Posted on 12/08/2006 5:35:13 PM PST by maui_hawaii
With the upstream and extraction portion of the Northern Lights oilsands venture pegged at $4.4 billion - a pricetag which has more than doubled and could rise another 30% - project operator Synenco Energy is looking to Asia for cost relief.
The Calgary-based company said today it will have modules as large as 2,000 tonnes fabricated in Asia and then shipped to northern Alberta for assembly.
The move is expected to result in a savings of about $1.2 billion.
"There is no question that costs affecting capital-intensive oilsands projects have changed dramatically in just a few months - largely due to resource shortages - and our project's cost estimates have also risen," said Synenco president and chief operating officer Todd Newton.
"This approach will reduce our field construction labour needs in a time of limited supply and improve both our cost and schedule certainty."
Synenco, which holds a 60% stake in Northern Lights, will look for help from Chinese-based Sinopec - which owns the remaining interest in the project through a wholly-owned subsidiary - to oversee the manufacturing of the modules.
The massive structures are about 12 times the size of traditional oilsands modules, which are normally made in the Edmonton area and transported by road to Fort McMurray.
The $4.4-billion estimate, released as part of Synenco's capital cost outlook, is up from a previous forecast of $1.7 billion, although the company said it could come in anywhere from 10% below to 30% above that figure.
Due for completion in 2010, the 114,000 barrel-a-day mining operation is located about 100 km northeast of Fort McMurray.
A revised estimate for the downstream portion of Northern Lights, a heavy oil upgrader in Sturgeon County near Edmonton, will be announced next year.
It's cost was previously pegged at $3.6 billion.
Several companies, including Shell Canada Ltd. and Nexen Inc., have reported cost overruns at their oilsands operations this year.
This is a perfect example of why companies want China 'as is'...problem is, it doesn't tell the whole story.
Look at it another way. 114,000 bbl/day at $60/bbl times 365 days/year = $2.5 Billion/year. Payback in less than 2 years. A lot of oil from a non-arab source. China gets a one time payment and some on-going profit. What's not to like about it.
Oil from a non Arab source is also fine.
One time payment to China---not exactly correct.
There are whole industries worth hundreds of billions supplying these very same oilfeild products.
Maintaining an oilfeild is an ongoing process. Stuff breaks, blows up, wears out, and needs replaced.
Because of the trade policies of China, we buy billions and hundreds of billions in this industry and others from them.
Yet, China's policies, and more importantly the structure of China's economy don't allow for those dollars to translate into a new market in and of itself that may or may not relate to oil at all, at least not up to its potential.
My point is, other countries, if we buy $20 billion in products from them, it will be roughly the same price or maybe slightly different....but cheap none the less.... But then we can turn around and target the people who we just gave the $20 billion to...
Which we are not doing now regarding China.
I refer to this concept as an ecosystem of economics.
Your point needs some work, or less wine (haha), there is either to much within the ...'s or I am too dense to see it. Sorry.
I think you just aren't seeing it...
Its hard to explain something so complex, but let me try to do a basic analogy (not for you, but for me)....
Lets say for example Las Vegas. Some mafia types put a place where people could gamble out in the middle of no where.
There was no economy there. It was desert. Literally.
Those casinos though were an attraction. They brought the people, who brought the money.
As a result a whole slew of businesses sprung up in Vegas. Restaraunts, hotels, gas stations, grocery stores, apartments, and on and on....
Those casinos took something from nothingness and made it into something where a whole range of people can market their wares to, or sell things, or generally benefit from.
Regarding the current state of international trade, when we send key components of the economy overseas it can either help us or hurt us.
If we send those key components to countries that are open to us, we then benefit all around. We can mimic the Las Vegas example.
If though we send those key components to places that aren't open to us then its economic opportunity lost. We got something cheap, but we did not achievegreater economic expansion.
Maybe I am just tired but I don't get your meaning...
Other than that I would say first off you and your company are not alone.
I have been in and out of China for 13 years. I understand the routine.
The solution won't be on a company level.
By getting real solutions done at the appropriate level, I would say your company would experience quite a bit more opportunity for growth. The landscape could see drastic changes, in your favor.
ellipsis: the omission from a sentence or other construction of one or more words that would complete or clarify the construction. A mark or marks as ... to indicate an omission or suppression of letters or words.
Maybe that could be a new career for me... fortune cookie message writer...
My position is neither.
I am most definately for expanded and continued expansion of international trade.
I am also for doing this in an orderly fashion, and not slow poking it along either.
I am also for doing things primarily bilaterally.
At the same time the US needs to stand up for US interests and those interests should include more than a short term quarterly profit for certain sectors who have the best lobbyists.
In other words, if we don't gain access to the markets we help create, grow a pair and stand up.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.