Will you spare a few minutes for new direction/beginning!?

After roughly 11 years of relative calm, Canadians (particularly those reliant on Oil and Gas) will likely experience a period of protracted decline in their standard of living.

I would like to put my excellent forecasting track record to work for you!

Good ideas never seem to go away! As we have done time and time again, build the new while phasing out the old. Modernizing the way Canadians use energy is a win/win right across the board; vested interests in oil and gas may not see it that way but inevitably they will be forced to see reality or suffer due to their inability to adapt.

Ok back to the Crises. Game changing numbers.

The people of western Canada (Alberta in particular) now need the help of their fellow Canadians more than ever because a massive build in Crude inventories in early 2020 will likely keep it’s value per barrel below $US 50.00 for a significant period of time. On Mar 18, 2020 April WTI crude oil closed @ $US 20.37. Why won’t it bounce back anytime soon?

Good question! Read on!

World Crude Oil production averaged around 81 bbl/d for last 5 years[1]

World Demand in 2018 hit 100 million barrels per day of oil consumption and averaged around $US 50.00[2] while consuming excess supply from prior years[3]

According to the Economist magazine

“China published economic data today for January and February, the most intense phase of its covid-19 outbreak. The figures, including retail sales and industrial production, showed deeply negative growth in the first two months of 2020: down roughly 20% from a year earlier. The last time that China reported a contraction was more than four decades ago, at the end of the Cultural Revolution.”

So in 2018 China was the world’s largest importer accounting for US$ 239.2 billion (20.2% of total crude oil imports). Let’s assume that percentage is roughly the same (20%) prior to the virus shutdowns (January, February 2020). During January February 2020 “China’s state refiners have said they would cut refining throughput by about 940,000 bpd this month.”[4]

If you would like further evidence, every city across the planet, if it is not already, will be shutdown.

Example: The great metropolis of Vancouver, Canada: to date I have been going to work in downtown Vancouver and would estimate that there is 1/10^th activity which will likely slow to near zero in the coming days and weeks.

The remaining storage capacity is estimated to be around 1.7 billion barrels of crude[5]

So the math looks like this:

100 mbpd (total demand) * .2 (china’s portion)= roughly china imported 20 mbpd in 2018

20/12 months = 1.67 mbpd per month

So if they cut 1 mbpd per month, they are importing 0.67 mbpd which is;

0.67 / 1.67 = roughly 40% of what they were importing.

But the important bit to Canadian and global producers is what’s to come.

Given that global crude oil production and demand are fairly closely balanced most of the time the market now has to deal with an extra 60 million barrels of crude oil accrued over a very short period of time : a conservative number, in my opinion, as other parts of the world have started to react as well decreasing consumption during this time frame.

Bloomberg news estimates “global markets, and the coronavirus crushes demand, more than a billion extra barrels could flow into storage tanks” and “if hostilities continue, the tide of oil is likely to become a tsunami.”[6]

On March 16, 2020 the NYTimes reports, “But factories in China are running at 50 to 60 percent of capacity, he said, and other measures show even less activity in many places.”[7] And they go on to point out, “Factory owners face still one more problem: slowing global demand for the goods China makes. The coronavirus outbreak is threatening global growth, which could slow factories just as they restart. “If the demand shock is not addressed fast, then it could become a problem,” said Mr. Cao, of Peking University.”

As of March 21, 2020 the increase of new infections still appears to be doubling, or worse, in almost every jurisdiction: the rate of global infection seems to have only begun.

So:

Supply is remaining roughly the same (or even increasing), should this change, prices will change.

Demand is decreasing significantly (albeit in the short term)

If everything is running at full tilt again, we should see demand around 100 million barrels per day of oil which means; if we stopped producing crude oil altogether it would take 10 days to consume all the extra oil produced at this time.

1 billion / 100 million = 10

Referring back to the supply/demand situation prior to the virus, both were closely matched.

It will be an extended period of time (long term, < 10 years) if ever that we consume the excess produced at this time.

What does that mean specifically for Canadian Oilsands producers?

· There could be a lack of demand for an extended period of time.

· All the excess oil created during this period is of higher quality than that produced in the Canadian Oilsands.

This makes the whole industry more economically questionable at best.[8]

Alternative Job Creation!

· Hydrogen! A viable option, that does not have some of the drawbacks of other renewables (solar, wind); when produced using green energy, there is no carbon footprint and it can be stored easily, similar to natural gas.

· Production from periodic clean sources (solar, wind) can be safely, and efficiently stored

· The stored energy can be released by burning it (possibly creating Nitrous oxides)[9] but (even better) we have fuel cells that can release the energy. Even better in Canada! We have experts in that field: Ballard Power[10].

So here is my specific recommendation for job creation in Canada

*** All this is in addition to the existing activities

*** End all forms of subsidies for the Oil and Gas industry if they can continue to survive, great, if not, adios.

*** Create a Crown corporation to implement the following

Here I have to apologize to my friends who oppose the Site C dam that is being built in northern BC,

The probability that construction of this dam will stop is now near 0%, because of the extensive job losses that will occur in the Oilsands and Natural Gas sectors in Canada.

Build 2 big hydrogen production plants either near or in Edmonton, Alberta, Canada and the other somewhere in the Vancouver Lower Mainland (VLM)

The Edmonton plant is there to: take advantage of the power produced by the Site C dam, be located close to the Trans-mountain pipeline and provide jobs for Albertans.

The one built in the VLM is again designed to create jobs, take advantage of the excess of fresh water as feedstock, advantageous location, and again use a BC hydro power or an offshore wind farm.

Convert the Trans-mountain pipeline to carry hydrogen

Build Neatbit[11] terminals to safely transport bitumen if buyer’s can be found

Create demand by mandating municipalities that have the ability to upgrade their bus fleet to hydrogen fuel cell buses.

Upgrade to all rural (off grid) communities to a cleaner energy source than diesel (case dependent)

Create Hydrogen Fuel cell cars and the associated infrastructure for the public[12]

Create the demand while building the supply side. I suspect international demand will soon outstrip what can be supplied locally (exports) and additional production facilities will be required in other parts of the country.

Expand electric car charging infrastructure 3 fold.

Covert more car production to electric cars.

I would love to hear your ideas! Please drop me a line at info@rened.co

This is but one idea of unlimited options

A couple of last thoughts, over the years I have talked to many of my Western Canadian friends and they dismiss my ideas saying something to the effect, “It (the oil industry) will bounce back and I’ll be back to work”; it has now been around 4 plus years that Canadian oil industry (oilsands in particular) has struggled and it has now been dealt a death blow.

Please pull your heads out of the oilsands see what direction the Energy markets are going, this is the next generation of energy production that is attainable now.

Honestly I don’t understand how our resistance to change has been so deeply ingrained. We love new technology, it just so happens that in this case it is better in ALL respects.

Cleaner, Safer, quieter, more efficient…. Which makes it inevitable