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US Congress Looks to Canadian Oil Sands to Enhance Energy Security

27 June 2006

Jec1
The forecast growth in oil sands production (In-Situ and Mining).

A new study released by the Joint Economic Committee (JEC) of the US House of Representatives concludes that the accelerated development of huge reserves of unconventional oil in Canada will undermine the OPEC oil cartel in coming years.

According to the study, Canadian Oil Sands: A New Force in the World Oil Market, estimates of proven oil reserves rank Canada second only to Saudi Arabia, with the possibility that Canada’s reserves may be even larger. Strong economic incentives would exist, even with oil prices at half the current level, to ramp up oil sands production and more than double output in ten years.

The large Canadian reserves of unconventional oil and their rapid development is very good news for consumers in the US and around the world. While these reserves can supply only a limited amount of oil at the current time, their development is exactly the kind of thing the OPEC cartel has hoped to avoid.

OPEC’s production quotas and failure to invest in expanded capacity have severely limited the conventional oil supply in the face of an unexpected increase in Asian demand. Concerns about Iran and terrorism have only exacerbated the situation. The result is sky-high oil prices and every economic incentive to develop alternative energy sources.

The Canadian oil sands will be an increasingly important factor in the world energy market in coming years. These reserves are immense and their potential output is very significant for the future energy balance. The oil sands will not solve the energy problem, but they will help to undermine OPEC’s power to increase oil prices and will thereby enhance US energy security.

—JEC Chairman Jim Saxton (R-NJ)

On the strength of expected oil sands output growth and despite declining conventional oil output, Canada can be expected to move from 7th to 5th place in ten years among the world’s oil producers.

The report, which focuses on the economics, not the technology or the feasibility of greatly expanded oil sands production, notes that although the projected amounts of oil produced are not large enough to achieve energy independence for North America, they represent a growing counterweight to OPEC’s market power and as such increase national energy security.

One of the underlying assumptions of the report is that OPEC has held back on developing more of its reserves, and that the accompanying increase in price caused by now surging demand is spurring the development of oil sands.

...as long as those who hold market power are opting to reap prices far in excess of the cost to develop the oil sands, they also are feeding the growth of a potential industry giant. High oil prices help to overcome shortrun increases in production cost while Alberta’s input markets and infrastructure adjust to a larger scale of oil sands production. In the long-run, the cost is likely to stabilize and may even decline, leading to ever larger rates of oil output.

What sets the Canadian oil sands apart from most other sources of oil under development is the vastness of the known resource and the secure access to it. It may take the oil sands industry a decade or more to stabilize the cost per barrel while accelerating the rate of output, but once it does, it will cap the power of OPEC.

—“Canadian Oil Sands”

Jec2
The current production from Canada and the North Sea is represented by the dotted line. The increase in oil sands production doesn't offset the decline in conventional production.

However, a new study by the Uppsala Hydrocarbon Depletion Study Group, Uppsala University, Sweden, has concluded that even in a very optimistic scenario Canada’s oil sands will not prevent the peaking of oil production (Peak Oil). Even if a crash program were immediately implemented it may only barely offset the combined declining conventional crude oil production in Canada and the North Sea.

The study, “A Crash Program Scenario for the Canadian Oil Sands Industry”, will be published in Energy Policy.

The Uppsala report argues that the implementation of a crash program for the Canadian oil sands industry has serious difficulties, including the lack of a sufficient natural gas supply and the problem of meeting Kyoto obligations (oil sands production is carbon intensive). Practical long-term production would require, in the report’s estimate, nuclear facilities to generate power for the in-situ projects.

Unfortunately, while the theoretical future oil supply from the oil sands is huge, the potential ability for the Canadian oil sands industry to meet expectations of bridging a future oil supply gap is not based on reality. Even if a Canadian crash program were immediately implemented it may only barely offset the combined declining conventional crude oil production in Canada and the North Sea.

The more long-term oil sands production scenario outlined in this report does not even manage to compensate for the decline by 2030. Today, world wide, there are many oil producing areas in decline whose productions have to be offset by new production. With the exception of ultra-deep off shore fields, of the world’s 65 oil-producing countries, 54 have passed their peak production and are in a state of continuous decline.

There are some areas that need the immediate attention by the world’s energy planners. Firstly, the future for the Canadian in situ oil sands production. How much can these activities grow without serious fuel costs problems as well as accelerating CO2E-emissions arise? Secondly, how effective will large scale SAGD in situ projects be for reservoirs of lower quality? Thirdly, is it realistic to include the construction of nuclear facilities for input energy for oil sands projects when making production forecasts? If not, how is the energy going to be provided and how much additional energy supply will be needed in order to extract the bitumen at the required high production levels? The Hirsch report [earlier post] has shown that the Canadian oil sands resources play a vital role for future energy planning, thus it is of outmost importance that these questions are thoroughly investigated as soon as possible.

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June 27, 2006 in Canada, Oil, Oil sands | Permalink | Comments (26) | TrackBack (0)

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That's a hilarious nonsense. How they are going to mine the bitumenous oil which needs gazzilons of fresh water and natural gas to cook?

Get some serious info on the matter here:
www.theoildrum.com

Putting aside the issue of the quality of energy available,i.e., the net energy extracted from these sands, the authors assume that the U.S. has a proprietary first right of refusal for the oil from these sands. Are we to assume that the Canadians will somehow isolate themselves from the world market and refuse to sell to China, for example, if it is willing to outbid or outmaneuver us.


The Canadians seem determined to get out all this oil whatever the cost in natural gas and environmental consequences. Stories like this tend to convince me that we will probably have to forget cutting back on co2 emissions and concentrate on geoengineering solutions like those outline in today's New York Times.

It seems to me that Canada is a dangerous country, where the general populous is being oppressed by an evil dictator. Not to mention, there is ample proof from the CIA, NSA, and DoD, that they are developing WMDs. I think it is incumbent upon the United States to invade Canada, liberate their oppressed, and occupy the country until it is stabilized. I.e., stabilized is synonymous with the United States controlling their oil resources. The expected loss of life of our enlisted military personnel is of course worth the price to maintain "freedom." This would also give our defense contracting firms a nice boost in profit and even higher bonuses for the executives of those firms.

Bonehead:

And don't forgot all those terrorist draft dodgers and deserters they are still harboring from the Viet Nam war.

I'd laugh if it weren't for idiots like Pat Robertson.

as somebody who lives in the heart of oil sands capital I would really like to know what a 'crash program' is - if we're not in the middle of one now I don't want to see what a crash program looks like.

Massive housing shortages, urban spawl of inefficient (and probably unhealthy) homes, massive cost increases in any infrastructure project whether sustainable or not, increasing reliance of the economy on the oil and gas sector, huge oppulance and bling in the face of poverty and inequality, falling into the trap of 'letting the good times roll' and forgetting the lessons of the last boom, not investing for the future, pissing away the surplus, driving the Canadian dollar and energy prices up which impacts the rest of the economy (and could potentially be called 'Dutch disease'), diverting political and entrepreneurial effort away from attempts to diversify the economy and build a semblance of a sustainable economy with reduced greenhouse gas emissions using unsustainable resource wealth.

Who knows if the forecast production level can actually be achieved with the soaring needs and limited availability of natural gas (production peaked in 2001 and is the majority of the province's royalties) as well as water.

the boom is good for some but is imposing its own costs on the province and the economy (and the environment - check out www.oilsandswatch.org). While achiveing the forecast production could be possible, achieving Hirst's Peak oil 'crash program' seems impossible.

Just keep this in mind - the daily local headlines reveal all kinds of costs and limitations (including real headlines of not enough port-o-potties, helicopter and asphalt for building roads) that show that the status quo IS a crash program.

Here we go again....'USA (by some obscure democratic god given rights) has a proprietary first right of refusal to grab oil from Canadian Sands'....

bonehead & t: Your statements may sound too funny to some but considering all the fake reasons used to invade Irak, you may be closer to the truth that you seem to imply.

Considering the huge amount of energy and water required + the massive pollution created, Tar Sands activities should be strictly limited to meet Canadian internal requirements until such time as extraction + upgrading technologies have evolved sufficiantly to make the process independent from fresh water sources and is 100% pollution free.

If USA wants this oil so badly, let it supply the technology required (up front) to clean the mess.

Eventually, Canada may have to call on China (or Europe) to protect the borders and the country from US Oil interest and invasion.

Let's hope that USA will soon produce enough alternative fuels locally and that direct or indirect invasion of Canada will not be required.

Does anyone remember the (fictional) movie "Canadian Bacon"? Alberta: soon to be the 51st state.

http://www.imdb.com/title/tt0109370/

The US Navy is sitting on huge oil shale deposits in western Colorado. Mercifully, those are not yet being mined. The environmental damage being done in Canada would pale in comparison.

Note also that the exploitation of these unconventional deposits (condensate fields are another) is economically viable only if demand for oil from traditional sources also remains strong and little additional capacity comes onstream there. This is entirely possible, especially given the mess in Iraq and the looming confrontation with Iran. However, China is growing so fast that it could stumble even well before its one-child policy begins to have a serious demographic impact on the active workforce (ca. 2020).

Bonehead and t: We don't need to invade Canada, after all it is pro-business. Venezuala has more oil sand reserves and they are socialist, not to mention far enough away that the American voters don't know what is going on. My bet is we have troops in Venezuala before Iran. And that is not a joke.

Rafael: I recently heard an interview with an energy expert here in Colorado that said our oil shale had an energy density per pound that is approximately equal to that of a pound if Capt'n Cruch. Bonn appetite.

A chunk of the tar sands has been bought out by the Chineese. Husky oil was purchased some time ago by a Chineese company and I believe they are planning a pipe line to the coast. Re "Canada pro business" won't matter if anyone listens to guys like Pat Buchanan who says we're communist (do Americans know he's idiot?)

While the kerogen bearing rock has fewer btus/lb than cereal the kerogen alone has more.
Canadian tar sands are not inherently dependent on natural gas to be extracted. Any way of making steam will do including burning the bitumen. Being a fossil fuel bitumen ought to be used only by fossils not the living.

I assume NAFTA has some relevance here?

American access to Canadian natural resources was one of the prime motives behind the original free trade agreement.
Capt crunch has a ton of energy in it. Anyone who has seen kids on a Capt crunch sugar high knows that. :)

Canada can do whatever they want to, period. They don't do what China, the USA, or anyone else tells them to, they make their own decisions. To think otherwise is absurd and is absolutely disrespectful to the honest, hardworking Canadians who could care less what anyone else thinks of them.

Ironically, some of the new tech that would extract the kerogen (oil shale goo) from the rocks envolves using CO2 as a supercritical liquid.
_
___Aside from that, US also has enough land (barren deserts, not ecologically important ones; and not radioactive) with enough sun, that a concerted effort in algae oil/biomass would provide the biodiesel and BTL to displace fossil oil. Add to that, enough space left over for solar electric production for peak energy demand. Additionally, accumulated heat could be used for a modified version of O.T.E.C. that would provide freshwater, power, and minerals (Magnesium to Uranium to Gold). Now, yes it would take hundreds of billions of dollars over 30-40 years to do, but it would likely be on federal land (Dept of Defense, Dept of Interior, etc) with revenues going to solve the deficit. Properly run*, it may solve the question of funding the socialist aspects of the US govt.
_
_Doing a quick calc, 14 million barrels/588 million gallons a day, 5.1135 billion barrel/214.767 bilion gallon a year oil. $2.5-$5.5 a gallon finish product. $536.9175- $1,181.2185 billion a year. Then you can add the electricity, water, minerals and it becomes apparent it is a huge sum.
_
___Now, this entails that the predominant energy/utility companies today to be relegated or cooped by the govt, a renationalization via new technology if you will. This may provide for friction and political battles. Do the Republicans let this enormous sum (to solve future and present shortfalls) and energy security (geopolitical) to get away for ideological reasons? Does the far Left want to cosy up to the military, cooping them for monetary reasons? Will entrenched interests put up an effective fight?
_
___This of course needs to be added to a concerted effort to increase efficiency, and productivity to get more bang for the buck/gallon. The $5.5 may be for the future, and phased in over time on a sensible schedule. In the end, it may be more, but lets get started first.


* : This means an enforced level of accountability, transparency and competence that would be applied to sensitive technologies and nuclear weapons. This amount of money and resources could be considered a strategic element for the health, well being, and the strength of the country. Thus, No Funny Business!

The reason is simple they are right next to us. No big secrets they just happen to be realy close and so sales to the us are very easy. Sales to china are also very easy as its a rather short boat ride to china.

"Canada can do whatever they want to, period. They don't do what China, the USA, or anyone else tells them to, they make their own decisions. To think otherwise is absurd and is absolutely disrespectful to the honest, hardworking Canadians who could care less what anyone else thinks of them."

As a Canadian, I truly appreciate the sentiment, Sid. But the unfortunate addendum is that we, like every other body of population in the western world, are headed up by a junta of grosseros whose actions do NOT reflect the conscience of our society at large. Ironically, we've found ourselves in a state of political affairs eerily similar to those in the States; a major backlash against "liberal mentality" that has put a figurehead with questionable capitalist motives in charge of the country.

Canadians, as a people, may want to do the right thing, but as a national entity..? The future's been seeming a whole hell of a lot less bright as of late.

All, sorry about the OT.

Mel,

Your parallels may have some cracks: I'm not sure what the US figurehead's motives are (and how many vowels, if any, are required to pronounce them) but a look at the US deficit should rule out anything remotely capitalist or free-market about them.

Bonehead, take off, eh. The only dictator in this country is a super liberal media that literally shuts the air-waves down to all who disagree with its slant and ommission of facts. And Harvey, we don't need to worry about American invasion. We handily beat them off in 1812, we'll do it again if we need to! Ha ha ha! I hear American's actually believe 'Canadian Bacon' is a real story!

Seriously though, I wish the fellows out in Alberta would put all that money into solar/wind, etc instead of this! I fear what will happen to Alberta and the larger environment.

Agreed, John W. (other than the liberal media blather), I live in Alberta and from what I've read there are already concerns of an increase in leukemia, lymphomas, lupus, and autoimmune diseases. The amount of water and natural gas they consume there is frightening also. It's no wonder our utility bills are flying through the roof.

Last Updated Tue, 27 Jun 2006 16:01:07 EDT
CBC News

A new poll suggests the vast majority of Americans are unaware that Canada is the largest foreign supplier of crude oil to the U.S.

Canada is the biggest foreign supplier of oil and natural gas to the U.S. Canada is the biggest foreign supplier of oil and natural gas to the U.S.

The Canadian American Business Council (CABC) — which represents some of the biggest private sector companies in both countries — said its survey of 1,000 Americans found that only four per cent of respondents thought Canada was the country that provided them with more oil than anyone else.

The survey also found that 41 per cent of Americans asked would support replacing oil from unstable areas of the world with oil from Canada "even if doing so resulted in higher prices for U.S. consumers."

"The findings suggest a foundation of American public support for meaningful initiatives to expand Canadian energy supplies to the U.S.," said CABC chairman Randoph Dove in a statement.

"As more and more Americans recognize Canada as a secure source of energy resources, this support should only increase," he said.

The release of this poll came just as energy-rich Alberta launched a massive lobbying effort in Washington to get across its message that Canada — and especially Alberta — has a stable and secure supply of oil that it's eager to sell the U.S.

Exhibits about Alberta and its vast oil sands deposits occupy a prominent place in this year's Smithsonian Folklife Festival in Washington.

That's drawn criticism from an environmental lobby group, the National Resources Defence Council, which says the industry and government-sponsored exhibits at the festival make no mention of the "devastating environmental consequences" the council says oil sands mining creates.

The survey was conducted by Vitale & Associates, who interviewed 1,000 people from June 13 to 15. It has a margin of error of 3.1 percentage points.

Oorgo, Alberta is much more "conservative" than Ontario. It's not blather here in ON, anyways. But thanks for not taking me too seriously.

I was serious about taking on the Americans though. I think we can stomp em! :/

The people saying that the US assumes it "owns" Canadian oil misread the story. The report just says that with all that additional oil production coming online, the global price will come down for everybody. If the Chinese buy the Canadian oil, then they won't be competing for the Saudi oil, or whatever, so there will be more of that available. In essence, more supply implies lower prices, for everybody. That's all.

NAFTA agreement resulted in doubling of US-Canada trade and in fact integrated our two economies in one. It is not legally possible to refuse to sell Canadian goods to US, like it is not possible between EU members. Being democratic county with classical developed capitalist economy, it is the most stable supplier of crude to US ever imaginable (more stable then Norway to EU). Oil sand of Alberta are landlocked, and it is way more cheaper to sell it directly to continental US then pump through inadequate pipeline system over Rocky mountains to yet unbuilt Pacific oil terminals.

As for environmental damage. Heavy bitumens are heavy for a reason: they already leaked all light fractions to atmosphere and surface/ground water. Additional deposit due to recent mining activity is negligent and relevant only to mitigation lawyers and environmentalist media, buzzing around any big money project. Supply of natural gas in this region is practically unlimited, and so is water. By the way, “industrial use” of water in continental areas does not mean that water used will disappear, like for example disappear 1000 glasses of water in order to produce one glass of orange juice.

No question, all necessary resources should be put in place to assure proper treatment and recycling of water, remediation of mining sites to “green lawn” condition, minimization of air pollution, etc. THIS should be the point of discussion, not political fiction novels, posted on this blog.

P.S. Meanwhile my shares of Alberta oil sands are doing just fine.

Do the math. The above charts reflecting the usual optimism of those who don't have to clean up the environmental mess still show only a 2 million bbl/day increase from 2005 to 2013. And oil production in the US (40% of its 20 million bbl/day production) is still declining, and that will not stop.

So at best the US can only increase its consumption to 22 million in that period without relying on more oil from "hostiles", but then that must be reduced by US production decline. Is anyone in their right mind releasing studies claiming that the US will only use 22 million a day in 2013? No, because the business elites would panic if they had to figure out how to keep their asset bubbles inflated in such a stagnant economy.

And on top of that the chart shows Canadian production practically flat after that. And it sounds like many Canadians intend to blow their jackpot on high-consumption lifestyles, so that also has to come off what is available to export. We've lost that 2 million barrels several times over by now, haven't we?

Meanwhile, the average mature oil well loses 5% of its production rate per year, I hear. And many important producing countries seem to have their own fast-growing economies with growing consumption. So we won't have to worry about being tempted into appeasing the "hostiles" much longer.

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