Wednesday, February 13, 2013

US and Canada do some more dancing on energy

From the FT: US approves $18bn Cnooc bid for Nexen. That headline struck me as odd--why would one non-US company acquiring another non-US company require US approval? But this is the oil & gas industry, and that impacts US security, so bring on a committee review:
Tuesday’s approval from the Committee on Foreign Investment in the US, a multi-agency body that reviews large deals that could affect US security, gives Nexen “all of the requisite approvals to proceed to close”...

Late last year it looked as if Cfius might challenge the deal. In November, Cnooc and Nexen resubmitted their agreement for approval, raising concerns that Cfius was taking a hard line.
Though less than a tenth of Nexen’s assets are in the US, those that are include a series of oil platforms in the Gulf of Mexico. Some of those are near US military assets, leading some to believe that Cfius might block the deal or require mitigation agreements.
The US (or at least two American brothers) has pretty high financial stakes in the Canadian oil & gas industry, as a recent real news interview of BBC's Greg Palast reveals: if the Koch brothers (yes, those down-home folks with their "plan to reshape America")  can get that pipeline through, they can cut out their Venezuelan competition with a cheap alternative, putting an additional $2B or so in their pockets each year. But this time the US interest is not about its energy security, at least according to Palast. Rather, the plan here is to sell the supply on to the Caribbean. From the transcript:
[The Koch brothers says to themselves] If we can use our political muscle to jam a pipeline through the guts of the United States down to Texas...we can make a killing. 
And by the way, they're making an extra killing. When the Republicans were talking about the XL Keystone pipeline making us energy-independent...We're not energy-independent if it comes from Canada. But if it comes from Canada, let's assume that this is our buddies, because they'll give us the oil cheap, and that's what makes them our buddies. 
It also undermines Hugo Chávez. They have to undermine Chávez, which they want to do for geopolitical reasons. 
But then the oil will not be used in the United States. It will be refined mostly for gasoline that will be sold at a premium in the Caribbean. Remember, these refineries are in the Gulf coast. Selling it, then running that stuff back into New Jersey is not a moneymaker. The way you make the money is you sell gasoline in places that don't have the refining capacity and will pay a premium, like, you know, Jamaica, Santa Domingo. That's where your money's going to be made. So this is oil from Canada which will then go into the Koch refineries and sold into the Caribbean.
I admit I am puzzled. How is it in the interest of either Canada or the US to build a mechanism for the Koch brothers to insert themselves as intermediaries in an energy supply chain to the Caribbean? From Canada's perspective, why not cut out the middleman, or to out it another way, why be such good buddies?  Is this a question of risk, cost, technological capacity, logistics, something else? And for the US, if the environmental hazards to communities across the nation are as Palast describes, why subsidize that risk for the greater personal profit of billionaires when the political costs of support for the pipeline seem so high? 

I also don't know the financing of the pipeline, haven't studied it. I am scared to go and look, if I am going to find out that the entire infrastructure is to be underwritten by government.


  1. Unfortunately these types of articles are why have laws such as FATCA passed. The Koch Brothers own one and only one oil refinery in Texas. List below:

    Baytown Refinery (ExxonMobil), Baytown 560,640 bbl/d (89,135 m3/d)
    Big Spring Refinery (Alon USA), Big Spring 61,000 bbl/d (9,700 m3/d)
    Beaumont Refinery (ExxonMobil), Beaumont 348,500 bbl/d (55,410 m3/d)
    Borger Refinery (Phillips 66/Cenovus 50/50 joint venture), Borger 146,000 bbl/d (23,200 m3/d) Nelson Complexity Index 12.3[34]
    Corpus Christi Complex (Flint Hills Resources/KOCH BROTHERS), Corpus Christi 288,000 bbl/d (45,800 m3/d)(KOCH BROTHERS)
    Corpus Christi Refinery (Citgo), Corpus Christi 156,000 bbl/d (24,800 m3/d)
    Corpus Christi West Refinery (Valero), Corpus Christi 142,000 bbl/d (22,600 m3/d)
    Corpus Christi East Refinery (Valero), Corpus Christi 115,000 bbl/d (18,300 m3/d)
    Deer Park Refinery (Shell Oil Company), Deer Park 333,700 bbl/d (53,050 m3/d)
    Double Punch Refinery (Barton Refining), Austin 24 bbl/d (3.8 m3/d)
    El Paso Refinery (Western Refining), El Paso 120,000 bbl/d (19,000 m3/d)
    Galveston Bay Refinery (Marathon Petroleum Company), Texas City 451,000 bbl/d (71,700 m3/d)
    Houston Refinery (Lyondell), Houston 270,200 bbl/d (42,960 m3/d)
    Houston Refinery (Valero), Houston 83,000 bbl/d (13,200 m3/d)
    Independent Refinery (Stratnor), Houston 100,000 bbl/d (16,000 m3/d)
    McKee Refinery (Valero), Sunray 158,300 bbl/d (25,170 m3/d)
    Nixon Refinery (Blue Dolphin) Nixon, Texas 15,000 bbl/d (2,400 m3/d)
    Pasadena Refinery (Petrobras), Pasadena 100,000 bbl/d (16,000 m3/d)
    Port Arthur Refinery (Total), Port Arthur 174,000 bbl/d (27,700 m3/d)
    Port Arthur Refinery (Motiva Enterprises), Port Arthur 600,000 bbl/d (95,000 m3/d)
    Port Arthur Refinery (Valero), Port Arthur 325,000 bbl/d (51,700 m3/d)
    Penreco (Calumet Penreco LLC), Houston
    San Antonio Refinery (NuStar Energy), San Antonio 10,300 bbl/d (1,640 m3/d)
    South Hampton Refinery Arabian American Development, Silsbee, Texas 6,000 bbl/d (950 m3/d)
    Sweeny Refinery (Phillips 66), Sweeny 247,000 bbl/d (39,300 m3/d) Nelson Complexity Index 13.2[35]
    Texas City Refinery (Marathon Petroleum Company), Texas City 80,000 bbl/d (13,000 m3/d)
    Texas City Refinery (Valero), Texas City 210,000 bbl/d (33,000 m3/d)
    Three Rivers Refinery (Valero), Three Rivers 90,000 bbl/d (14,000 m3/d)
    Tyler Refinery (Delek Refining Ltd.), Tyler 62,000 bbl/d (9,900 m3/d)

    As you can see owning ONE oil refinery in Texas is not that big of a deal especially when there are almost as many right next door in Louisiana as in Texas. There are real issues which I could go on and on about the political economy between the US and Canada in terms of where oil flows and what stages of the value chain are added where. The Koch Brothers though are not in my mind significant players in all of this.

  2. I will also add another factual error(I was too busy yesterday to comment myself on Naked Capitalism). One of the largest customers of exported US gasoline is in fact Venezuela. There some people actually trying to Florida Cuban Republicans riled up against the TX/LA oil and gas industry for selling some much gasoline to Venezuela which allows Venezeula to sell its own locally produced gasoline to Cuba and Fidel Castro.

    Blog Post to read

    I can't tell if the above author is left wing or right wing(It seems to be a little of both). This post doesn't say anything about Cuba(perhaps I read that someplace else or I am inserting my own opinion). I don't necessarily agree with the conclusions of this blog post but I think his facts are more correct.