From the Belleville News Democrat:
ConocoPhillips Gets Final Permit for New Coke Plant
ConocoPhillips Wood River Refinery has been issued an air permit -- originally challenged by the U.S. EPA -- allowing the refinery to move forward with plans for a new $2 billion coke plant.Tar Sand Oil production and downstream projects like this coker in Illinois are the real driving force behind the Alaska Gas Pipeline. Lower 48 refiners need Canadian crude oil. The Canadian Tar Sand Oil producers need gas to process Tar Sand Oil into a synthetic crude product that can be piped to the lower 48.
The second coker at the Roxana refinery "will allow the facility to process Canadian crude oil and produce a wider variety of fuels," according to a news release today from U.S. Rep. Jerry Costello, D-Belleville. (Link)
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What about Enbridge's pipeline to the west coast and Asian markets?
"CALGARY, Alberta -- Enbridge Inc. (TSX: ENB) (NYSE:ENB) today announced that it has entered into a memorandum of understanding with PetroChina International Company Limited to cooperate on the development of the Gateway Pipeline and supply of crude oil from Canada to China. The Gateway Pipeline is a proposed project to transport 400,000 barrels per day of Alberta oil sands production from Edmonton, Alberta to a port on the west coast of British Columbia where it would be shipped by tanker to China, other Asia-Pacific markets, and California. - April 2005"
California wants natural gas, not tar sand petroleum... but nobody wants LNG terminals, except Baja Mexico.
All the Bay Area refineries recently started retrofitting for heavy grades of crude, though... I thought that was Venezuela, but maybe that's not what they have in mind at all.
What about Enbridge's pipeline to the west coast and Asian markets?
Didn't the PetroChina deal fall apart?
The general point is that the Alaska Gas Pipeline is part of a vertically integrated strategy to produce petroleum products. An AK Gas Pipeline is not justified by peak electric power generation or home heating.
Over all it makes the fair price of the gas and the calculation rate of return hard to calculate based on strictly a $/MMBTU basis. The pipeline is worth more to a refiner because it generates rates of return in the form of petroleum products.
A trader in gas futures would value the gas differently. So much differently that the merchant gas market will not support an investment of this magnitude.
Concerning Venezuela and China - I think Hugo Chavez is keen on doing business with China these days - adding urgency to the Tar Sand / AK Gas development.
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