If this goes to court, we may find out what is the real cost of oilsands crude.
NEW YORK, March 6 (Reuters) - Most oil drillers are fretting after crude prices fell 70 percent since last July, but a group of Oklahoma oilmen pin much of the blame for their plunging profits on an unlikely culprit: Canada.
Producers led by driller Harold Hamm have asked local authorities, including Oklahoma's attorney general, to investigate whether Canada -- the largest oil supplier to the United States -- is selling crude at prices below production costs from its vast oil sands reserves.
The Oklahoma group, Domestic Energy Producers' Alliance, says it may seek to halt new Oklahoma-bound pipelines, or ask the state to temporarily fix prices -- a measure it once took in the 1930s. The group could also pursue Federal import tariffs on Canadian crude.
"We think Canadian oil is sold here at below what it costs to produce. As a result, we are getting less for our oil than it's worth," Hamm said by phone. "They want to pump in another 1.5 million barrels a day. It would be a disaster."
Several trade experts and oil industry officials said Hamm was unlikely to succeed, but they expected him to fight.
Hamm, CEO of Oklahoma's Continental Resources (CLR.N: Quote, Profile, Research, Stock Buzz) who ranked No. 42 on Forbes' richest Americans list last year, led an effort by drillers in 1999 to sue Mexico, Venezuela, Saudi Arabia and Iraq for allegedly dumping cheap oil in the United States. That effort briefly threatened to escalate into an international trade dispute, but ultimately failed.
Canada shipped 2.2 million barrels a day to the United States last year, double its average level in the 1990s. Some U.S. drillers complain the flood of Canada's oil is distorting the value of U.S.-produced oil. Hamm's group says it has received calls of support from drillers in eight other states.
Oklahoma pumps around 200,000 barrels a day (bpd) and receives 300,000 bpd of "upgraded," synthetic crude from Canada, Hamm said. The state currently lacks enough outbound pipelines to ship the oil elsewhere.
"We don't know exactly what it costs to turn their sludge into light oil, but it's probably well north of $45, maybe $60 or $70," said Mickey Thompson, an Oklahoma driller.<snip> |
