Chinese Firms Pumping Many Billions More Into Canadian Tar Sands - A US Devil Is In The Details

pipe dream photo

Pipe dream. Image credit:Flickr, Meilburgin

"U.S. exports of distillate fuel (which includes diesel) reached a record 656,000 barrels per day (bbl/d) in 2010 and have grown every year since 2003" Source: USEIA, U.S. distillate fuel exports continue to grow . Increasingly larger volumes of liquid fuel made from tar sands oil may, in the future, be exported from US refineries with access to an oil pipeline originating in Alberta Canada.

Liquid fuels are globally traded commodities, sold to the highest bidder. China's demand for liquid fuel is growing fantastically. It makes perfect free-market sense that Chinese investors would want to invest a lot of money into Canadian tar sands oil extraction ventures - especially if they had some inkling that the downstream products could come their way by freighter.Pipe dream indeed.
As reported in the Houston Chronicle and subsequently posted on Poten and Partners, it is no surprise that

...Chinese firms are rushing to snap up Canadian oil sands resources and invest in ongoing projects -- to the tune of $15 billion in the past 18 months in Alberta alone.

They are motivated by a desire to jump into one of the world's lowest-risk oil investments and to quench the exploding energy demands of Asian markets -- even though getting the product from Canada to Asia is just a pipe dream now.

The foreign funding can help pay for what research firm IHS CERA estimates will be $100 billion in spending on oil sands projects over the next decade.

And for a growing number of U.S. oil companies, many based in Houston, the infusion of Chinese cash in Canadian projects is welcome funding for some capital-intensive oil sands projects.

In case you haven't connected the dots yet, here's a re-cap of some highlights.

Hundreds have been arrested recently, for protesting the proposed "XL" pipeline to deliver tar sands-extracted oil to US Gulf Coast refineries.

Last year Chinese investors took a majority stake in one tar sands development firm. Now it is reported that Chinese investment has increased there by an order of magnitude.

The Gulf Coast Spring
There's growing pressure on EPA by House Republicans, Gulf State Democrats, presidential candidates, and (it seems) White House Advisers to further ease EPA air emission standards in general.

Oil companies, hard pressed lately to come up with oil reserves away from crowds brandishing Kalashnikov's, can breath a sigh of relief - as will their stockholders - if the XL pipeline is approved and Gulf Coast refineries let to expand as if it were 1960 again.

A Devil is in the details.
If given a choice, which proven oil source do you think US voters would most prefer to see extensively developed with Federal support? Would they mainly prefer more oil be extracted via dozens of new deep-water platforms in the Gulf of Mexico?

Or, would they prefer instead that Canadian tar sands oil, extracted with a heavy dose of Chinese money, be piped to US Gulf Coast refineries? Substituting the pipeline for more deep water platforms would lower the risk of more tar balls on Southern beaches. However, that choice could increase the likelihood of oil spills on land and into streams, potentially threatening drinking and irrigation water on the drought-suffering plains.

What a miserable trade-off. Can't we have more choices?

It would be nice to be offered such alternatives as strong hybrid and electric vehicle incentives, a steep gas tax increase to help pay for job-creating upgrades to roadways, bridges and railroads, or even the option of telling China to go pound their own sand. But, of course, no such alternatives are allowed on the table.

He's in that pipe dream. Horns and all. You just have to look.

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