Heavy Oil

By Duncan Sutherland – Exclusive to Heavy Oil Investing News

Market News

As most of you know by now, the barrel price for oil has dropped pr ecipitously in the wake of Gustav’s fairly uneventful passage through the Gulf of Mexico.

The drop in prices has weighed down the energy-heavy TSX indexes, energy companies and the Canadian dollar. The US dollar, however, is at a ten month high, and several hurting industries got a boost.

Company news

Buffalo Resources (TSX.V:BFR) has announced its second quarter results, noting record profits from high oil prices.

Action Energy (TSX.V:AEC) also detailed its Q2, noting a 100 per cent success rate on its six new wells, and revenue 178 per cent higher than Q2 2007.

Greencastle Resources (TSX.V:VGN) had a hugely better Q2 than it did last year, and has a number of applications pending for new projects around the country.

Deep Well Oil & Gas (Pink Sheets: DWOG) had an independent estimate of the oil in place at its Sawn Lake Project that detailed some 1.2 billion barrels there. This was a substantial increase from the initial estimate of 819.5 million barrels, and is great news for the company.

Enbridge (TSX:ENB) and BP (NYSE:BP) have agreed to an Alberta-Texas pipeline project. The two had initially been discussing infrastructure of much higher capacity, but concluded that this smaller project would be a better starting point. The project is expected to be complete by 2012, and deliver a quarter million barrels per day to refiners on the Gulf Coast. Gulf Coast refineries that are equipped for heavy oil are hungry for inputs right now, as Mexican heavy oil production appears to have peaked and Venezuela’s lack of investment has affected its output.

BP also has a test project beginning on Alaska’s North Slope Ugnu formation. Using the CHOPS technique (cold heavy oil production with sand) familiar to those in Alberta’s heavy oil fields, BP hopes to get the field producing within a few years, but the high failure rate of CHOPS in Alberta should give pause.

International news

Iranian officials said that the country has some 85 billion barrels of recoverable heavy oil, suggesting that there is more heavy than light oil in the country. Also this week, Iran has cleared its Gulf storage of heavy oil, selling the last shipload. The heavy oil storage facilities at Kharg Island are now empty. Aminollah Eskandari, an official with the Iranian Oil Refining and Distribution company has confirmed that more heavy oil refineries are an important component of the country’s long term plan.

South Africa’s state-owned PetroSA is to begin exploring in Venezuela’s Orinoco belt, hoping to find new input for its planned Coega refinery. The Coega refinery is expected to start operating in 2014 and have a capacity of 400,000 barrels per day. President Hugo Chavez of Venezuela was extremely happy with the agreement, and made his usual bloviations about anti-imperialism and helping out friends in the global south.