Saturday, 15 May 2010

Canada's Oil Sands - North America's Saudi Arabia - Report Highlights Water and Greenhouse Gas Issues to Target

Exploiting this resource often creates 3 to 5 barrels of contaminated water per barrel of oil produced. Current production exceeds 1.3 million barrels a day of oil.

Excerpts from Fact Sheet

Current upgrading capacity in Alberta is approximately 1,209,000 barrels per day (bbl/d) of bitumen with synthetic crude oil (SCO) output at approximately 1,037,500 bbl/d.

Bitumen production is expected to more than double to 3 million bbl/d by 2018.

In 2008, Alberta exported 1.51 million barrels per day (bbl/d) of crude oil to the U.S., supplying 15% of U.S. crude oil imports, or 8% of U.S. oil demand (EIA).

Water Usage

  • The amount of water permitted to be withdrawn from the Athabasca River for all oil sands projects – existing and future – is equivalent to less than 3% of its average annual flow. During periods of low river flow, Alberta Environment limits water consumption to 1.3% of annual average flow. At times, this can mean that industrial users will be restricted to less than half of their normal requirement given current approved development. Source: Alberta Environment.
  • Up to 90% of the water used can be recycled depending on the maturity of the facility and type of extraction. Industry is working on making production more efficient so fresh water use is further reduced.
  • In mining operations, between 2.2 and 5 barrels of river water are withdrawn to produce each barrel of SCO.
  • In SAGD operations, up to half a barrel of fresh water is required to produce each barrel of bitumen.

Land Management and Reclamation

  • By law, industry must post financial security equivalent to the cost of reclamation before beginning oil sands activity to the Environmental Protection Security Fund.
  • As of March 2008, the fund held over $875 million. The money is returned when reclamation certificates are issued.
  • In March 2008, the Alberta government issued its first reclamation certificate to Syncrude Canada Ltd. for the 104 ha parcel of land known as Gateway Hill, approximately 35 km north of Fort McMurray.
  • To date, about 602 km2 of land have been disturbed by oil sands mining activity (approximately 0.1% of Alberta’s boreal forest of 381,000 km2).
  • Currently, over 67 km2 of disturbed lands are in the process of being reclaimed. Reclamation certificates will not be issued until monitoring through time demonstrates that these particular lands meet the Alberta Environment criteria for return to self-sustaining ecosystems.
  • The Government of Alberta and private industry have each invested more than $1 billion in oil sands research. Combined efforts and investments of both the public and private sectors will continue to improve the efficiency and reduce the environmental footprint of oil sands recovery and upgrading.

April 4, 2010

Canada Oil Sands Are Still a Gamble

Energy investors are showing their short memories. The stampede to the initial public offering of Athabasca Oil Sands is a tribute to the allure of Canada’s extra-heavyoil. Last week Athabasca priced at the high end of its range and raised $1.35 billion, twice its goal. Yet it was only two years ago the sector was hit hard by the economy. Greater bullying of private oil companies by governments around the world makes it all too easy to forget the risks of another price slump.

Practically no energy portfolio is complete without exposure to Canada’s oil sands. The country accounts for half the world’s oil reserves that aren’t locked up by national companies of foreign governments. Including oil sands, Canada’s reserves are second only to Saudi Arabia’s — around 175 billion barrels.

The Dudley Do-Right factor also helps. Canada’s stable and predictable government is a rarity in the oil business. True, the sand-rich province of Alberta irked producers in 2007 by demanding an extra cut from the sharp rise in prices. But this was nothing compared to the political risks energy companies are accustomed to in places like Nigeria, Russia and Venezuela.

Even so, Athabasca investors seem merely to be swapping potential troubles. The I.P.O. valuation — at about $1 for each contingent barrel — looks in line with the industry average as calculated by the research firm IHS Herold. But there is the looming possibility of environmental controls. Despite the industry’s best efforts, extracting oil from sands generates about 10 percent more carbon dioxide than conventional oil does. That could make the burden of greater regulation costly.

The economic hazards look dangerous, too. Oil sands stop being economical south of $65 a barrel. That proved especially painful for this corner of the business in 2008 when the price of oil fell below $35. Athabasca’s rivals Suncor Energy and Canadian Natural Resources lost 75 percent of their value while more diversified oil majors fell by much less. Some 90 billion Canadian dollars of the country’s sands projects were shelved. If the economy hits another serious bump, oil sands investors are likely to suffer the worst.

May 18, 2009

Report Weighs Fallout of Canada’s Oil Sands

In the tense debate between energy security and environmental sustainability, Canada’s vast oil sand reserves hold a special place.

Canada has the second-largest petroleum deposits after Saudi Arabia and the biggest in the Western hemisphere. Its oil sands produce 1.3 million barrels of oil a day, up from 600,000 a day in 2000. As a result, Canada has become the biggest foreign oil supplier to the United States, accounting for 19 percent of imports in 2008.

But the development of these sands in the Alberta region has also been sharply criticized by ecological groups, local communities and even Catholic bishops, for their impact on the environment, and their intensive use of both water and natural gas.

The growth in oil sands is the reason Canada has failed to contain its greenhouse gas emissions in recent years despite its commitments to do so. Critics refer to the bituminous deposits as tar sands, calling them the dirtiest fossil fuels on earth.

Trying to balance the size of Canada’s reserves and their environmental impact is a tough act. But a new report, to be released Monday by IHS CERA, an energy consulting group, sees big opportunities for the oil sands, shrouded in vast uncertainty.

“The oil sands are an immense resource in North America, and so they represent an opportunity to enhance energy security,” said James Burkhard, the managing director of IHS CERA’s global oil group. “But there are also questions about the future economic feasibility of oil sands, given the drop in oil prices, and second, there are a number of issues related to greenhouse gases, land and water use, on which there is a wide spectrum of views.”

Producing fuels from oil sands requires large amounts of natural gas and water and produces large quantities of waste material and carbon dioxide. In one process, steamed water is injected at high pressure to melt the dense, oil-bearing bitumen. In another, the sands are strip-mined and then cooked to release the oil.

Environmentalists would like President Obama to set strict limits on some of the dirtiest fuels, including heavy oil from Canada. They urge the administration to resist calls by the Canadian government to exempt oil sands from greenhouse regulations now being considered in the United States.

Canada’s oil sands industry has been hit hard by the recession and a 60 percent drop in oil prices since their peak last year. As prices tumbled, more than 70 percent of proposed heavy oil projects were postponed. But if economic growth eventually pushes up oil demand and prices rebound, the oil sand production could rise as high as 6.3 million barrels a day by 2035, according to CERA’s report. On the other hand, stringent regulation, weak economic growth or low energy prices could trim investments and result in production of as little as 2.3 million barrels a day within the next two decades, according to the report.

One of the most controversial issues related to oil sands is figuring out how much they contribute to global warming. According to CERA, which provided an analysis of 11 previous studies, producing oil sands emit 30 to 70 percent more greenhouse gases than the average oil consumed in the United States.

The CERA report points out, however, that once the total life of the fuel is considered, from the production phase to when the fuels are burned in engines — a so-called wells-to-wheels analysis — oil sands emit only 5 to 15 percent more greenhouse gases than the average fuels consumed in the country. The difference, CERA says, comes because 70 to 80 percent of total emissions come from the combustion of refined products, like gasoline and diesel, irrespective of their source.

The report recommends more research to reduce the use of natural gas in the production of oil from sands, as well as investing in technology that captures and stores carbon dioxide underground instead of emitting it into the atmosphere.

But environmental advocates point out that while Congress is looking at cutting carbon emissions in the United States 80 percent by 2050, the growing reliance on oil sands from Canada would offset some of those benefits.

“It’s not small potatoes when you stack it up against efforts to get carbon reductions,” said Matt Price, an analyst at Environmental Defence in Toronto.

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