Summary: Canada’s oil sands are becoming one of America’s major sources of oil, and our dependence on it can only grow. This new report tells the story, with some eye-opening graphics: “Canada’s Oil Sands: Shrinking Window of Opportunity“, by RiskMetrics Group for Ceres, May 2010.
Contents
- Introduction
- Executive Summary
- Key Report Findings
- Oil Sands Production Primer
- Tailings Production
- Contingent Liabilities
- For more information, and an Afterword
(1) Introduction
From “Role of Canadian Oil Sands in US Oil Supply“, Cambridge Energy Research Associates (CERA), 21 April 2010 (31 pp):
“Geography has made us neighbors. History has made us friends. Economy has made us partners. Necessity has made us allies.”
—John F. Kennedy, Address Before the Canadian Parliament, 17 May 1961 (source)
What is the role of Canadian oil sands in US oil supply today and in the future? The answer to the first part of the question is clear: growth in oil sands production has been the main driver in making Canada the largest supplier, by far, of foreign oil to the United States. Oil sands production grew from 0.6 million barrels per day (mbd) to 1.35 mbd from 2000 to 2009, more than a twofold increase.
… The more challenging question is about the future. Even if nothing changes, the oil sands, by virtue of their size today, will be an important source of supply for many years to come. But the growth potential is much bigger—volumes could be as much as three to four times higher in 2030 than in 2009. But how much of that potential will be realized is subject to a range of economic, political, and environmental variables.
From the RiskMetrics report:
(2) Executive Summary of the Riskmetrics report
ExxonMobil, Shell and ConocoPhillips, has a financial stake in this resource, with $200 billion committed to current and future oil extraction projects covering an area the size of Greece. These companies are betting that demand for higher-priced oil is here to stay. As oil prices climb above $80 per barrel, producers are optimistic that they can double oil sands production over the coming decade, and more than triple output by 2030 to produce more than 4 million barrels per day. That is more than double current oil production in the Gulf of Mexico.
However, oil sands production is expensive and faces significant risks associated with its environmental and social impacts. This report concludes that if the industry does not take steps to aggressively manage these risks, its long-term growth is in doubt.
Production of crude oil from highly viscous bitumen requires substantial amounts of energy and water; hence, oil sands production in Alberta comes at a high financial price. In addition, the process exacts a heavy environmental toll. Bitumen mining mars the landscape and consumes large volumes of water that end up in toxic tailings ponds. In-situ production fragments wildlife habitat and is extremely carbon-intensive. Restoring this vital ecosystem will require sustained investments in land reclamation and water treatment projects, which presents one of this industry’s biggest long-term challenges.
At the same time, oil sands development is turning an expanding section of Canada’s vast boreal forest, one of the world’s largest carbon sinks, into one of the fastest growing manmade sources of carbon dioxide emissions. With continued expansion, oil sands operations are forecast to rise from 5% to 15% of Canada’s total CO2 emissions by 2020, working against national and global goals to achieve substantial GHG emission reductions. A CAD $15 per ton levy imposed on CO2 emissions in Alberta in 2007 has had little demonstrable eff ect in altering companies’ production plans. However, the effects of climate regulations, including emerging Low Carbon Fuel Standards (LCFS), in the U.S. and Canada will likely bring added pressure on the industry to reduce its growing carbon footprint.
This report examines how carbon and land reclamation regulations, climate change and other environmental and social issues may adversely affect the future of oil sands development in Alberta. …
(3) Key Report Findings
Canada’s oil sands companies operate in a shrinking window of opportunity.
These producers of unconventional crude oil face volatile global energy markets and rising production costs. Th ey need global oil prices to stay above at least $65 per barrel — and possibly above $95 per barrel — to justify $120 billion in planned expansion projects over the next decade. The production fl oor price for oil sands is rising with the onset of carbon pricing, higher input commodity prices and growing regulatory expenditures for water treatment and land reclamation. …
Water shortages could emerge as an oil sands production constraint by 2014.
Oil sands production is highly water-intensive, with up to four barrels of water consumed for every barrel of oil produced from surface mining projects. (The ratio is less than 1:1 for underground, in-situ projects.) Water withdrawals from the Athabasca River watershed are already restricted during winter months to protect fish habitat. If oil sands production volume grows according to companies’ estimates, some oil sands mining operations could exceed their wintertime allowances by as early as 2014, causing possible production interruptions. …
Land reclamation presents growing operating costs and liability for some oil sands producers.
After 40 years of production, no oil sands companies have yet fully reclaimed tailings ponds created by development. That is because the fine particulates in toxic mining waste take decades to settle out in tailings ponds. Such tailing ponds — already covering an area the size of Washington, D.C. — pose risks of contaminating adjoining soil and water resources, and present health problems in downstream communities as well as the risk of a catastrophic breach. …
(4) Oil Sands Production Primer
Canadian oil sands deposits are a mixture of sand (73%), clay and silt (13%), bitumen (10%), and water (4%). The ore lies above limestone and below the non-oil bearing layer of earth called overburden, which is covered by muskeg (an acidic type of soil common in boreal forests). The deposits are found primarily in Central Alberta in three main fields: Athabasca, Peace River and Cold Lake.
Bitumen is a heavy crude oil that cannot be recovered through a well in its natural state and hence needs enhanced recovery in the extraction process. The two main extraction methods are conventional surface mining and in-situ (Latin for ‘in place’) recovery using heat (steam). Approximately 20% of Alberta’s oil sands are deposited close enough to the surface to be mined; the remaining 80% of the resource lies deeper underground and can only be recovered through in-situ processes. The mining reserves are concentrated in only 2.5% of the oil sands land area; in-situ reserves are spread over the remaining 97.5%. In 2008, 55% of Alberta’s total 1.3 million bbls/d oil sands production came from mining, and 45% from in-situ projects. …
(5) Sectino 3.3 – Tailings Production
As a general rule, about 1.7 tons of oil sands ore (or 4.28 bbls) is processed to obtain 1 boe. Based on average composition of the ore and the previously presented water model (see Figure CC), we have compiled a resource input/output equation for oil sands mining. Th is equation presents a ratio so that one boe results in an average tailings production of 17.47 bbl, of which 4.37 bbl are tailings sand, and 4.35 bbl are liquid tailings that ultimately need to be remediated. …
(6) Section 3.6 – Contingent Liabilities
Tailing dams have a propensity to leak. This was evidenced by the breach of a dam in Tennessee accumulating coal ash deposits that spread 1.5 million cubic yards of toxic sludge over hundreds of acres in December 2008.69 In the December 2008 report, The Tar Sands’ Leaking Legacy, author Matt Price of Environmental Defense researched the filings of environmental impact assessments for oil sands project applications, and calculated that in 2007, over 4 billion liters of tailings leaked out into the environment. Th e projected leakage amount in 2012 could reach 26 billion liters.
In the H2Oil documentary screened at the Royal Ontario Museum at the Toronto International Film Festival in May 200970, ecologist and water researcher Dr. Kevin Timoney of Treeline Ecological Research also describes the existence of leakage. His research indicates that Suncor’s Tar Island Pond dam, built 300 feet above the Athabasca River, leaks 67 liters of tailings per second, essentially making it a continuous oil spill.
(7a) For more information
Other articles about oil sands:
- “Canada’s Oil Sands Resources and Its Future Impact on Global Oil Supply“, Bengt Söderbergh, Uppsala University, January 2005 (105 pages)
- “Canada’s Oil Sands – Opportunities and Challenges to 2015“, June 2006 (85 pages) — Produced by Canada’s Natinal Energy Board; excellent work!
- “Canadian Oil Sands: A new force in the world oil market“, US Congress Joint Economic Committee, 26 June 2006 (14 pages)
- “Canada’s Energy Future“, Canada’s National Energy Board, November 2007 (155 pages) — Scenarios out to 2030
- “High costs squeeze oil sands“, Financial Post, 5 September 2008 — “Break-even price jumps 31%.” Now aprox $85/barrel.”
- “UBS says new oil sands projects need pricey crude“, Reuters, 19 September 2008 — New projects need $100+/barrel oil to turn a decent profit.
- “Growth in the Canadian Oil Sands: Finding the New Balance“, Cambridge Energy Research Associates (CERA), 2009 — 120 pages
- “Role of Canadian Oil Sands in US Oil Supply“, Cambridge Energy Research Associates (CERA), 21 April 2010 — 31 pages
Posts about oil sands on the FM website:
- An urban legend to comfort America: our massive reserves of unconventional oil, 29 August 2008
- An urban legend to comfort America: demand for oil creates new supply, 8 September 2008
- An urban legend to comfort America: oil is oil, even if it is not oil, 10 September 2008
(7b) Afterword
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