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Canada Boosts 10-year Total Crude Forecast by 11%; Oil Sands Production Up 2.7x

Capp_canadian_forecast
Almost 3 out of every 4 barrels of oil will be from oil sands

The Canadian Association of Petroleum Producers (CAPP) is projecting a 50% total increase in Canadian crude oil production by 2015 from 2.6 million barrels per day in 2004 to 3.9 million barrels per day.

The new 2005 Canadian Crude Oil Production and Supply Forecast reflects a total increase in output of some 11% from last year’s forecast of 3.5 mbpd. The 400,000 barrel per day increase was driven by an increase in projected oil sands production, as well as slower decline in conventional production than previously thought.

Canada is currently one of the top oil exporters to the US, vying for that position with Mexico.

The decline in conventional crude production, which peaked in 1997 according to CAPP, slows from an average 5% per year to 4%, due partly to advances in drilling and production technologies, and partly to the doubling of offshore Newfoundland developments to 290,000 barrels a day by 2015.

Tens of billions of dollars are pouring into oil sands development, and a number of new oil sands projects are due to come online during the next 10 years.

Oil sands are a mixture of sand, clay, water and deposits of bitumen—a very viscous form of oil that must be rigorously treated in order to convert it into an upgraded crude oil before it can be used in refineries to produce gasoline and other fuels. (Earlier post.) (Oil sands used to be called tar sands, to give you a sense of it.) The ratio of bitumen to everything else is relatively small: 10%–12%.

The bitumen contained in the oil sands is characterized by high densities, very high viscosities, high metal concentrations, high amounts of sulfur and a high ratio of carbon to hydrogen molecules. With a density range of 970 to 1,015 kilograms per cubic meter (8-14° API), and a viscosity at room temperature typically greater than 50,000 centipose, bitumen is a thick, black, tar-like substance that pours extremely slowly.

Oil sands production can be divided into in-situ production (heating and other processing of the tar-like sands while still underground to release the oil, with subsequent extraction) and mined production (where the sands are mined, and then hauled to a retort for processing).

According to CAPP, 60% of current oil sands production comes from mining projects. By 2015, that will drop to half.

Given the nature of oil sands production (open pit mining or underground heating), there are a number of environmental issues that must be worked through. Historically, there have been numerous cost issues for producers to worry about as well, although the ongoing rise in the price of conventional crude is making the processes more economically viable.

Areas of primary environmental concern relative to oil sands production include:

  • Surface disturbance from mining operations.

  • Water. Both types of processing consumer large amounts of water, ranging from 2.5 units to 4.0 units of water for each unit of bitumen produced.

  • Greenhouse gases. Oil sand operations emit large amounts of carbon dioxide (CO2) and some methane (CH4) gas and nitrous oxide (N2O). Increases of GHG emissions from oil sands production will have to factor in to Canada’s Kyoto compliance.

  • Energy needs. The recovery and upgrading of bitumen from the oil sands are energy intensive activities, consuming large amounts of natural gas, electricity, transportation fuels and hydrogen.

Producers are tackling the problems from a variety of approaches, trying new production techniques, and different schemes for reducing consumption of energy and water, for example.

In a report (referenced below) posted on the ASPO site provides an in-depth and longer-term analysis of these and other aspects of the oils sands industry in Canada, and concludes that:

Being the most expensive large-scale oil production in the world, oil sands mining is today a well proved technique. In the light of an approaching peak oil scenario, it is reasonable to assume that the oil price will remain high and climb even further. Although associated with great economic and environmental costs the oil sands mining industry might very well continue its high growth.

Unfortunately, while the theoretical future oil supply from the oil sands is huge, the potential ability for the Canadian oil sands industry to meet a growing world oil demand, is not based on reality.

The International Energy Agency claims that 37 million barrels of unconventional oil must be produced by 2030. Canada has by far the largest unconventional oil reserves. By 2030, in a very optimistic scenario, Canada may produce 5 million barrels per day. Venezuela may perhaps achieve a production of 6 million barrels per day. Who will be the producers of the remaining 26 million barrels per day?

Resources:

Comments

Noel

Canada is not vying for number one oil importer with the US, it is the number one oil importer.

Mike

I think you mean exporter. :-) But Canada and Mexico go back and forth as #1, depending on the month.

Data from the US Energy Information Administration for crude oil imports:

May 2005: Mexico: 1.755 mbpd; Canada: 1.702 mbpd

April 2005: Mexico: 1.541 mbpd; Canada: 1.676 mbpd

YTD, though, you’re correct. Canada is number one by 22,000 barrels per day.

Adam

The wording of the article on the main page is awful. Between the title and into paragraph, I had a really difficult time understanding what was being said.

Mike

Hmm, well, sorry about that. I’ll work harder to be clear. Thanks for the corrective feedback!

Adam

That came off a little too harshly. I should have simply said it was confusing. Sorry.

mohseni

Why is oil sands production limited to 5 mbd by 2030?

Alberta says OS production is $8 a barrel. I believe the producers say it is really $20 a barrel. Assume it is $30. At $70 a barrel for crude oil, that is $40 a barrel profit. So each extra 1 mbd will generate about US$ 15 billion of profits.

Which government and which corporation is willing to turn a blind eye to such monies?

Again, what limits OS production to 5 mbd in 2030?

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