Canadian Oil Sands

The NY Times reports on the problems and promise of Canadian oil sands, providing another perspective on the energy dilemmas we face.

As I pointed out in an earlier post, the United States gets more of its foreign oil from Canada than any other country.




According to the United States Energy Information Administration, more than half of Canada's production comes from oil sands. (See this post for more.) The EIA also states that Canada has 179 billion barrels of proven reserves (second only to Saudi Arabia), which makes me wonder where the Times gets its figure of 1.7 trillion barrels.* Whatever the correct number is, the point is clear: Canadian oil is extremely important to the United States.

The first problem with this is environmental.

In a recent study, the RAND Corporation estimated that oil from the oil sands generates about 10 to 30 percent more greenhouse gases than conventional crude.

[snip]

Spent water used in oil sands projects is placed in lake-size tailings ponds, one of which killed about 500 migrating birds in April. Seepage from the ponds is polluting rivers in northern Canada, some scientists argue. In December, Environmental Defense, an environmental lobby group based in Toronto, estimated that about four billion liters of contaminated water leaks from the ponds each year. (The Alberta government and the oil industry dispute that finding.)

Strip mining of the oil sands, the most common method of extraction, has destroyed large swaths of boreal forest, an important habitat for migratory birds and other wildlife. In December, a study published by the Natural Resources Defense Council and two other groups found that six million to 166 million birds could be lost over the next 30 to 50 years because of that disruption.

The second problem is the expense involved in extracting oil from the sands.

With oil prices around $49 a barrel, profitability is fast eroding at oil sands projects and may already be vanishing at some operations. Producers have widely differing cost structures and varying definitions of profitability. But Andrew J. Leach, a professor of environmental economics at the University of Alberta in Edmonton, estimates that long-established plants can operate with prices as low as $30 a barrel. But he said newer operations need $60 to $70 a barrel for acceptable returns, and no one will proceed with proposed projects until prices return to the $80 to $90 range.

Thus, in order for the United States to continue to receive large portions of oil from its northern neighbor, we must accept higher oil prices and greater environmental destruction. Folks, this is not sustainable.

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*To add to the confusion, consider that this graph from the Financial Times, apparently based on data from BP, does not even include Canada in its list of top 10 countries of proven reserves - not even beating number 10 Nigeria's 36 billion barrels.

Info On Canadian Oil Production

In a previous post, we saw that the U.S. imports more oil from Canada than any other country, including Saudi Arabia. I thought it was worth doing some more investigation into Canadian oil production. The following information comes from the Energy Information Administration (EIA) of the United States government.

• Canada had 179 billion barrels of proven oil reserves as of January 2008, second only to Saudi Arabia.
• Canada sends over 99 percent of its oil exports to the U.S.
• "In 2007, oil sands production represented approximately half of Canada’s total crude oil production."
• "Despite the excitement surrounding the development of Canada’s oil sands reserves, there are still several difficulties that could impede the future development of the industry. Analysts predict that the production of synthetic crude from oil sands is only economically viable with relatively high crude oil prices."
• EIA estimates that Canadian oil sands operators will produce 3.6 million barrels per day by 2030.

Some quick math to put some of the numbers into perspective:

• World oil production is currently around 80 million barrels per day. With 179 billion barrels of reserves, Canada theoretically could supply the world for a little over 6 years.
• At 3.6 million barrels per day, Canada's oil sands will amount to less than 5% of world oil production in 2030 (assuming world production in 2030 will be greater than or equal to current production - a controversial assumption).