Author Archives: prosperitysaskatchewan

The real reasons for the Keystone gridlock #kxl

The real reasons for the Keystone gridlock

Andy Sullivan

The Globe and Mail

Published Tuesday, Oct. 28 2014, 6:31 PM EDT

Last updated Friday, Oct. 31 2014, 10:31 AM EDT

Canada has staked its future on the oil sands. In November, Report on Business magazine together with Thomson Reuters examine what that means both at home and abroad. Read more from the issue at tgam.ca/oil.

Gary Doer has a front-row seat to political gridlock. From his top-floor office along Pennsylvania Avenue, Canada’s ambassador to the United States can gaze down on courthouses, government agencies and the majestic Capitol complex, which dominates the view to the east.

In the past four years, productive activity in many of these buildings has slowed to a crawl. A bitterly divided Congress has punted on taxes, trade and other matters and allowed government funding to run out last fall. The world’s most powerful military has struggled to respond to new threats in the Middle East while President Barack Obama has watched his gun-control and immigration reform efforts grind to a halt.

Then, of course, there’s Keystone XL. Because the $5.4-billion pipeline (all currency in U.S. dollars) would cross an international border on its way from the oil sands of Alberta to the refineries of Texas, the State Department has to determine whether its construction would serve the national interest. Pipeline projects typically take two to three years to clear regulatory hurdles. TransCanada, Keystone’s owners, have been waiting for six years.

It’s Doer’s job as a diplomat not to get ruffled. With his wavy silver hair and pinstripe suit, the former NDP premier of Manitoba projects the confident air of a man who spends his days managing relations between two close allies. Still, it’s impossible not to detect a hint of irritation in his voice as he talks about the U.S. environmental groups that have turned the pipeline into a high-profile symbol of global warming. “This is an easy item to raise money on: ‘You say no to the pipeline, you’ve solved climate change.’ It’s a pretty good bumper sticker, but it’s not science,” Doer says.

Environmentalists say they are only trying to discourage the development of an especially dirty form of oil extraction. But they agree that Keystone has served as an important symbol in their fight to wean the world’s largest economy from fossil fuels that contribute to climate change. Greenhouse gases may be invisible, but Keystone yields powerful visuals: despoiled forest, oozing lakes of spilled oil, pristine prairie habitat along the proposed route.

Since TransCanada filed its application with the State Department in September, 2008, the project has morphed into one of those hot-button issues, like abortion or gun control, that provide steady employment for Washington’s army of lobbyists and spin doctors. Environmental groups have staged protests in front of the White House, while business groups and construction unions have blanketed Capitol Hill with papers arguing that the pipeline would boost employment by anywhere from a mere 35 jobs to 500,000 jobs. Well over 100 organizations, from the American Jewish Committee to the League of Women Voters, have lobbied on the issue. The State Department has received 2.5 million comments on the topic.

Keystone had the misfortune to come along as U.S. politics was entering a period of deep polarization. As recently as 2008, Republican John McCain campaigned for president on a promise to scale back carbon emissions; now, few members of his party are even willing to say that human activity is contributing to climate change. Democrats have been tugged in opposite directions by labour unions that see the pipeline as a job creator and environmentalists who view it as a chance for Obama to prove his green bona fides. “It’s obviously become a signal of whether the administration is serious about climate change,” Democrat Sheldon Whitehouse, a leading environmentalist in the Senate, said this spring.

The State Department has given Keystone backers plenty to cheer about. It has concluded that the pipeline might encourage oil sands development but wouldn’t meaningfully affect climate change. Transporting the oil by other methods, such as rail, would lead to more accidents and higher greenhouse gas emissions, the department concluded.

The delay on Keystone hasn’t shut down the oil sands, as environmentalists had hoped. But there is evidence that it has hampered development: The State Department estimated last year that 200,000 barrels per day of oil sands crude would travel by rail to U.S. refineries in Texas by December; by June of this year, traffic hadn’t exceeded a quarter of that level.

Few observers were surprised when Obama’s administration announced in April that it would postpone a final decision until a dispute in Nebraska plays out, well after this year’s congressional elections in November.

Since then, the battle has shifted outside of Washington.

On Sept. 5, the Nebraska Supreme Court began hearing a challenge brought by environmentalists and landowners arguing that the state legislature overstepped its authority when it approved a route for the pipeline in 2012. A ruling isn’t expected until early next year.

Rocker Neil Young and country icon Willie Nelson staged an anti-Keystone concert in a Nebraska cornfield on Sept. 27. Advocates convened the “largest climate march in history” in New York and other cities on Sept. 21.

In South Portland, Maine, the city council voted in July to prohibit a pipeline owner from exporting oil sands crude through the second-largest terminal on the East Coast of the United States. The pipeline currently carries oil in the other direction, from South Portland to Montreal, but green groups worry it could be reversed. They are also trying to block a similar project in Washington state.

From coast to coast, green groups are squaring off against business interests in the dozen or so elections that will determine whether the Democrats retain control of the Senate in November. For Obama’s allies, the Senate is an important firewall against the Republican-controlled House of Representatives, which has tried repeatedly to scale back Obama’s environmental efforts.

After years of being outspent by the oil and gas industry, environmentalists have vowed to make climate change a top issue for voters in this election. San Francisco billionaire Tom Steyer, a fierce Keystone opponent, has spent at least $26-million so far to back climate-friendly candidates.

Surprisingly, Keystone doesn’t seem to be playing a prominent role in these campaigns; experts who monitor political advertising say the pipeline is showing up in fewer ads this year than in 2012. This may be due in part to the nature of the battleground, which is largely in conservative states. Democrats in six of the most competitive races are eager to tout their support for the pipeline; for candidates like Mary Landrieu in Louisiana, Keystone is a way to demonstrate their independence from an unpopular president.

Environmentalists also can read opinion polls, which consistently show that a majority of Americans support building the pipeline, even though they believe that humans play a role in global warming. While Keystone may be an effective way to rally the most committed activists, it could backfire in a broader political campaign. Thus environmental groups have sought to localize the impact of climate change by highlighting coastal flooding or algae blooms in the Great Lakes.

They also are defending Obama’s decision this spring to slash carbon dioxide emissions from power plants, which has prompted a fierce backlash in coal-producing states like West Virginia. Mitch McConnell, the Senate Republican leader, has said he will push to repeal the power-plant rules if his party wins control of the chamber.

In theory, Republicans could force approval of Keystone if they control both chambers of Congress after November. The Republican-controlled House of Representatives has voted several times to approve Keystone, and a majority of lawmakers in the Senate, including 17 Democrats, backed the effort in a non-binding vote last year. However, Republican allies expect they will probably still fall short of the two-thirds majority needed to override an Obama veto.

With no resolution in sight, advocates in Washington have little to do except repeat their talking points and speculate about how Obama might eventually rule.

Those who think the president will greenlight the project say it will be hard to ignore the State Department’s findings. Approving the pipeline also would give Obama a bargaining chip with Republicans on other matters.

Those who think Obama will reject it point to the influence of top White House aides like John Podesta and Valerie Jarrett and deep-pocketed donors like Steyer, all Keystone foes. Obama will want to burnish his green record ahead of a global climate conference at the end of 2015, they say, and he also may be reluctant to hand a victory to Prime Minister Stephen Harper, with whom he has a prickly relationship.

Doer says he doesn’t want to guess about the outcome. But he points out that Obama has already taken significant steps to curb emissions, thanks to tightened standards for power plants and automobiles. Now he should keep other factors in mind, like the likelihood of an oil-train wreck, as he thinks about posterity. “He’s not stopping the oil from coming, and he knows that–I heard him say that to people,” Doer says. “I would argue that, God forbid, if there’s ever an accident in the States, I wouldn’t want that to be my legacy.”

Andy Sullivan covers American politics and policy for Reuters News in Washington.

NORTHLANDS COLLEGE ACQUIRES SPACE FOR TRAINING PROGRAMS

NORTHLANDS COLLEGE ACQUIRES SPACE FOR TRAINING PROGRAMS

Released on October 31, 2014

The Government of Saskatchewan has transferred two buildings in Air Ronge to Northlands College for the expansion of the college’s training programs.
“We are pleased to announce the transfer of this property to Northlands College,” Central Services Minister Jennifer Campeau said.  “This is a great example of collaborating as partners to expand training programs and increase the number of skilled workers in the province.”
One of the buildings was being used by Central Services for storage, and the other building on the property was being leased by Northlands College for use as a lab and a classroom.
“These buildings will allow Northlands to expand their programs as they continue to play a key role in educating a skilled workforce in the north,” Advanced Education Minister Kevin Doherty said.  “Northlands is helping all our northern students have opportunities to live and learn at home, and ensuring First Nations and Métis students are part of our growing economy.”
Northlands College acquired the building for the expansion of its training programs and campus facilities.  The building is being used to expand trades and technical programming, including electrical, plumbing, carpentry and power-line training.  Northlands College now owns and is responsible for both buildings and the surrounding property.
“We are extremely appreciative of the Ministry of Central Services for the transfer of these buildings and properties,” Northlands College President and CEO Toby Greschner said.  “These buildings are already filled with students taking trades and mining related programs.  This is a good example of how we are all working together to utilize what we have to meet the training needs of the growing Saskatchewan economy.”
Northlands College provides education, training programs and services that meet the development and employment needs of northerners.  The college offers programs that prepare northerners to participate in the labour market and that help industry meet its labour needs.
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For more information, contact:
Alyssa Pittet Central Services Regina Phone: 306-787-4460 Email: alyssa.pittet@gov.sk.ca
Aimee Pascua Advanced Education Regina Phone: 306-798-3170 Email: aimee.pascua@gov.sk.ca

PotashCorp to ring NYSE bell #potash

31 Oct 2014
The StarPhoenix
THE STARPHOENIX
PotashCorp to ring NYSE bell
Potash Corporation of Saskatchewan Inc. (PotashCorp) will mark its 25th anniversary as a public company by ringing the closing bell at the New York Stock Exchange.
PotashCorp first traded on the NYSE on Nov. 2, 1989.
Five employees, selected as part of a companywide contest, will help ring the bell.
“Throughout 2014 we have celebrated how PotashCorp has played an important role in nourishing human potential,” said Denita Stann, vicepresident of investor and public relations, in a news release. “We are delighted to share this quarter-century milestone with five amazing employees from across our company.”
In 1989, the Canadian company sold four million tonnes of product — all potash. Between 1995 and 1997, a series of acquisitions helped the company bring together world-class assets in all three primary crop nutrients.
By 2013, PotashCorp sold nearly 20 million tonnes of potash, nitrogen and phosphate products transported to approximately 40 countries around the world. Since 1989 the number of employees has increased from 1,200 to more than 5,000 people.
“As a new employee, this has been a terrific year to work at PotashCorp,” said legal assistant Taya Tokarski — one of the local contest winners. “I’ve learned so much about the company’s history through the 25th anniversary videos and stories and now I’m going to New York City for the first time to experience the bell ringing!”

Mexico readies for its first dance with oil

31 Oct 2014
Leader-Post
BY YADULLAH HUSSAIN Financial Post yhussain@nationalpost.com Twitter.com/Yad_FPEnergy
Mexico readies for its first dance
The accelerated timetable gives companies less time to study
Eagle Ford may be North America’s most prolific shale gas basin with more than 8,000 wells drilled in the region. By contrast its Mexican cousin, Burgos basin, just across the border, has barely seen any action. But that may soon change.
In a span of just two years since his 2012 election as Mexican president, Enrique Peña Nieto has swept aside stateowned Petróleos Mexicanos (Pemex) 76-year monopoly over the country’s oil and gas sector with a constitutional amendment and a string of new laws.
“The constitution was passed quickly and the secondary laws were passed with blinding speed, and the regulations are being implemented,” says Jay Park, a Calgary-based lawyer who has been advising Pemex since 2003. “Everybody I know in the Mexican government is working eighteen-hour days to get this done.”
While Mexico and Canada compete to supply heavy oil to U.S. Gulf Coast refineries, some Alberta companies are reportedly eyeing opportunities across the boarder in Mexico as North America’s last energy frontier opens up.
“Mexico is a unique opportunity right now,” says Peter Volk, general counsel and secretary at TSX-listed Pacific Rubiales Energy Corp. The company has been targeted by Mexico based-Alfa Group, which has taken a 19% stake in the company in recent weeks in a bid to to leverage Pacific Rubiales’ expertise in heavy oil.
Mexico has watched with envy the shale oil plays in the United States and Canada, especially the Eagle Ford basin in Texas that now yields more than 1.5 million barrels of oil per day. Meanwhile, only 25 wells have been drilled on the Mexican side, even though the play is expected to contain 60 billion barrels of oil.
“Mexico is a virgin market,” says Oscar Lopez, E& Y’s Mexico City-based oil and gas leader. “There is opportunity to produce an additional market of the same size as we have today — 2.5 million bpd market.”
The International Energy Agency has more subdued projections for Mexico’s crude oil output, but that may change as the president pushes through with reforms. If all goes to plan, the country could attract US$350-billion in investments within a decade, according to some estimates.
While there is considerable resistance in Mexico to hang on to the family silver, Pemex is struggling to maintain production and also fund the government’s revenues. The company revenues make up 4.7% of Mexico’s GDP, and accounts for 30% to 40% of government revenues in taxes.
To appease critics, Mexico’s Energy Ministry (SENER) granted Pemex about 83% of the country’s proven and probable reserves to exploit on its own — known as the Round Zero allocation — when it announced the historic opening of the sector in August.
But that’s likely to encourage, not dissuade, American and Canadian companies.
“The biggest opportunity right now is Round Zero,” says Eduardo Rodriguez Jr., who founded Calgary-based Flatstone Energy, which advises Canadian clients on Mexican opportunities. “There are a number of opportunities for farm-outs and enhanced oil recovery projects that provide tangible opportunities for Canadian companies.”
The overall estimated investment for these projects could reach US$32.3-billion over a five- to 10-year time frame, according to Citibank estimates.
Pacific Rubiales has already taken that route, this month signing a deal with Pemex focused on exploration, deepwater projects, revitalization of mature fields, and heavy and extra-heavy oil.
“We feel that identifying and working with Mexican partners are really the only ways to properly enter the market,” Mr. Volk said, noting that government-ownership of the oil and gas sector is embedded deep in the Mexican culture.
The key opportunities are in exploration and production, Mr. Rodriguez says. “It’s a bit like a first dance — who will start first, and Pacific Rubiales has taken the lead. Within next 12-24 months, we will see a number of other players going to Mexico.”
As part of the opening of the sector, SENER has also rushed to identify 169 production blocs, off and onshore, with total reserves of about 18 billion available for foreign investors in the so-called Round One bidding set for next year.
“All of these assets, though will require significant investment,” said Ernst & Young in a report, noting that the initial bid for the first round will likely come in November, with the tendering process starting early next year.
“The accelerated timetable gives companies less time to study the available opportunities, develop a detailed strategy for pursuing Mexican assets and prepare bids.”
International companies would also take a long hard look at a the new jurisdiction at a time of when shareholders have little patience for marginal projects. But Mr. Park says many of the laws are being based on the “Canadian model” that would appeal to companies.
Canadian companies would also be mindful that their focus in Mexico may hurt them back home, as both countries compete to supply heavy oil to the U.S. Gulf Coast.
Mexican offshore heavy oil is a short tanker ride to the cluster of U.S. Gulf Coast refineries, while Canadian oil has to traverse through environmental opposition, get on barges, rails and choked pipelines across the length of the United States to get to the coast.
While Canadian oil is ascendant in the Gulf Coast in sharp contrast to receding supplies from Mexico, the country could emerge as a threat in future.
“I don’t think Mexico is a threat,” says EY’s Mr. Lopez. “The heavy oil requirements from the U.S. are extremely big. I see North America as an integrated oil-producing area, with Canada and Mexico complementing each other.”
For TransCanada Corp., Mexico’s infrastructure deficit is clearly an opportunity. The company has US$2.6-billion worth of natural gas investments in Mexico, comprising five pipelines, of which two are under construction.
“The gas infrastructure required in Mexico is growing significantly,” said Karl Johannson, president of TransCanada’s natural gas business. “Mexico is looking at the North America market and saying they want to be a bigger part of that. So they are building infrastructure from the centre of the country out north and connecting to the greater North American grid.”
The Calgary-based company also plans to bid for two power projects with a combined value of $1.5-billion, and is also eyeing opportunities to service the oil sector that may require as much as 15,000 kilometres of new pipelines.
“We have been talking to Pemex over a period of time,” Mr. Johannson said. “Right now, 100% of our business is in power and utilities in Mexico, but it’s not lost on us that Pemex is a pretty big market as well, and we would love to start doing some business with them.”
Security issues are often overplayed as well. “You have to be aware of security and build it into your plan, but it’s not something that we found have limited our ability to do business in communities,” Mr. Johannson said.
But there is opposition to development from some groups, including labour union leaders that have a vested interest in maintaining the status quo, and that may come to the fore as companies venture out on their own with Pemex’s cover.
“My feeling is that there is clearly a divide,” said Mr. Rodriguez.
“There is obviously conflict of interest from all the unions. They have a hand in the kitty — some of the union leaders are millionaires and have private jets — they continue to argue that oil is for the people.”

Cattle producers enjoy high prices after years losing money – 5x’s higher

1 Oct 2014
Leader-Post
SCOTT LARSON THE STARPHOENIX
Cattle producers enjoy high prices after years losing money
SASKATOON — Paula Larson hasn’t seen the prices she is getting for her cattle in her lifetime.
“Right now this is the first time that these cattle have paid their own bills,” said Larson, a cattle producer from D’Arcy and chair of the Saskatchewan Cattlemen’s Association.
That’s a far cry from a few years ago when it was next to impossible to make money as a cattle producer.
For example, Larson said in 2009 she sold a number of dry (cows that are not pregnant) and received $300 a head for them.
“This summer I sold dry cow and sold them for $1,500 apiece,” she said. “I sold 20 head in 2009 for the same amount of money I got for four in 2014. That is how the world has changed for me.”
Larson operates a 250 cow/ calf operation, said much of the price increase has to do with dwindling herds across North America.
The number of cattle in Canada has gone from a peak of more than five million breeding cows in 2005 to about 3.9 million today.
“It is simply because the number of animals in North America keeps going down,” Larson said of the price increase. “That is because of the tough, tough markets that we had. People my age and older started saying, ‘We are taking a loss on these animals. We can’t do this any more,’ and they got rid of their cows.”
The higher prices paid for cows is translating to higher beef prices at the local grocery store. But the price hikes are not uniform on all cuts of beef.
For example, cuts such as rib-eyes and strips have risen about 30 per cent in the stores over the last eight years. But ground beef prices have more than doubled.
Larson said there are a number of reasons why ground beef has risen more.
“There is a lack of culled cows,” she said. “Those numbers are not here anymore and that is why they are worth something.”
It’s also because more and more customers are choosing hamburgers. With two-income families, there is little time to spend in the kitchen and hamburger becomes a staple.

Regina housing starts down, Saskatoon up

31 Oct 2014
Leader-Post
BRUCE JOHNSTONE bjohnstone@leaderpost.com
LEADER-POST
Backlog to slow down builders
Drop seen in Regina construction
With more than 400 unsold new housing units on the market, Regina’s housing construction activity is expected to slow by 25 per cent in 2014, followed by an 8.5 per cent reduction in 2015 and a 2.3 per cent decline in 2016, according to the Canada Mortgage and Housing Corp. (CMHC) fall housing market forecast.
Total housing starts in the Regina area are on pace to reach 2,350 units in 2014, with 2,150 and 2,100 starts projected for 2015 and 2016 respectively, CMHC said Thursday.
“We’re seeing a moderation in housing starts in Regina,” said Goodson Mwale, CMHC’s senior market analyst for Saskatchewan, noting that both 2013 and 2012 were “very strong years” for housing construction in the Regina area, with 3,122 and 3,093 total starts respectively.
But builders got ahead of themselves, resulting in a backlog of 146 unsold single-family homes and 273 condo units by the end of September, forcing them to slow down the pace of construction in 2014. “This year, we’re definitely seeing a pullback in terms of the number of starts, particularly in the single-detached sector,” Mwale said.
Single-detached housing starts are expected to decline to 750 in 2014, down 40 per cent from 1,246 singlefamily dwellings started in 2013, and fall further to 725 starts in 2015.
As a result, new home prices are also expected to moderate, with Statistics Canada’s new home price index (NHPI) projected to rise 1.8 per cent compared with 2.9 per cent in 2013, with similar increases in 2015 and 2016. The average new home price is forecast to increase modestly to $509,000 in 2014, before rising to $517,000 in 2015 and $522,500 in 2016, CMHC said.
Multi-family dwellings, which consist of semi-detached units, row houses, and apartments, are projected to reach 1,600 units in 2014, down 15 per cent from 1,876 in 2013, falling to 1,425 in 2015 and 1,400 in 2016.
“Rising inventory, a slower employment expansion, and lower net migration are contributing to fewer multifamily starts in Regina this year,” Mwale said. “These factors will reduce housing starts further over the next two years.”
By contrast, Saskatoon will see housing starts rise 10.7 per cent to 3,300 in 2014, before declining to 3,125 in 2015 and 3,050 in 2016.
Stu Niebergall, president and CEO of the Regina & Region Home Builders’ Association, said the CMHC forecast seems reasonable and agreed that the unsold inventory of new housing units is holding the Regina market back somewhat. “I think it’s pretty close to the mark,” he said.
Niebergall noted most of the unsold housing units are multi-family dwellings, either semi-detached or apartment-style units. “On the single-detached side, that inventory … isn’t going to be a challenge for the market to turn over,” Niebergall said. “The market can absorb that.”
He added that Regina still has a “reasonably healthy market.” “We’re at very low risk of seeing a big housing price correction. But I don’t think we’ll see price escalation for quite a period of time.”

Low kimberlite discovery rate seen sparking diamond production crisis by turn of decade

Low kimberlite discovery rate seen sparking diamond production crisis by turn of decade

The stability of the diamond sector has always been a slave to the fine balance between supply and demand. Over the last century, the industry has had to contend with various crises of oversupply, largely spurred by conflict, global economic instability and the vagaries of consumer demand. As a result, it has been at the mercy of drastic price troughs.

The most recent crisis, spurred by the 2008 global financial recession and a sharp fall in gem prices in 2011, is still fresh in the mind of the industry, although there are definite signs that the sector is beginning to recover with steady growth of consumer demand, and the stabilisation and steady increase of diamond prices.

De Beers’ recently published Diamond Insight Report 2014 reveals that global demand for diamond jewellery reached a record high of $79-billion in 2013. The report also states that demand is expected to continue to grow over the long term, driven by ongoing economic recovery in the US, as well as the growth of the middle classes in developing markets, such as China and India.

However, while recovery is expected to continue for the next four years, which will facilitate a more balanced market, there is growing consensus among analysts and industry stakeholders that a new spectre – that of waning production – now looms on the horizon and threatens to disrupt that recently restored balance by the close of the decade.

The Diamond Insight Report reveals that global rough diamond production has already begun to decline from a peak of 175-million carats in 2005 to 145-million carats in 2013. The report also states that the forecast reduction in supply from existing sources is not likely to be matched by new production coming on stream in the years ahead; diamond supply is expected to plateau in the second half of the decade before it is expected to decline from 2020.

Speaking at the Kimberley Diamond Symposium 2014 last month, junior miner Tsodilo Resources president and COO Michiel de Wit elaborated that, while there are several new projects set to come into production over the next few years – including the Grib mine, in Russia; the Botuobinskaya project, in Siberia; the Gahcho Kué, Renard and Jay mines, in Canada; as well as the Lace, Liqhobong, and Ghagoo mines, in Southern Africa – these projects are quite small and will only add some 17-million carats a year to global production.

“Cumulatively, these projects will not have a major effect on the steady decline on production of rough [diamonds], and the downward trend is forecast to accelerate over the next few years,” warned De Wit.

He further emphasised that the widening gap between supply and demand is a reality, which “will not do the diamond industry any good, as it will open a feed for synthetics and recycling”.

Downward Slump
The looming production crisis can be attributed to the significantly low discovery rate of economically viable kimberlites since the turn of the century.

De Wit states that even new projects coming into production consist of kimberlites that were found decades ago.

Interestingly, since the discovery of the first diamondiferous kimberlite pipes in the Northern Cape in the 1870s, more than 8 000 kimberlites and lamproites have been discovered worldwide, 43% of which are directly attributable to De Beers’ exploration efforts over the past five decades.

However, this significant number belies the difficulties associated with diamond prospecting, as only 15% of kimberlites have proven to be diamondiferous. More astonishing is that, of that vast number of discoveries, only 67 deposits have had a resource sufficient to justify the economics of establishing a mine with sustainable production, while only seven deposits are classed as Tier 1 deposits and account for 62% of rough production.

The heyday of diamond exploration was the period between the 1960s and early 1980s, which yielded the remarkable Tier 1 discoveries of the Orapa and Jwaneng mines, in Botswana, and Venetia, in South Africa.
Meanwhile, though diamond prospecting has continued, although at a much-reduced rate since 2008, the rate and nature of economic kimberlite discoveries has declined substantially.

According to the Diamond Insight Report, the industry has spent almost $7-billion since 2000, with only meagre results to show for its efforts. Only one diamond deposit of significant size, Bunder, in India, was discovered during this period.

Moreover, the average size of kimberlites that contain diamonds has decreased significantly from just over 30 ha in the 1940s, to just 2 ha in the past decade.

“These statistics show not only that the number of discoveries has decreased significantly, but also that the sizes of more recently found kimberlites are substantially smaller than those found several decades ago, which even further reduces the already tight supply of rough [diamonds] for the future,” states De Wit.

De Beers exploration head Charles Skinner believes that the decline in the diamond discovery rate is attributable to a decrease in exploration effectiveness over the last two decades, exacerbated by the fact that key prospective areas lie in countries that are deemed a political risk.

Skinner says finding an economically viable kimberlite is significantly more difficult than looking for other minerals. Key factors contributing to the decline in appetite include: the difficulty of retaining expertise, particularly operational competencies and in-house knowledge and science; rising costs, which results in longer lead times and less perseverance; and increasing prerequisite regulatory compliance and best practice, particularly in the US, the UK and the European Union.

Skinner adds that these factors, coupled with the recent cycle of depressed prices and a scarcity of venture capital for mineral exploration, have resulted in a prominent exit from diamond exploration by juniors and key majors.

Reiterating this sentiment, exploration and development company Incubex Minerals CEO John Bristow tells Mining Weekly that global diamond exploration is, currently, “pretty dismal”.

“There is little true exploration work being undertaken in Africa, particularly in Southern Africa, with most of the current projects seeking to evaluate or re-evaluate already known deposits.

“At this point in time, companies, particularly the majors, are just so protective of their balance sheets that they are unwilling to release the funds necessary to pursue green- or brownfield diamond exploration, and junior explorers and miners have been decimated.”

Greenfield diamond exploration is a difficult process and can be prohibitively expensive and lengthy. Typically, the work programme to undertake an initial indicative grade test on a kimberlite pipe of five to ten hectares might take a month and cost $1-million, while determining its potential economic viability might take up to 12 months and cost between $2-million and $4-million. Thereafter, the resource evaluation to deliver a conceptual study, which can take up to 18 months, can cost between $10-million and $35-million.

Illustrating this general sentiment is midtier miner Petra Diamonds technical director Jim Davidson, who tells Mining Weekly that, given the reality of the poor success rate of diamond exploration, Petra Diamonds does not allocate material resources to its exploration arm, spending only between $3-million and $5-million a year, against a total group revenue of $427-million last year.
“At this point in time, we do not envisage any significant increases to this spend,” says Davidson.

This is despite Petra Diamonds’ success in its limited exploration programme, having discovered the KX36 kimberlite pipe in Botswana several years ago. Davidson elaborates that the kimberlite is now close to being classified a ‘deposit’, although more work is required to prove the diamond grade and value.

Outlook
With diamond
exploration proving less successful, are there any other large economically viable kimberlite deposits left to discover? And will there be an upswing in prospecting activities in the near future, particularly in light of a looming production crisis?
Fortunately, the understanding of the geological complexity of kimberlites has deepened over the past two decades, along with the required
expertise, technologies and techniques to effectively target, discover and assess diamond deposits.

On that basis, there is a general consensus among geologists that there are parts of the globe that are still highly prospective and could yield large kimberlite discoveries.

Southern Africa, particularly parts of South Africa, Botswana and Lesotho, are still prospective, insists Bristow.

“There is still room for good junior mining development across all commodities, not just diamonds,” he says, adding that there are still parts of South Africa, namely the Northern Cape and the Bushveld Complex, where the geological setting is not entirely understood, and intensive and fairly detailed exploration could still yield important mineral discoveries.

Given that there are still highly prospective areas in Southern Africa, Bristow believes there could be a resurgence of diamond exploration in the future.

However, regarding South Africa, he notes that to unlock the untapped mineral potential of this unique and still highly prospective country, there is an urgent need to make the local mineral title application and compliance process more user-friendly for exploration and mining companies.

“We are at the bottom of the cycle and are beginning to see a change in the attitude towards cold exploration. The recent diamond symposium in Kimberley, which was surprisingly well attended by a range of industry, academic, manufacturing and supply company representatives, is certainly an indication that the horse hasn’t entirely bolted from the stable, and the jockeys are starting to mount up again, ready for the next race of diamond exploration,” Bristow avers.

While it cannot be argued that De Beers, the major player in Southern Africa for the last 126 years, has dropped the exploration baton entirely, the scale of its prospecting activities has reduced.

“Post 2006, De Beers completely refocused its exploration business to align [with] the reality of the future – where we need to be, what we need to do to be successful and how much it would cost, but in a manner that would ensure sustainability of the exploration business over the longer term,” states Skinner.

The group is currently focusing its exploration activities on South Africa and Angola, which De Beers believes to be the most prospective countries in Southern Africa.

No Keystone? No worries #kxl

No Keystone? No worries
Kristen Hays And Terry Wade
Special to The Globe and Mail
Published Tuesday, Oct. 28 2014, 6:29 PM EDT
Last updated Friday, Oct. 31 2014, 5:15 AM EDT
Canada has staked its future on the oil sands. In November, Report on Business magazine together with Thomson Reuters examine what that means both at home and abroad. Read more from the issue at tgam.ca/oil.
In the Gulf Coast, home of the U.S. refining industry, the long limbo of the Keystone XL pipeline matters less than you might think if you’d only followed developments in western states and Washington.
Refiners in Houston and within a 500-km radius of the world’s energy capital are turning the U.S. Gulf Coast into the bottom of what is essentially a giant funnel of oil delivered by pipelines, railroads and river barges. If Canadian crude isn’t coming via Keystone, the industry will find other ways.
The U.S. Midwest is the top initial destination for Canadian crude, as it is home to the U.S. crude futures and storage hub in Cushing, Oklahoma. In June, more than 70 per cent of the 2.8 million barrels per day of Canadian oil exported to the United States reached the Midwest, while about 5 per cent headed for Gulf Coast refiners.
But more is set to flow further south as alternative routes less direct than Keystone crop up. Gulf Coast refiners want Canadian crude, Canada wants them to have it, and middlemen are increasingly opening paths of least resistance. “The world has had to move on without it,” Rusty Braziel, president of consultancy RBN Energy, said in August of Keystone XL. Keystone would complement four major cross-border pipelines that already carry Canadian crude to the U.S.
Heavy Canadian crude, or bitumen in its undiluted form, is practically tailor-made for the massive U.S. Gulf Coast refining complex, which has long been configured to run heavy Latin American crudes arriving by tanker. Thanks to its attractive prices and surging output, Canadian output is displacing crudes from Venezuela and Mexico along the Gulf Coast.
Refiners see Canada as a friend-ly, stable source of cut-price crude, unlike Venezuela or other oil-producing countries plagued by war or unrest.
What’s more, Gulf Coast refiners have limited capacity for the growing flood of light sweet crude from shale patches in Texas and North Dakota. That surge has lifted U.S. crude output to a 25-plus-year high and put pressure on Congress to lift a decades-old ban on exporting crude.
While some refiners are making adjustments to run more lights, large-scale retoolings would cost billions and make little sense, since heavy crudes are usually cheaper than U.S. light-sweets.
Refiners also want flexibility to mix and match from the growing number of North American crudes, from Canadian heavy to light-sweets in North Dakota’s Bakken shale, the Permian Basin in Texas, and more burgeoning oilfields in Oklahoma, Colorado and Wyoming. To that end, U.S. refiners and logistics companies are adding pipeline connections and terminal capacity along the Gulf Coast at a dizzying clip.
The more cheap crude they can get, the more the refineries can run at full tilt and maximize profits by exporting gasoline and diesel as domestic demand slips.
Linkages to move Canadian crude to the Gulf have already been built, and workarounds to Keystone XL are under way.
TransCanada split the original Keystone project in two so it could move ahead with its 400,000-bpd Marketlink southern leg, which runs from the Cushing oil hub to the Gulf Coast.
Seven new or expanded pipeline projects aimed at moving Canadian crude to the Gulf Coast are slated to start up by 2016, adding combined capacity of 2.5 million bpd. Those include the 450,000-bpd Seaway Twin, a Cushing-to-Texas joint venture of Enterprise Products Partners and Enbridge that is awaiting flows from Enbridge’s 600,000-bpd Flanagan South Illinois-to-Cushing line later this year.
The Twin runs parallel to the original Seaway pipeline, which Enterprise and Enbridge reversed and expanded to 400,000 bpd from 150,000 bpd early last year to move Cushing flows south. Some of the crude transported in the original Seaway is Canadian, while the Twin will move most if not all Canadian.
Enbridge’s plans to sharply expand its 450,000-bpd Alberta Clipper system, which moves Canadian crude to the company’s U.S. system, is caught up in the same kind of permitting delays that have dogged Keystone XL. Now the company is contemplating the construction of a 140,000-bpd crude-train unloading terminal in Illinois to help fill Flanagan South and the Seaway Twin.
Other projects are already there. More than a dozen rail or rail-to-barge projects along the Gulf Coast and Mississippi River can receive a total of 1.2 million bpd.
Valero Energy Corp., the largest U.S. refiner, in March started a 20,000-bpd rail offloading operation at its St. Charles refinery in Louisiana that takes Canadian crude. More comes via barge.
Valero, Exxon Mobil Corp., Phillips 66, LyondellBasell, Marathon Petroleum Corp. and Royal Dutch Shell also receive Canadian crude at refineries in Texas and Louisiana. “It’s coming already,” Valero spokesman Bill Day said of Canadian crude.
TransCanada has said it might get into the rail game too. As an alternative to Keystone XL, Braziel of RBN Energy said that pipeline companies may build new lines to a rail terminal at the border, where crude would be transferred to a train.
Logistics behemoth Kinder Morgan Energy Partners this summer started up the largest of the Gulf Coast rail projects at its operations along the bustling Houston Ship Channel. Kinder’s joint venture with Watco Cos. can take up to 210,000 bpd of crude from U.S. sources as well as Western Canada. “We will go bigger,” says John Schlosser, president of Kinder’s terminals division. “We have to stay ahead of our customers’ growth. We want to be the destination of choice, so we will continue to grow.”
Even as pipelines start up, rail will stay big for Canadian crude, logistics executives say. Canadian oil must be diluted to flow in a pipeline, but a heated railcar can carry pure bitumen. And demand for undiluted Canadian crude is growing. “That’s the holy grail from Canada. It’s what refiners want, and we’re being driven by that,” says Bart Owens, vice-president and general manager of GT OmniPort, a rail and vessel terminal in Port Arthur, Texas.
Rail terminal operators are increasingly installing heated pipes and boilers–portable or stationary–for bitumen. At GT OmniPort, which is next door to three major refineries and 150 km from many more, a portable boiler will hook up to the pipes and fill them with steam to melt the bitumen so it can be offloaded, Owens says. “It turns the thick stuff into thin stuff.”
Terry Wade is Reuters News’ Houston bureau chief. Kristen Hays is a bureau member focused on energy.

TransCanada touts Energy East benefits for refiners, export markets

TransCanada touts Energy East benefits for refiners, export markets
Shawn McCarthy – GLOBAL ENERGY REPORTER
OTTAWA — The Globe and Mail
Published Thursday, Oct. 30 2014, 5:20 PM EDT
Last updated Thursday, Oct. 30 2014, 5:24 PM EDT
TransCanada Corp. is promising its proposed $12-billion Energy East pipeline will drive down the cost of crude for eastern Canadian refiners – and their consumers – while opening new export markets including on the U.S. Gulf Coast for western oil producers.
The company filed a 30,000-page application on Thursday with the National Energy Board, which is expected to take up to 18 months to review the project before making a recommendation to the federal cabinet for a final decision.
In a news conference in Toronto, TransCanada chief executive Russ Girling said the pipeline represents the safest and most economical way to transport crude from Western Canada to refiners that are increasingly relying on rail to access cheaper North American crude and replace higher-priced offshore imports. He noted the company has 20-year shipping contracts covering more than 900,000 barrels a day (b/d) of the project’s proposed 1.1 million barrels-a-day capacity.
“These confirmed, long-term contracts demonstrate the strong desire for eastern Canadian refineries to access growing supplies of domestic crude oil and for Canadian producers to potentially reach both domestic markets and international markets in the safest and most efficient means possible and that is in a pipeline,” Mr. Girling said.
With Energy East, TransCanada plans to convert portions of its mainline natural gas system to carry crude as far as Eastern Ontario, adding new pipe to get oil to refineries and tanker ports in Quebec and New Brunswick.
He said the pipeline could deliver light oil from western North America to refineries in Quebec and Saint John, N.B., for $10 (U.S.) a barrel less than it costs to ship it by rail. Deliveries to the U.S. Gulf Coast by Energy East and supertanker would be $6 a barrel less than the current costs of shipping Alberta by rail, and would be competitive with other pipelines, Mr. Girling said.
TransCanada expects roughly half of the volumes shipped along Energy East will be used at refineries in Quebec and New Brunswick, which currently import about 700,000 b/d of crude, though rising volumes come from the United States. The most attractive export markets will be the U.S. East Coast for light crude, and the U.S. Gulf Coast, Europe and even western India for diluted bitumen from the oil sands, the company said.
While the project has won support from premiers in Alberta and New Brunswick and from the Harper government in Ottawa, approval is no slam dunk.
Natural gas customers in Ontario and Quebec oppose the plan to convert for oil use a key section of natural gas mainline through eastern Ontario. TransCanada also filed on Thursday for NEB approval for its $1.5-billion (Canadian) plan to build a 250-kilometre gas pipeline from southern Ontario to Quebec, a project it says will ensure customers have all the gas they need and will save $900-million over 15 years.
But distributors such as Montreal’s Gaz Métro and Ontario’s Union Gas and Enbridge Gas Distribution insist the plan will hurt their customers, and they want the NEB to order TransCanada to build keep the Eastern Ontario gas line in service and build new pipe from North Bay to Cornwall to carry crude.
The company also faces opposition from environmentalists who warn about risk of spills and increased greenhouse gas emissions from growing oil sands production that new pipelines support. The National Energy Board has indicated it won’t review the upstream impacts of GHG emissions, but environmental groups have launched court challenges in British Columbia to force the regulator to include such analysis in pipeline reviews.
TransCanada executive vice-president Alex Pourbaix said the company has consulted extensively with First Nations along the route and has benefits agreements with many, but regional chiefs in Ontario and Quebec say that effort has been insufficient. Failure to gain their support could result in lengthy lawsuits and delays.
“Over all, there has been very minimal contact so for them to say they have consulted First Nations, it falls well short of what’s expected,” said Lloyd Philips, a chief in the Mohawk community of Kahnawake and member of the chiefs’ council for the Assembly of First Nations of Quebec and Labrador. “There has to be proper consultation and accommodation of the aboriginal rights of our people … We need to be full partners in any development on our lands.”

Oil below $100 (U.S.) oil will ratchet up geopolitical tensions

Oil below $100 (U.S.) oil will ratchet up geopolitical tensions
CHICAGO — Reuters Breakingviews
Published Thursday, Oct. 30 2014, 5:30 PM EDT
Last updated Thursday, Oct. 30 2014, 5:30 PM EDT
Sub-$100 (U.S.) per barrel crude may inflame geopolitical tempers in 2015. The sharp slide in the oil price since June from triple digits into the $80- to $90-range is turning up the heat on oil producers. But two of the world’s most flexible suppliers – Saudi Arabia and U.S. shale drillers – can stand the pain for some time.
OPEC linchpin Saudi Arabia needs an average oil price of around $92 per barrel to cover public spending, according to analysts surveyed by Thomson Reuters. Even with the recent price slide, Brent crude oil has still averaged well over $100 a barrel over the past six months. The price would have to stay below Saudi’s break-even level well into 2015 before OPEC’s swing producer starts to feel the pinch. Even then, the kingdom has roughly $770-billion of foreign reserves, enough to cover shortfalls for years.
Analysts say U.S. shale drillers, the newest arrivals among big global producers, mostly need an average oil price of $60 to $80 to break even. But the precise number varies widely, and drilling costs have been falling as engineers become more experienced. The companies involved may just step up cost-cutting efforts or divert investment to cheaper oil fields rather than cutting supply if prices stay low.
Some petro states won’t have it so easy. Venezuelan President Nicolas Maduro, for instance, needs a crude price of about $117 a barrel to pay his government’s bills – second only to Iran’s $136. The Latin American nation’s financial difficulties could morph into a political crisis. OPEC members in need of such high prices may not take kindly to Saudi Arabia’s stance.
Vladimir Putin’s Russia, meanwhile, relies on oil and gas to fund more than half government spending. And at just $92-billion as of September, its rainy-day reserve offers only a limited buffer. A fall in oil revenue combined with the impact of sanctions over Ukraine could choke off growth in 2015.
The Saudi-U.S. shale dynamic suggests that without a big shock to supply elsewhere, prices in the $80 range could hold in the coming year. For oil users, whether industrial importers or car-loving consumers, lower prices will provide a boost. But within the OPEC group and beyond, reduced oil revenue could make political tensions worse.
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