter containing the latest data on oil supply, demand, oil stocks, spare capacity and exports.  I find its narrative and charts particularly well laid out and easy to read.  Readers can view today’s newsletter by clicking here and subscribing to it.  The website is in the Dutch language, the newsletter is in English.  In order to subscribe fill out the name and e-mail address boxes, select ‘Oilwatch Monthly’ from the dropdown, and click the  ‘Schrijf je in’ box.

Click here for the ‘Today’s News’ Economic, Mining and Oil & Gas feature on StockResearchPortal.com.

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An article titled ‘China’s oil giant seeks alliance with Canada’ says China’s state-controlled energy giant, China National Petroleum Corp., is proposing a strategic alliance with Canada - and particularly Alberta - to help meet its energy needs, while helping Canada develop a new market for its oil. The company said it is seeking the support of Canadian political leaders to help establish a major energy corridor linking Western Canadian supplies to the Chinese market.

As I have said in a number of prior posts, I expect China to aggressively pursue acquisitions and alliances outside of China that it believes strategic to it going forward. Given the size and importance of the Canadian Oil Sands this report does not surprise me. However, it will surprise me if the U.S. does not enter these discussion directly or indirectly. As I see it the Canadian Oil Sands viewed in totality is a ‘world strategic asset’, and accordingly definitely worth ‘fighting over’ if it comes to that.

There is also an article today posted in ‘Today’s News’ on the Home Page of StockResearchPortal.com that focuses on technology developments in the Oil Sands in the context of the environment – a topic I commented on in a blog post in the past few days.

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An article titled ‘Billions of bacteria produce nickel and clean water’ says that Vancouver’s BioteQ Environmental Technologies Inc. has developed a process called anaerobic respiration where bacteria “breathe in” sulphur and “exhale” sulphide, a substance used to crystallize nickel remnants in water generated in Xstrata PLC’s Raglan Mine, near Kattiniq, Nunavik - which nickel remnants can be extracted and sold along with the rest of the mine’s production – and that armed with new funding from the Canadian National Research Council “BioteQ is adapting its method for one of Canada’s toughest environmental conundrums: how to deal with massive amounts of contaminated water generated by the oilsands in Alberta”.  The article also says Brad Marchant, CEO of BioteQ is confident of a solution by this time next year, and quotes him as saying “A lot of water problems are the same (across) industries”.  To put experimental oilsands remediation into perspective, the article reports that this remediation effort has received recent Canadian Federal Government commitments of at least $1 billion.

While there is no assurance that such a process will work in the Canadian Oil Sands, and the article itself quotes at least one doubter, this is an interesting development that I think bears watching.  The Canadian Oil Sands represent approximately 1/3 of the world’s known oil reserves in circumstances where the referenced article says new UN data largely blame the oilsands for a 4% jump in carbon emissions to 747 megatonnes in 2007.  It seems inconceivable to me that the Canadian Oil Sands will not be developed.  That technology is required to ensure the ‘greenness’ of extraction going forward is not surprising.  That such technology will be developed, while not certain, surely can be assigned a high probability given the need to extract that oil commercially combined with scientific ingenuity.

Click here for Canadian Oil Sands Company Research.

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A Seeking Alpha article today (published first on April 10) titled ‘Canadian Oil Sands Offers Long-Life, Clean Energy’ comments briefly on the Canadian Oil Sands Trust, which the article calls “a favorite income stock in the last cycle”. The article then turns to a general discussion of the Canadian Oil Sands resource, saying:

• that in the author’s opinion high-quality synthetic crude oil is a more attractive fuel environmentally on a complete basis than perhaps half of the world’s energy supply;

• the most visible investment advantage of oil sands is that once the resource is outlined and the infrastructure is up and running, production can continue for a long time at a constant rate with minimal upkeep and at moderate operating cost;

• the initial capital cost for an oil sands mine and upgrader is high. Facilities are necessarily large to take advantage of economies of scale;

• if the world energy supply is considered to be one-third coal, one-third oil and one-third natural gas, nuclear and hydro, in the context of ‘clean’ coal is at one end, oil in the middle and natural gas at the other end. Oil sands, part of oil supply, is between coal and conventional oil on the clean spectrum;

• because of Canada’s high environmental standards, the author rates Canadian oil sands as cleaner than half of world energy supply; and,

• clean coal is still a dream, but clean oil sands have become a reality. If clean coal is in our future, we’ll increasingly appreciate the superior economics of clean oil sands.

From what I know of the Canadian oil sands, the picture is not all the author paints. First, I am not as certain as the author that production from the oil sands pursuant to existing mining practices are as environmentally friendly as the article might lead one to conclude. Second, oil sands production pursuant to the SAGD process which uses natural gas as an important input is comparatively inexpensive when Natural Gas prices are low (as they are today), but becomes increasingly more expensive as Natural Gas prices increase. Third, new technologies are being developed that may result in commercial exploitation of the oil sands being cleaner and less expensive than current extractive techniques. For an example of a company undertaking development of such a new technology, readers might consider researching Petrobank Energy and Resources Ltd. (TSX: PBG) which is both an Oil & Gas explorer and producer and a developer of a patented oil sands extraction technology. I am not currently a Petrobank shareholder, and am not recommending Petrobank shares as an investment. For full disclosure, Petrobank is an advertiser on StockResearchPortal.com. I suggest you click here and read the referenced article in its entirely for both content and context.

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Last Thursday the Alberta Government released a plan for development of the Canadian Oil Sands that calls for reducing the environmental footprint of the Oil Sands mining operations and increasing the quality of life in the Fort McMurray region. An article quotes the Alberta Treasury Board President as saying: “When it comes to Alberta’s oil sands, we believe that Canada can be a leader in finding innovative ways to ensure both economic growth and greater environmental protection”. The report is stated to be: “a long-awaited response to calls from all quarters to slow the pace of development and reduce the environmental effects of the oil sands projects”. Simon Dyer, director of the Pembina Institute’s oil sands program, is quoted as saying: “(The plan) doesn’t address the No. 1 concern Albertans identified when they were consulted two years ago, which was the pace and scale of development. And it lacks substance, so I don’t think it will stand up to the increased scrutiny we’re getting”.

The Oil Sands are the second largest petroleum reserves in the world with deposits containing an estimated 1.7 trillion barrels of bitumen, although only about 10% can be recovered through current mining processes.

My Comment: In the face of the current world economic malaise there recently has been very little talk of ‘Peak Oil’ and concerns over oil supply going forward. Economies recover, and the world economy will recover from what it is experiencing at some future (albeit uncertain) date. When that happens I think oil will again be ‘top of mind’, and I think it highly likely the Canadian Oil Sands will play a larger and larger part in world oil supply as new extraction technologies prove to be commercial. One example of such current technology development is that being undertaken by Petrobank (PBG:TSX). Watch for further M&A activity in the Oil Sands – the French company Total (TOTF:PA) currently is bidding for UTS (UTS:TSX) – and in particular watch for the possibility of China being interested in investing substantively in the Oil Sands going forward. Indeed there are legacy environmental and infrastructure problems, and these will have to be dealt with. History says (and here is a place I do buy into an application of history in today’s economic climate) that innovation leads to new manufacturing (read in this case ‘extraction’) techniques. I will be surprised if that does not happen in a commercial and environmentally friendly way in the case of the Oil Sands.

Read the referenced article by clicking here.

Disclosure: I am not currently a shareholder in Petrobank, Total, or UTS. My mention of these companies in this post are in each case neutral and should not be construed by readers as investment recommendations. Petrobank and UTS pay to advertise on StockResearchPortal.com.

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Following from my post yesterday on the Total bid for UTS, the CEO of the largest UTS shareholder has said there’s no way he’ll support Total SA’s takeover bid “because it’s too low and doesn’t ascribe any value to the company’s share of the oil at the Fort Hills project in Alberta” – see full story here.

I suspect, as posted yesterday, that this is just the first of a flurry of comments and activity with respect to Total’s bid.  I consider the outcome of this bid process important and will continue to add posts under a new Blog Category ‘Total/UTS’ – stay tuned.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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Only 4 days ago I posted on this Blog about development of the Canadian Oil Sands retracting in light of the current oil price – read that post here.  Late yesterday the French company, Total made an unsolicited bid of C$1.30 per share - a 57% premium to yesterday’s closing price.  As recently as last July UTS’s share price was C$6.00 (a market capitalization of approximately C$3 billion).  At yesterday’s close UTS’s market capitalization was just under C$400 million.  Total’s offer expressed in market capitalization is just over C$600 million.  You can read about this bid in an Oilweek write-up here, a Reuter’s write-up here, and on the UTS website here.  You can access systematically organized UTS trading, corporate and financial data by visiting the UTS website here, clicking on any page under the ‘Investors’ tab, and clicking on the gold ‘button link’ to StockResearchPortal.com you will find there.

It is virtually certain that a large number of UTS shareholders will lose significant amounts of their invested capital if Total’s bid succeeds.  I consider it very important to follow this story closely as it unfolds.  Largely, this is because I am convinced that in this market an increasing number of mining and oil & gas companies with good long-term assets will be targeted by unsolicited and hostile bids.  If I prove to be correct there will be a lot of very unhappy Institutional and Retail shareholders who are prepared to wait for good assets to be more appropriately valued by the markets.

I will post regularly on this Blog as the Total/UTS story develops – stay tuned.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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The following are excerpts from an article titled ‘Oil ands layoffs coming down pipeline’ posted today in ‘Today’s Articles’ – the RSS feed found on StockResearchPortal.com.

“The big retreat from plans to expand oil sands projects has begun to show up in job losses and declines in expected corporate revenue.”

“While the prospect of reduced activity in the oil sands is now hitting home in the energy sector, the effects are expected to soon wash across the wider provincial and national economies.”

“Right now there are a lot of projects still on the go, but the big question is what happens after those projects are complete, and at this point there is absolutely nothing on the horizon to replace what’s currently under construction,” said Gil McGowan, president of the Alberta Federation of Labour.”

Read the entire article in context by clicking here.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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