Canada’s Oil Sands – Half 2

An enormous part of the rationale that Canada can export oil to the United States is the truth that it is importing oil on its East Coast for its personal use. When one seems at oil sands in relationship to its different oil sources (together with imports), oil sands oil is only about one quarter of the total. The non-oil sands portion is anticipated to decrease in the future, so a major improve in oil sands production is needed simply to offset anticipated decreases elsewhere. See my earlier post about this.

Until oil prices rise above in the present day’s stage, and stay increased, it appears unlikely that there will likely be a major increase in oil sands manufacturing. Don Thompson from the Oil Builders Group informed us that with a purpose to justify new growth, the cost of West Texas Intermediate (WTI) crude should be at the very least $80 a barrel. CERA signifies in a brand new report (free with registration) that greater than 70% of proposed Oil Sands enlargement tasks had been postponed, after the drop in oil costs in 2008. CERA quotes a needed WTI worth of $sixty five to $85 barrel to justify Oil Sands expansion–but based mostly on a price of return of 10%–which is probably not high enough.

Even past high oil costs, a serious ramp up would additionally require an enormous amount of investment funds. For example, if one needed to add 1 million barrels a day of upgraded oil by adding new mines and upgraders, it will require an funding of roughly $126 billion dollars, based on a CERA estimate of $126,000 per flowing barrel. It will also require a huge amount of credit score availability and a veritable military of workers.

Within the absence of a significant improvement in expertise (or maybe even with one, since a giant change in know-how often takes a very long time to implement), my estimate of the ramp up in oil sands production to 2020 is given under:

My rough estimate of Canada’s future oil sands manufacturing, different oil production, and overseas imports to their East Coast as shown on this submit.

I am forecasting that oil sands production will approximately double by 2020 (from 1.2 million barrels per day in 2008, to 2.Four million barrels a day in 2020). This forecast, partially, displays Tony Eriksen’s (“ace’s”) calculation that initiatives already authorized and in construction are expected to carry production as much as 1.Ninety four million bpd. Development past that is expected to be constrained for a variety of causes, including difficulty in acquiring adequate investment funds, need for a high value of oil to justify new development, issue in acquiring sufficient diluent, and the possibility that royalties will likely be increased as governments discover that oil corporations are among the many few firms from whom increased taxes may be extracted.

Observe that even with this increase in oil sands manufacturing, the total provide of oil obtainable to Canada (including imports) dips somewhat, and exports are prone to decline. My forecast for oil sands production to 2020 is much like the average of CERA’s two decrease production forecasts, taken from the new CERA report.

CERA forecast of Oil Sands manufacturing, from report cited above.

Even in CERA’s “Barreling Ahead” forecast, the ramped up manufacturing will barely make a dent within the four or six Saudi Arabias of recent oil manufacturing that Fatih Birol of the IEA has stated shall be wanted if new production is to offset declines.

How much Canadian oil will the United States import?

Canada’s exports to the United States, if it exports every part that’s left over to the United States

Primarily based on the forecast I made for oil sands production, the quantity of imports to the United States are likely to drop somewhat, even if the United States continues to receive virtually all of Canada’s oil exports.

Will oil actually be exported to the US?

But how doubtless is that this situation? When one reads Canadian material, it becomes clear that many Canadians would very a lot like to diversify the nations it exports to, even when at the moment practically all pipelines lead from Canada to the United States. With the US as its solely export companion, Canada has little leverage in bargaining over worth. Additionally, there are details such as the US charging less for gasoline than Canada–why should Canadians be taxed to maintain their consumption down, and the identical time People can buy Canadian oil and promote it for much less? NAFTA limits adjustments proper now, however over the long term, that may be modified.

Canada is already engaged on an method that will enable it to export oil in directions apart from the US, to help diversify its exports. The approach is a rail hyperlink that acts like a pipeline, and may be applied quite shortly. China and others with few environmental considerations are notably favored as export companions. Canadian Nationwide (CN) also has tracks going East, so this method is also used to convey oil from western Canada to eastern Canada.

CN’s revolutionary pipeline on rails

The Canadian National Railway has developed a transformative technique it calls the “Pipeline on Railwhich may move oil sands manufacturing shortly and cheaply to markets in North America or Asia. . .

CN could gear up its capacity to ship by rail as much as 4 million barrels a day of oil at less cost and extra quickly, bypassing the necessity to finance huge pipelines. By the end of this 12 months, the corporate will be delivery 10,000 barrels each day from producers whose reserves are actually stranded.

Oils sands: Canada to China, Japan, India not US

This challenge, in its early stages, will eliminate three obstacles to the development of Canada’s vast oil sands: the fee, delays and financial dangers involved in building multi-billion greenback pipelines; the politics of obstruction south of the border from environmentalists and the danger of selling oil to monopoly buyers in the U.S. which has, previously, resulted in contracts being ripped up when times have been powerful.

It also permits Canada to decouple from the American economy in terms of its most vital commodity which is oil products. This is because all the oil sands production can be routed to the west coast for shipment to Asia or anyplace, thus avoiding monopoly pricing and bullying by the Individuals. Besides that advantage, oil sands are the national trump card in the future and the American economic system, now sputtering, won’t ever be as robust as earlier than.

China is interested in investing within the oil sands. Simply at this time we read that China is paying C$1.9 billion for an oil sands investment.

Alberta will ramp up oil sands, to the better of its potential

Alberta may be very dependent on the oil sands business, both for jobs and income. A report by Canadian Vitality Analysis Institute (CERI) indicates

. . .each dollar spent on huge oil projects stokes nearly $2.50 in additional spending in Alberta, plus one other roughly $2.50 in the rest of Canada. In different words, a $10-billion decrease in power spending interprets into about $60-billion in lost economic activity throughout the country.

These revenues translate to tax revenues as properly, so I discover it difficult to believe that Alberta will cut again oil sands manufacturing voluntarily, or even restrict new production. If the US wants to cut back on imports as a result of it is sad about CO2 or other environmental issues, I do not see that as an enormous downside to Canada. Canada will sell its oil elsewhere.

Potential Influence of Loss of Oil Sands Manufacturing on US

From the US viewpoint, the potential lack of oil sands oil could possibly be problematic. Pipelines that feed the oil sands oil feed on to the Midwest. If oil sands oil is reduce off, those more likely to be hit the toughest hit are Midwestern American farmers. We all know from experience that when there’s a shortage of oil, it is the oldsters at the end of the pipeline which might be hit. If the US decides it would not need Canadian oil, or if Canada cuts us off, it is probably going the oldsters at the tip of the pipelines, away from Chicago and the Midwest that can be hit most–places like North and South Dakota.

We could theoretically import more oil (maybe from OPEC) to one in every of our coasts, and pipe it to the Midwest. This might or might not be successful. We don’t have a rationing plan to work round shortages of diesel gas in the Midwest at this point–possibly we should be interested by such a plan.

How huge an issue is environmental considerations?

Oil sands oil has a variety of environmental points. The one which is most obvious is the clearing of forests and taking on layers of overburden, storing them for a few years, and then putting them back. This is a matter primarily with mining, somewhat than in place (in situ) manufacturing. Mining additionally tends to supply tailings ponds that are polluted with bitumen which is missed within the extraction process and with naphthenic acid. There may be concern that water from this tailings water will escape, or will hurt birds that happen to land in it. Corporations use scarecrows and noise makers to try to maintain birds away, but typically these precautions fail. There can also be concern about the quantity of water use, especially if production of bitumen from the oil sands should scale up.

There are different concerns with the extracted sulphur, and whether or not it gets into the air, as sulphur dioxide fuel. So far as I know, the largest issue with that is with upgrading operations, where the sulphur is separated out from the bitumen, comparable to that of Syncrude.

There are additionally metals that are discovered with the oil sands oil. This can be each good and unhealthy. Unhealthy as a result of they could probably be another source of pollution, and good, in the event that they can be utilized as a supply of uncommon earth minerals. We learn:

It has been found that the tailings are a novel and rich supply of titanium (5-10 % on solids), zirconium (2-5 %) and iron and uncommon earth minerals (eight-12 %). These invaluable minerals are at present not being recovered.

The quote pertains to a patent for a way of extraction of those minerals, by applying centrifuge methods to tailings ponds. I anticipate we’ll see extra centrifuge methods used sooner or later, both because of the potential for financial achieve, and because of a want to cut back the amount of water stored in tailing ponds.

In situ manufacturing has much less direct environmental issues than mining, as a result of it disturbs the soil much less, and because it leaves among the potential pollutants underground. In situ ends in far much less tailings ponds. Most of the problems from in situ mining result simply from the fact that it’s a low EROEI process, and uses a whole lot of natural gas in its production. In consequence, its carbon footprint is quite high.

While there are fairly a few environmental issues, I think that what we hear could also be exaggerated.

Scale-up Confusion

I feel the difficulty of “scale up” is a matter of large confusion to environmental groups. How a lot worse will the environmental impact be, 10 or 20 years from now, if oil sands production continues to grow as forecast? Will the size up have 20 instances the current environmental impact of the worst company, or will the affect be quite small, as production is shifted increasingly to in situ (in place) amenities, that do not disturb the ground except to put underground pipelines to heat the bitumen, and as new environmental laws begin to have more impression?

Suppose that production really grows to the extent forecast by the Canadian Affiliation of Petroleum Producers (CAPP) in its “progress case”. (That is more of an increase than I am displaying in my forecast earlier in the submit.)

CAPP “Development Case” forecast for Western Canada, together with typical as well as oil sands manufacturing, from June 2009 Report.

With this forecast, mining will roughly double between 2008 and 2025, and in place production will triple. Mining is the problematic one, in terms of land disturbance, water use, and tailing ponds. At worst, it would seem to me that there might be double the amount of pollution points in 2025 that we have now, primarily based on the forecast enhance in mining. However even this estimate is high–firms can be getting rid of legacy expertise that holds them again environmentally, and latest legislation adjustments (similar to one passed in 2009 requiring way more speedy retirement of tailing ponds) will further reduce the affect of elevated manufacturing.

The quantity of surface space that is at the moment lined by oil sands mines quantities to about 200 sq. miles (518 square kilometers), in keeping with the CERA report. This corresponds to a sq. 14 miles (23 kilometers) on its aspect, which is smaller than the footprint of many cities. What we’re speaking about, based on the CAPP mining forecasts, is, at worst, is doubling this footprint. The equivalent sq. would have an space of 400 sq. miles, so would measure 20 miles (32.2 kilometers) on a aspect.

Seemingly Space to be Disrupted by Mining

The confusion about scale up has led to very strange statements. For instance, I not too long ago acquired an e-mail from the Sierra Club that said (concerning the latest approval of the Alberta Clipper Pipeline):

This choice is deeply distressing because tar sands development in Alberta, Canada is creating an environmental catastrophe, with toxic tailings ponds so giant they can be seen from space and plans to strip away the forests and peat lands in an area the size of Florida.

Your entire space where oil sands deposits are positioned is the dimensions of Florida. However the mines themselves are tiny compared–the size of a not very large metropolis. Perhaps we’re talking about doubling this by 2025. The tailing ponds are contained within this area. The percentage of this space lined by tailing ponds is now about 10%. This percentage might very well lower, as new expertise and new stricter legal guidelines are carried out.

When timber are cut, we have been told that the trees are bought to the logging corporations in the realm, and thus offset other timber that may have been logged elsewhere. The peat moss is saved for later reuse, in accordance with the Province of Alberta.

Carbon Dioxide Emissions

Another query is the way to measure carbon emissions. Do you take a look at emissions throughout their whole life cycle, or solely throughout extraction and refining? One would expect emissions to go up with the price of producing oil (or decline in EROEI), and that is usually what a CERA study shows. The majority of the emissions relate to burning the oil that is produced, and these remain unchanged regardless of how low the EROEI of producing the oil is.

CERA’s comparison of Greenhouse Gas emissions, on a well to wheel basis.

Also, when it comes to absolute stage, if one compares CO2 emissions from oil sands operations to those of coal fired power plants, the coal fired energy plants appear to be a a lot bigger drawback. If Alberta’s oil sands emissions were doubled (as might probably occur by 2025), they still would be less than the coal fired electricity emissions of many US states.

Comparability of Oil Sands Emissions with Coal Fired Power Plant Emissions, from Setting the Document Straight presentation by Don Thompson.

Athabasca River Pollution

Another supply of confusion is pollution of the Athabasca River. The Athabasca River has been polluted for a few years, and can proceed to be polluted, as a result of the river runs proper by means of the oil sands area. In actual fact, the oil sands deposit was found because of water pollution.

Oil Sands Pure Leakage to Athabasca River.

The health of rivers in the area is being monitored by Regional Aquatics Monitoring Program (RAMP), a multi-stakeholder committee which includes representatives from oil corporations, Ft. McMurray First Nation, Ft. McKay First Nation, Health Canada, Alberta Pacific Forest Industries, Fisheries and Oceans Canada, and many others.

Every year, RAMP issues a scientific report. The indications of those studies seem to point out little downside with water pollution or overuse, aside from a normal mercury pollution drawback, which I understand is quite widespread, extending all through the US and Canada.

Air Pollution

With all the pollution issues I had heard about, I assumed air pollution would be an actual drawback. Instead, the air was very clear. Don Thomson of the Oil Sands Builders Group advised us the air in Ft. McMurray exams better than that in every other main city in Canada for air pollution, on almost any common pollutant. This may be in part as a result of Ft. McMurray is several miles away from the mines.

I haven’t got many details on air pollution, except that this is likely one of the areas regulated by the province of Alberta. For example, Syncrude has undertaken a challenge called Syncrude’s Emissions Reduction Mission (SERP), designed to reduce stack emissions of sulphur compounds by 60% from present accredited levels by 2011, under an agreement with the province.

Political Football Sport

It appears to me that the Oil Sands are a huge political soccer sport, and a superb proportion of the environmental tales we hear are associated to the posturing happening to win this football recreation.

Eastern Canada vs. Western Canada

First, Eastern Canada is aware of that it is prone to losing its imports from the East, because of peak oil. It wants the oil from Alberta, but so long as Alberta regulates the oil sands and exports the oil from the oil sands to the United States, (or to China), the East Coast is out of luck. So if Japanese Canada can present that Alberta just isn’t doing a ok job of regulating the oil sands, then it might perhaps get management via new Federal regulation of the oil sands. With that management, the Japanese part of Canada could be assured of getting oil. Additionally, if they want to raise taxes, it will be helpful to them. So we now have experiences just like the one by Ecojustice, advocating additional Federal regulation.

US vs. Canada / China / Far East

Second, the US is the current recipient of the oil from the oil sands. If the United States will be satisfied that we don’t need it, because of environmental problems, that makes all of it the simpler for Eastern Canada to get it, or for Western Canada to export to China. Western Canada actually would favor to not promote to the United States, since the price it gets from the US is perceived to be not the best, and the US is seen as a bully.

Consultants /Assume Tanks / Environmental Reports

Because of the political scenario, there is an enormous “market” for experiences by consultants and assume tanks that present huge environmental problems. There are also all kinds of ways one can legitimately show that there may be an issue. For instance:

Undermining the Report Card: The Oil Sands Report Card by WWF and the Pembina Institute. This report compares the varied oil sands initiatives towards each other on a number of different variables, and makes statements reminiscent of, “If all companies had as low emissions as [lowest firm], there could be a financial savings of __________ in emissions.” That’s interesting, however would not tell you whether or not there is an issue in the primary place.

Statements like “Toxic tailing ponds crammed with liquid mine wastes already cover greater than 50 square kilometers,” additionally from Oil Sands Report Card. Fifty square kilometers corresponds to a square a bit over 7 kilometers (4.Four miles) on a aspect. Having so many tailings ponds is not great, but it is not as big an issue as it’s made out to be. In the future, the amount isn’t prone to grow a lot, with more in-situ production, and with latest modifications in rules concerning tailing ponds that require much quicker ends to the ponds. Environmental Commissioner Renner instructed us that the oldest tailings pond (which is the one with by far the most leakage points) is expected to be retired in 2010.

Images with captions like, “Oil sands operations remove rivers, forests, and wetlands with a purpose to access the oil sands beneath,” also from Oil Sands Report Card. The angle of the image makes it seem like a huge space is involved, and the way in which the caption is worded makes it sound like there are no steps being taken to put the items back in place according to current views of best environmental practices.

Statements by aboriginal teams that they have some most cancers above normal levels. Any of us who have studied probability know what the difficulty is right here. There are all sorts of little aboriginal groups with population of around 1,000. So if you happen to look at enough of these groups, some of the groups could have a handful of people with one or another kind of cancer. There may be pollution in the realm–there all the time has been, as a result of the river naturally runs through the oil sands. The background pollution level might increase the probabilities of most cancers a bit larger. But there would not appear to be any research displaying an total problem.

Not for Revenue Issues

Not for Revenue organizations are almost actually underneath funding pressures. If they want donations, it is to their advantage to make things sound as dire as possible. If the leaders of the organizations actually don’t perceive the dimensions of scale up points, these organizations can easily make statements that inadvertently overstate how unhealthy the long run will be, relative to as we speak.

Also, needless to say, their analyses are usually not of the nature of a value/profit evaluation. They simply tell you that there is perhaps environmental prices involved, not that the oil ultimately produced may provide benefits.

These organizations additionally do not inform you in regards to the possible environmental penalties, if the substitute oil had been extracted in a much more closely populated area, comparable to one of the OPEC international locations. The environmental impacts on the population would seemingly be worse–but quite a bit less reported, and too much less regulated.

medium salt distillation column

Individuals belief Not for Earnings. In spite of everything, they’re “do good” organizations. An individual would possibly think that somebody is looking over the shoulder of Not for Income to see that what they say is adequately supported by information, but I can’t see that that is going on in any respect. That is sophisticated “stuff” to know. If these organizations miss the boat, or slant issues in a approach to get extra donations, nobody is probably going the wiser.

How the Politics Will Work Out

No one really knows the answer to this–however we actually have quite a lot of people who are prepared to take reports at face worth, with out contemplating the possibility that political maneuvering could also be distorting what we see. Since peak oil isn’t in the newspapers, even Oil Drum readers assume “higher-ups” don’t learn about peak oil. That is solely not true. They know that imports may be declining sooner or later, and find Trojan horses during which to hide their causes.

There is one thing I am fairly positive of. No politician in Canada actually has any intention of stopping oil sands manufacturing primarily based on environmental issues, although a couple of might need to make sure it would not grow too rapidly. Principally what politicians want is the oil, or the income from the oil, for themselves. If it takes an exaggeration or two about environmental issues to succeed in this end, so be it.

Observe: Oil sands vs Tar sands. The province of Alberta and CAPP want oil sands, so that is the terminology I’ve used. Oil sands is also far more commonly used, in keeping with Google.

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