By Duncan Sutherland - Exclusive to HeavyOilInvestingNews.com

The provincial government of Alberta announced that it will invest $4 billion (CDN) of hydrocarbon royalties into carbon capture and storage technology. Ed Stelmach's Conservative government will create two separate funds. The first will be used to “finance large projects to capture and store carbon dioxide emissions from oil sands recovery sites, the plants that upgrade the bitumen into crude oil, and from coal-fired power stations ^[1].” A second fund will be used to invest in public transit infrastructure.

The carbon capture and storage fund is a response to the increasing salience of carbon emissions and climate change as political issues. (See here ^[2] for a more in depth look). Environmentalists widely view the Alberta government as a laggard on emissions and regulations, a reputation it has been trying to improve.

Alberta's heavy oil/ oil sands sector saw a good deal of business activity this week. Perhaps the most significant was Royal Dutch Shell's (NYSE:RDS.A) public pondering of whether to gear up its existing U.S. refineries (Deer Park, Texas and Martinez, California) to process the bituminous Alberta crude instead of committing to a new Alberta refinery proposal pegged at $27 billion ^[3] (CDN). Whether Shell decides to build the new refinery, upgrade the existing ones or some combination of both, it reinforces the centrality of Alberta to Shell's North American strategy.

JJR Acquisition Inc. (TSX.V:JJR) has made an agreement ^[4] with Blue Horizon Energy Inc. (privately-held). JJR will issue 20 million common shares at $0.50 (CDN) per share to acquire Blue Horizon. Elsewhere, Daylight Resources Trust (TSX:DAY) has entered into an agreement to acquire Athlone (TSX.V:ATH) at $0.85 (CDN) per share. This will amount to about $32.8 million (CDN) including $2.6 million (CDN) of debt ^[5]. Athlone's significant assets border on Daylight's core heavy oil holdings, so the move is a natural one for Daylight.

Tomorrow (15th) will see the beginning of the 2008 PennWell Oil Sands Heavy Oil Technologies show in Calgary. Only in its second year, the show is expecting a large influx of experts from the geology, engineering, business and equipment supply sides of the business. Given the two day interval between the end of the Stampede and the beginning of the PennWell show, it is likely that many of those present will be sober.

An also-ran news piece in the Calgary Herald ^[6]noted a new Boeing- SkyHook International Inc. venture to produce a heavy-lift rotorcraft geared specifically for remote forestry, mining and oil & gas projects. This is something to keep an eye on, but it is still far too early to gauge whether it will work.

The G8 summit ended with the assembled leaders pledging tough action ^[7] on reducing climate change and oil crises. Superb analysis of the meeting and its ramifications can be found here ^[8].
Tullow Oil (LSE:TLW) was trading well on its Trading Statement of July 9th. Tullow announced an unexpectedly large return ^[9]from a well in Ghana's Jubilee field. Tullow has properties in multiple African countries, and the Kaiso-Tonya heavy oil fields in Uganda are expected to be its next big play.

Saudi Arabia's announcement last month of plans for new heavy oil refineries has now been echoed by Kuwait. The emirate will issue tenders ^[10] in August for upgrades to two refineries. A new refinery at al-Zour is also in the works, with contracts having been awarded to JGC Corp (JP:1963), GS Engineering and Construction Corp (KS:006360), and others.

President George Bush has declared that he will lift the executive order prohibiting offshore oil and gas drilling on the Outer Continental Shelf ^[11]. Though the Congressional ban persists, the announcement is likely to put additional pressure on the legislature to repeal it. It is difficult to tell whether the pressure on Congress will amount to anything. Republicans, including the Presidential candidate John McCain, support the removal of the ban, while Democrats generally favour the moratorium.

My take is that the Republicans are pushing this as a political issue, given that “A late-June poll by CNN found that 73 percent of the US public at least mildly supports increased offshore drilling, while 27 percent at least mildly opposes it ^[12].” With an unpopular war and widespread economic malaise, Mr. Bush's party appears desperate to prioritize any issue they have popular support on.

The beginning of the week saw a strengthening US dollar, which dampened enthusiasm for commodities and led to a cooling of the Standard & Poor's/ TSX Composite Index ^[13]. Oil prices swung upward on the 9th after the Iranian government tested its newly acquired Photoshop technology ^[14].

In all seriousness, the Revolutionary Guardians (a parallel military structure responsible for Iran's missilery, covert operations and defending the Strait of Hormuz) responded to an Israeli military exercise by test-firing multiple missiles. It should be noted that the price of oil fell almost nine dollars in the days leading up to the test-firing on disappointing indicators of global economic slowdown. Though speculating about the motivations of the Iranian leadership is difficult, I would contend that falling oil prices are as much a reason for the test firing as the Israeli exercise.

Iran also discovered ^[15] a new oil field of approximately 233 million recoverable barrels. It is likely that Russian oil firms will pick up the contracts for this one.