My latest at Macleans digs into TransCanada’s analysis on crude cost savings for eastern refiners from Energy East. Check it out here.
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Crude costs and Energy East
By Andrew on September 11, 2013
Posted in Uncategorized | 4 Responses
4 responses to “Crude costs and Energy East”
Although Deloitte didn’t do it, surprised Andrew’s “climate” blog doesn’t consider the relative costs of internalizing the carbon in the refining scenarios.
To keep Ronald Coase from turning in his grave, i’ll point out that if the carbon was internalized, the feedstock savings would be reduced by roughly $1/BBL for every $10/T of carbon charge (assuming 0.1 T/BBL WTW emissions premium of Albertan oil over Brent)
Chris, you are assuming that oil sands producers could pass through that costs to coastal canadian refiners. The impact would more likely be on oil sands netbacks, since the coastal refiners would have no incentive to pay the extra costs. You could also have gone a step further and suggested that Canadian refiners may be willing to pay less for Canadian crude if policies such as low carbon fuel standards proliferate and reduce the market for refined products produced therewith. So, if you want to talk carbon policies, it’s more likely that these would either have no impact on the refinery crude cost impact or that they would see even lower crude costs but with an offsetting revenue hit due to carbon policies.
Andrew — if they go to the bother to build a pipeline across the country, and then goto the bother of building refineries to run on heavy oil from that pipeline, and there’s room for movement on the bid since its priced at a discount to the alternative Brent, and the entire deal is structured simultaneously, with senior politicians involved, and at a time when climate and pipelines are on the radar everywhere but this blog, then sure, i’ll assume carbon has been thought about, its in the regulatory change provisions of the contracts, and there’s some allocation beyond the producers.
Thanks for that long and confusing argu-sentence.