While in Alberta last week, I was surprised to see a story in the Edmonton Journal that had energy industry types less than enthusiastic about the current spike in oil's price.

From the Jan. 2 Edmonton Journal:

"It's like people with their noses pressed up against a window watching a party go on," said Gary Leach, executive director of the 470-company Small Explorers and Producers Association of Canada.

"We're fairly discouraged at the moment," said Don Herring, president of the Canadian Association of Oilwell Drilling contractors.

"The actual impact of a big increase or drop really isn't felt much now by the Alberta industry," agreed Greg Stringham, vice-president of the Canadian Association of Petroleum Producers.

Here's the deal:

International prices for February deliveries topped $100 US a barrel for the first time before easing to close today at $96.67, up $2.69. Conflict in Nigeria, limited stockpiles in consumer countries and weakness in the U.S. dollar's value heated up global trading in New York.

But effects of price highs are spread unevenly across an Alberta industry divided into light oil, oilsands and natural gas producers, Leach and Stringham said.

Less than half of Alberta oil production is the premium grade flowing from traditional wells that fetches full international prices, the industry spokesmen said. Conventional output peaked in Alberta about 30 years ago and has been steadily declining for about two decades.*

* Emphasis mine - BD

Alberta output is increasingly oilsands bitumen and heavy crude that costs more to tap but sells at quality discounts of 30 per cent to 60 per cent off the global benchmarks, said the CAPP and SEPAC officials, whose groups represent virtually all Canadian production.

Oilsands developers cannot jump to take quick advantage of international prices because their megaprojects take five to 10 years to build and follow plans based on energy outlooks for four to six decades, Stringham said.

In the industry's swifter conventional drilling segment "we're still in the gas business," Herring said.
"We're going to have a pretty bad 2008" as field activity and employment drops towards 1990s lean-times lows with only about half the drilling rig fleet employed, the CAODC president predicted.

Natural gas fuels about 70 per cent of Alberta drilling and provincial royalties, and its prices continue to lag far behind oil.

Prices for Alberta gas only rose modestly Wednesday to $6.55 per gigajoule, or still nearly 40 per cent below the $9 that industry leaders say is required to revive the brisk pace of drilling in the bygone boom of 2005-06.