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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Tomas who wrote (75020)	9/28/2000 11:30:14 PM
From: Tomas	Read Replies (1) \| Respond to of 95453

Oil refineries at capacity, but low margins make new ones unlikely - Fuel costs to keep rising Building an oil refinery can cost a prohibitive $1-billion, and many Canadian refineries have shut down in the last decade. Financial Post, September 28 By Ian McKinnon CALGARY - Tight supplies for fuel oil, diesel and jet fuel are being exacerbated by a shortage of excess refinery capacity, a situation observers expect to translate into even higher fuel costs for consumers. The Calgary-based Canadian Energy Research Institute said the world is awash in crude, but Canadian refiners can't crank up production of middle distillates, which include diesel and heating oil, to take advantage of the supply imbalance south of the border. In the last decade, just as a growing population, increased driving habits and larger vehicles have steadily pushed up fuel demand, numerous Canadian refineries have shut down. With a new refinery costing at least $1-billion, it is unlikely large petroleum firms like Imperial Oil Ltd., Husky Energy Inc., Petro-Canada, Shell Canada Ltd. and Suncor Energy Inc. will ramp up production. "The historical margins at the refineries have been bad. It's well-known that the downstream [refining] sector have had returns on capital that really would not justify them staying in business," said Michael Ervin, president of MJ Ervin & Associates in Calgary. Besides the enormous capital cost, the economics of building new plants are hostage to a volatile commodity cycle that can viciously hammer profits. Petro-Canada, for example, had a negative return of 23% on capital employed in 1991, when the Persian Gulf War caused prices to fluctuate wildly. Only in 1997, when oil prices crashed, has Petro-Canada earned more than 10% from its refining operations in the past decade. "There is a general belief that we're making piles of money, but the downstream business in particular is a very low-margin business," said Donna Hildebrant, a company spokeswoman. "You don't invest a billion dollars to have a profit ride from zero to 5%." Bill Simpkins, a vice-president with the Canadian Petroleum Products Institute in Ottawa, said maximizing production at existing plants is the priority for refiners, not building new facilities. "The returns have been very low and there is not a lot of incentive to build new facilities, but there is a lot of incentive to debottleneck, improve and become more efficient," he said. The high cost of environmental compliance is another reason for the dearth of new refineries. Ms. Hildebrant said Petro-Canada expects to spend between $250-million and $300-million in the next few years to meet stringent sulphur content rules for gasoline. Fuel prices soared to decade highs earlier this month of US$37.50, before the release of 30 million barrels of oil from the U.S. government's reserves last week sent them back to just under US$31.50 per barrel. But Judith Dwarkin, vice-president of global energy for the Canadian Energy Research Institute, says consumers should take little comfort from the respite. The energy think-tank is predicting crude could soaring past US$40 per barrel by early November. "It's not going to be a long-lived thing, it's going to be a spike," Ms. Dwarkin said. "We don't see the stocks of middle distillates moving much and that's going to restore that jitteriness to the market. The refineries are operating at capacity and they can't add to the stocks, in fact stocks went down last week by a million barrels instead of up." Heating oil rose 2% to US94.8¢ per gallon in New York yesterday after a report showed supplies were 36% below last year's level. Prices are up 53% from the same period in 1999. The U.S. government is appealing to its refineries to delay maintenance they typically do in the fall during the lull between the summer driving season and the winter heating season. That shutdown would cut American refinery production by half for about a month. Instead, the government yesterday asked the refineries to concentrate on building up inventories of heating oil. Ms. Dwarkin said some firms have already put off maintenance programs because of strong gasoline markets during the summer and may not be able to wait any longer, prolonging the squeeze on supply. Iraq's Saddam Hussein could also increase the volatility by withholding Iraq's production in protest against 10 years of sanctions by the United Nations and to put pressure on the Nov. 7 U.S. presidential vote, Ms. Dwarkin said. "The very fact that we increase the demand on whatever spare infrastructure that there is out there raises the price. It's certainly becoming a seller's market," said Mr. Ervin. "I think we're going to see an increase in refiner margins if we continue to see demand increase." imckinnon@nationalpost.com

To: Tomas who wrote (75020)	9/29/2000 12:16:04 AM
From: isopatch	Respond to of 95453

Thanks Tomas. LOILY is even better than I thought. Looks like an exceptional value with excellent intermediate and long term growth on the way. Iso

To: Tomas who wrote (75020)	1/3/2001 4:30:07 PM
From: Henrik	Read Replies (1) \| Respond to of 95453

LOILY - pipeline from Papua New Guinea to Queensland, Australia >>The economic viability of the field depends on the proposed pipeline from Papua New Guinea to Queensland, Australia, which is currently being promoted by Chevron and Exxon. The project is at an advanced stage, the final decision to go ahead is not far away.<< Tomas, update from the local paper this morning thecouriermail.com.au PNG gas line faces a $1bn withdrawal Chris Griffith 04jan01 THE proposed Papua New Guinea gas pipeline, possibly the largest Australian project since the Snowy Mountain Scheme, has had another major blow. A letter from the State Government suggesting a delay in building a gas-fired power station at Townsville may lead to a $1 billion expansion project abandoning its plan to generate its power from Papua New Guinea gas. A lack of custom from QNI Pty Ltd, which is planning an expansion to refine West Australian nickel transported to Townsville, would be expected to further undermine the need for the pipeline. QNI needs to have its power source in place for the project by 2003, but a letter in December from the Department of State Development suggests there could be a delay in commissioning the power station until 2004 or 2005. The letter also indicated the Government had rejected two bids it commissioned from the Queensland Power Trading Corporation and the Stanwell Corporation for the station, but negotiations would continue. Industry sources said that delay could tip QNI's hand and the company may now ditch its plans to generate power using natural gas from the proposed pipeline and instead stick with coal-generated steam and power. QNI is to decide what form of energy it will use by mid year. Leading energy consultant John O'Brien, who has worked with one of the bidders, Stanwell, said industry had anticipated gas from on-shore sources would have allowed the power station to have operated from 2003. Mr O'Brien said that without QNI's custom, the demand for gas from the Papua New Guinea pipeline and therefore the need for the pipeline was further endangered. "It puts it in some degree of jeopardy," Mr O'Brien said. He said QNI was expected to draw about 15 petajoules of gas from the pipeline. The pipeline project needed 110 petajoules of custom to be viable. QNI yesterday said the timing of the power station would affect whether it would adopt gas or stay with coal. A QNI spokeswoman said a gas-fired plant at Yabulu would be more efficient "but we can only consider gas if we are not economically disadvantaged". The spokeswoman warned that the timing was crucial. "Should we elect to proceed with the Yabulu extension project and if over-the-fence supply of steam and power is to be considered, it would need to be available by mid-2003." Mines and Energy Minister Tony McGrady said neither he, Deputy Premier Terry Mackenroth, and probably Premier Peter Beattie had seen before yesterday the letter to the bidders from State Development which was written by a bureaucrat. He was previously unaware of the possible delay in the power station to 2004-2005 and said the Government was "100 percent committed" to bringing gas initially to Townsville and then to other parts of the state. The Government still had a target of requiring electricity producers to manufacture at least 15 percent of their power from gas by 2005. Mr McGrady said he would meet interest groups in Townsville on January 11.