MIT Bringing Smart Biking Project to Copenhagen; Prototype Hybrid Bicycle
iQ Sales Launch with 1.0L Gasoline and 1.4L Diesel; New 1.33L Gasoline Engine with Stop/Start Due in 2009

RAND Study Concludes Oil Sands Synthetic Crude Can Be Cost-Competitive with Conventional Petroleum Even Over a Wide Range of CO2 Prices

Estimated unit costs of SCO from steam-assisted gravity drainage (SAGD) with upgrading, with and without CCS, and of conventional crude oil in 2025, versus different costs of CO2 emissions. Click to enlarge. Source: RAND

A new report from RAND concludes that in 2025, synthetic crude oil (SCO) produced from oil sands can have a cost advantage over conventional petroleum at a wide range of CO2 prices, even though it is more CO2-intensive (15-20% on a life-cycle basis). Coal-to-Liquids (CTL) transportation fuels can also be cost-competitive with conventional petroleum, although the degree of cost-competitiveness is more sensitive to the price of oil and the CO2 emission cost, the report says. CTL fuels can be approximately twice as CO2-intensive on a full life-cycle basis as conventional petroleum fuels.

Current methods for oil sands production require large quantities of water and can harm local water quality, the report notes. Development of oil sands can also cause large-scale disturbances of land and habitat. Both resources also represent potentially significant sources of carbon dioxide emissions. The study was funded by the National Commission on Energy Policy.

Because the potential environmental impacts are considerable, decision makers need to assess the economic and other benefits of alternative fossil fuels relative to these environmental concerns.

The most important constraints for oil sands are the local environmental impacts and demand for water. Since major investments in coal-to-liquids become more likely if environmentally sound carbon capture and storage can be commercialized at relatively low cost, the future expansion of this fuel source will be strongly influenced by future private sector and government initiatives to support such commercialization.

However, even with carbon capture and storage deployed, neither alternative fuel offers a path toward large long-term reductions in total carbon dioxide emissions to limit climate change. There will still be a need to develop lower-carbon fuel options, such as fuel synthesized from a mixture of coal and sustainably grown biomass.

—Mike Toman, lead author of the report

The study, Unconventional Fossil-Based Fuels: Economic and Environmental Trade-Offs, assesses the potential future (in 2025) production levels, production costs, greenhouse gases (GHGs), and other environmental implications of synthetic crude oil (SCO) produced from oil sands and transportation fuels produced via a variety of CTL processes. Production of liquid fuels from a combination of coal and biomass is also considered.

Although oil shale is also a significant potential unconventional fossil fuel resource, the RAND team opted not to include it in the report because “fundamental uncertainty remains about the technology that could ultimately be used for large-scale extraction, as well as about its cost and environmental implications.”

Key findings of the report include:

  • Even with future policy constraints on CO2 emissions and their associated costs, SCO seems likely to be economically competitive with conventional petroleum unless future oil prices are relatively low. The main constraint on SCO appears to be its local and regional environmental impacts.

    Because SCO’s increased GHG burden compared to conventional petroleum is relatively low (15-20%), it is less sensitive to CO2-emission costs than CTL.

  • The economic competitiveness of CTL is more dependent on future oil prices, carbon dioxide–sequestration costs, and the stringency of future carbon-dioxide limitations. For CTL to be cost-competitive with conventional fuels, one of two distinct conditions needs to be met. The first is that either the future cost of CO2 emissions or the cost of CCS is low. The second is that the price of crude oil in the longer term is significantly above EIA’s 2007 reference level. This would make investment in CTL with CCS attractive.

  • Higher oil prices or significant energy-security premiums increase the economic desirability of both synthetic crude oil and coal-to-liquids.

  • Unconventional fossil fuels do not, in themselves, offer a path to greatly reduced carbon-dioxide emissions, though there are additional possibilities for limiting emissions. Even if successful on a large scale, applying CCS to producing CTL and SCO would still leave unaddressed the CO2 emissions from final combustion of the fuels.

    Investments in expanding SCO or CTL do not, in themselves, offer a path toward the very large reductions in long-term CO2 emissions from use of liquid fuels that would be needed to stabilize atmospheric concentrations of CO2, a major consideration for those concerned with the long-term threats of climate change. Aside from some hypothetical future breakthrough in end-use capture and storage of CO2 emissions, the path toward very low transportation-sector emissions is often seen to involve biofuels or very advanced electric vehicle technologies.

  • Relationships among the uncertainties surrounding oil prices, energy security, sequestration costs, and carbon dioxide–control stringency have important policy and investment implications for coal-to-liquids.

    The RAND analysis concludes that adding CCS to CTL is a good hedge against the cost of future CO2 limitations if CCS can be realized on an adequately large scale, if CTL and CCS costs are in the lower part of the range of costs considered, and if future oil prices do not fall well below reference levels. If CTL and CCS costs are higher, however, the value to the CTL supplier of adding CCS to hedge against a high cost of future CO2 controls is positive only with higher long-term oil prices.

    From a societal perspective, it is desirable to reduce the need for bearing higher long-term costs of more-aggressive and -costly CO2-emission reductions. On the other hand, nearer-term concerns about energy security could lead to a situation in which there is a desire to keep nearer-term CO2 limitations relatively modest while putting more emphasis on significant CTL investments even if they were made without incorporating CCS.

    Neither CTL investors nor policymakers have many options for reducing long-term oil price uncertainty. Moreover, there is a risk to the economic value of CTL investment just from the possibility of relatively low long-term prices. On the other hand, policymakers do have options for reducing the uncertainties surrounding CTL and CCS costs. There is a large social benefit from government financing for both continued R&D for CCS and initial CCS-test investments at a commercial operating scale to further assess the technical and economic characteristics of CCS.

Other authors of the study are Aimee Curtright, David S. Ortiz, Joel Darmstadter and Brian Shannon.




I am kind of skeptical, the trend in the cost of extraction of oil sand have soared in the past 5 years from 45$ to 80$. So I would say their studies is not supported by the trend. Adding a CCS would make it even more expensive as for the EROI that is already low for the Tar Sand (like 3) CCS is energy intensive. I am aware that they are planning to gazeify waste of the Tar sand process to generate H2 but still i am not encline to believe their conclusions.


In the early days of carbon pricing liquid fuels aren't that badly affected. For example if CO2 costs $20 a tonne that adds about 5c per litre to petrol. Thus straight CTL would have carbon charges about 10c/L or 5c with CCS. What would happen with say an 80% carbon reduction target in year 2050 is hard to predict. If CTL costs haven't increased badly the carbon component would be relatively much higher. Maybe $2 carbon charges on top of $5/L fuel, inflation adjusted. On the other hand a wholesale switch to EVs, long distance train travel and low carbon electricity could mean only a small amount of CTL is needed for jet fuel. If so the tough carbon cap may not be too onerous because the problem has partly self corrected.

However I think we have to stick with a shrinking global carbon allowance so that CTL is seen as a less preferred option. I'm unimpressed with politicians who say because of this month's financial crisis we should back off cap and trade after years of planning. Doing things the old way clearly isn't the answer.


I instinctively don't trust anything the RAND corporation says. There conclusions in this study sound more like wishful thinking than forward-looking.


"the trend in the cost of extraction of oil sand have soared in the past 5 years from 45$ to 80$"
Do you have a source for that? I'm interested. Thanks.

The Scoot

Well, petroleum as a commodity is not going away. That being said, what with off-the-shelf technology able to make an electric car go sixty miles a four hour charge, do oil companies honestly believe they are going to be in the business of motive energy fifteen years from now?

Sixty miles is well above the average commute range, and was cutting-edge ten years ago.

Let them develop the oil sands. It's not like anyone is going to buy gasoline from them in two decades...



It was reported on this site acatually, a few weeks ago in "in brief culumn" but don't see it anymore.
You caan do a search on "soaring cost of tars sand extraction" i am sure you will find article about that


What would we have done if there didn't existed this molecule co2? All these studies would have been useless. Maybe RAND also does special studies that only cares about cost competitiveness for Hong Kong, Taipei, Singapore, Seoul and Shanghai entrepeneurs. Some clues: price of oil has dropped, price of steel has dropped, coal is still rising. And labour in Asia costs nothing.

Will S

"The future course of each unit-cost driver is uncertain,..."

"For oil sands, new extraction technologies are being brought forward whose future costs are uncertain. For coal liquefaction, there is not yet experience with
modern plant designs implemented on a larger scale."

"All of these parameters are uncertain and difficult or impossible to accurately predict early in the planning process."

"However, if CTL turns out to be more costly than anticipated or oil prices in the longer term are lower than this reference price, CTL may not be cost-competitive even without a CO2-emission cost."

There are so many caveats in this report that the conclusion should have been "there is no clear answer". But then they would likely have fewer customers in the future, so might as well tweak the answer to favor the people who paid for the report.

Reality Czech
Let them develop the oil sands. It's not like anyone is going to buy gasoline from them in two decades...
You don't want to do that. The useful life of those facilities will be much longer than that, and if they are not economically viable they will divert materials and labor from enterprises which are.
Max Reid

Note the Year '2025'. By that time, conventional petroleum will cost $300/barrel and hence synthetic crude will be competitive.

But there is another factor. For every 1 unit of energy input, synthetic crude will give 5 units of energy output. So where is the input energy going to come.

Naturally Coal which will increase the coal consumption.
No other go, but we have to look for all these sources as the conventional crude supplies are dwindling.

Parallely, nuclear and wind are gaining rapidly and I hope they gain bigger share in our energy mix.

Max Reid

Read this article

It says 'North America will keep oil sands production growing from 1.2 million barrels a day in 2007 to 3.5 million to 4 million barrels a day by 2020'.

So in a period of 13 years, production will grow from 1.2 to 4 million barrels which is 3 fold. On the other hand, wind will grow atleast 10 fold in this period without depending on any other source like coal as input energy.


What's the average energy input for building a wind turbine?

Rand is offering a study to its petroleum clients just to offer something. It's doubtful the client will pay much attention or take any action.

The Rand study merely makes the observation that the price of OIL has gotten far out of hand. It is now so far out of whack, compared to the cost of production, that it is economical to mine Tar Sands, and convert Coal to liquid Petroleum. That includes all the inefficiencies and the losses that that incurs.

What is implied is that a new analogue to the SynFuels debacle can be aborning, if the wrong stupid politicians are placed in charge.
The debacle is more likely, since few others then governments, would make investments on that basis.

It also means that this speculative price spike, but not supply problem, has about run its course, and oil prices will recede as they are doing, now.

From the perspective of the readers of these pages the Electrification of Ground Transport, accelerated to high gear by the price spike, once begun, will continue.

Henry Gibson

Very large amounts of money were sent to oil producers these last two years of speculative oil price increases. This money was obviously a great increase in their profits. It must be noted that the oil producers did not set the price of oil high with straight forward demands that people who wanted their oil must pay a certain price, but knowing that the US government and others would allow the collective witholding of oil from the market, the oil producers allowed the speculators to drive up the price so that they could reap the profits. There is no benefit to oil companies producing oil in the US to have foreign oil companies produce lots of oil. Even though oil from off shore drilling and oil from shale and fuel from coal is not now available, merely stating the intention to support such activities would reduce speculation within minutes and reduce the flood of money out of the US. No one can claim that it costs $100 to get oil out of the ground. In fact, there is probably no place where, even including discovery, drilling and other costs does it cost more than $30 dollars a barrel and it is likely that the average costs are less than $10.

Oil companies have the money and oil companies have the technology and oil companies have the distribution systems and finally oil companies have the full knowledge that getting oil out of the ground is very cheap, so there is no way that oil companies will have any incentive to invest large sums towards alternative production of fuels except to preempt others from doing so. A recent effort to get oil from oilshale used expensive electricity to produce the heating and then abandoned the efforts on the pretext that it was too energy and CO2 intensive to produce oil from oilshale. This false test, with all its in efficiencies, will be quoted for the next century to show that even a rich oil company could not make oilshale work.

Every penny that they spent on expensive electricity and many more will be made up with the high prices they have recieved whilst deceiving the Colorado and US politicians into believing that oilshale is not profitable. There is no possibility that there was not an engineer that could be hired to make a burner to produce the required heat from natural gas or even butane-propane even in a deep hole.

This very moment, oilshale is being mined, ground up and burnt as a substitute for expensive oil and natural gas. Coal is too cheap in the US to have anyone need to burn oilshale directly.

All of the money sent abroad to oil producers could have built a massive, coal to liquids and oilshale to fuel, infrastructure, but no oil company would allow a government to support such a thing. It would be worse than an electric car. Why the US government's antitrust division allows an oil company to own the most reliable high energy battery technology for hybrid cars is entirely understandable.

Nuclear reactor heat can be used directly to produce both oilshale fuel and tar-sand fuel. Such reactors can be very small and made in a factory and delivered on site. Such reactors are used in ships and submarines.

If only half of the U235 in natural uranium is fissioned, 300 pounds of natural uranium will produce the same heat as 3,000,000 pounds of coal which, itself might leave 300,000 pounds of ash and produce over 8,000,000 pounds of CO2. At least %99 of the possible fission energy of the fuel is left in the "used" rods.

Already tested reactors and processes can get the remaining energy out if the price of natural uranium gets too high. Eventually all of the natural uranium can be fissioned. There is probably enough "used" uranium in stockpiles and "spent" fuel rods to supply all of the the electricity needs of the US for a century without mining an additional pound. Uranium can be got from the ocean itself now at a price less than price of energy from crude oil. This is not necessary now because uranium is and can be gotten out of the coal ash piles of power plants.

Thorium is also a fuel that is about three times as abundant as uranium. By adding two percent surplus uranium or plutonium from warheads or used fuel rods to thorium, CANDU reactors could start an efficient thorium burning cycle tomorrow. No additional plutonium or uranium is needed after starting the cycle.

If the high pressure steam is eliminated from reactors, most of the cost and most of the safety issues are eliminated. If no water had been in the Chernobyl reactor it could not have exploded and would have gotten very hot for a few seconds and just partially melted leaving the building intact and little or no fire. Automatic pressure relief valves might have even prevented the explosion.

There is a belief that efficient steam turbines are necessesary for nuclear power reactors, and this belief requires that the very efficient very large steam turbines be used. This belief is probably economically false, but is based upon coal and direct gas fired boiler steam power technolgy. Even this technology is probably obsolete especially if natural gas is being burnt.

Combined cycle units with lower power gas turbines and much lower power steam turbines is the most energy efficient widely used method of producing electricity at central power stations from natural gas. But any of the relatively low electric efficiency micro-turbines from Capstone and others are much more energy efficient and CO2 efficient as a part of combined heat and power and cooling units of buildings. There is almost no reason to build a single additional natural gas powered combined cycle power plant, and all of the capital should be devoted to building local generation. The natural gas used for such machines should be charged at low rates related closer to the rates that are charged to utilities.

Never again should a coal boiler be built for a power plant. The coal could be gassified and purefied first in a large central location out of town where byproducts can be economically extracted due to the large scale. Much expensive plant fertiliser is now being burned up with the coal in ordinary boilers and must be replaced with ammonia made from natural gas. No such unit should ignore the possibility of producing methanol and storing it. Methanol can be burned directly in some engines, converted to DME to burn in diesel engines or easily converted to gasoline directly.

High efficiency, on site diesel engines could be used for power peaking by burning either natural gas or synthetic gas with DME as the ignition fuel. Large ship diesel engines have a simple efficiency greater than %50; a combined rankine cycle could be added for even higher efficiency.

These coal to gas units can use much of the waste heat from the processes to generate some electricity or to refine ethanol from fermentation. Some organisms can use hydrogen gas and CO2 as part of the food for making ethanol.

The pure gas made from such coal gas plants can be shipped in pipes to small combined cycle power plants throughout any city where the waste heat can be used for building heating. Building owners near such pipelines can have the option of using that kind of gas in their microturbine, combined heat and power units.

Nuclear heat is very cheap heat, so expensive efforts to gain efficiency may not be worth the effort. Less than two pounds of natural uranium a year, used in a CANDU reactor, could supply the average house with electricity. Doubling of uranium prices should be unnoticable on a customers bill; Natural Uranium now costs about fifty dollars a pound which is high enough to make recycling profitable. One pound of natural uranium used in a CANDU reactor gives the same energy as 5000 pounds of coal. In a CANDU reactor a pound of natural uranium produces as much heat as about 20 barrels of crude oil. This much oil has cost as much as $2800. The coal energy at its highest price($100/ton) would have cost $250. Even doubling coal prices should only result in an increase of less than %20 percent on a customers bill because capital, management and operating costs are about %80 of every bill.

The smallest CANDU reactor that could be built on a site that might have as many as a hundred such units with even to or three turbines per reactor, could be built and be in production to produce revenue for the subsequent small units. The large numbers would make the design costs unimportant and the maufacturing costs much lower. The loss of revenue during repairs is eliminated with temporary higher power operation of the remaining reactors. These small reactors can also be built at tar sand production sites easily and quickly.

The successful pebble bed reactors can also be used for this purpose and produce hydrogen by themochemical means for upgrading heavy crude oil. ..HG..

> knowing that the US government and others would allow the collective witholding of oil from the market

Sorry, I can't see how anyone could claim this. We can't even drill to anywhere near the capacity in the GOM or on open leases right now (Exxon was kicked off a lease by Palin because they simply sat on it too long), so nothing has been 'withheld'. Drilling costs are simply too high in the US at the current time compared to pulling oil out of the sand in the Middle East.


Here is my take on this. From a mass balance stand point, going from coal (CH0.8) to liquid fuels (CH2) requires more hydrogen (or the elimination of more carbon as CO2) compared to using oil sands or heavy crudes (CH1.5)


Great Job
interesting topic , I would like to read more on this topic and Steam Coal Suppliers .


For your information...

The lattest cost of extracting oil from tar sands is about $32/barrel split almost evenly between mining and upgrading the product. (most long term clean-up cost are not included in the above production cost) Inflation, increasing royalties, and NG price may bring production cost up in the future. However, In Situ technology may bring in down. A solution will have to be found when NG runs out. Will it be cheaper dirty coal or cleaner but more expensive Nuclear?

EROI varies between 1.5 to 5.2 depending on what is included in inputs and the technology used. Have your pick. When the potentially huge clean cost are included, an EROI of 1.5 to 2.0 may be closer to the truth for open mining operations. Of course, full In Situ operations could raise EROI closer 5.0.

Average CO2 created per oil barrel produced is about 135 Kg.

Fresh water used per barrel produced varies between 2.5 to 4.5 barrels. The highest figure may be the right one.

The comments to this entry are closed.