A week ago today I wrote a post explaining how I think Canada should be making a greater effort to develop and benefit from the oil sands in Alberta. Naturally, I’ve been keeping my eyes open for any news regarding the oil sands, and I’ve actually come across a couple things.
First is The Oil Sands of Alberta which aired on 60 minutes on Sunday. A couple things stood out for me:
There are 175 billion barrels of proven oil reserves here. That’s second to Saudi Arabia’s 260 billion but it’s only what companies can get with today’s technology. The estimate of how many more barrels of oil are buried deeper underground is staggering.
We know there’s much, much more there. The total estimates could be two trillion or even higher,” says Clive Mather, Shell’s Canada chief. “This is a very, very big resource.”
Very big? That’s eight times the amount of reserves in Saudi Arabia.
Clearly, there’s a lot of oil there. We just need the technology to be able to get it out of the ground for a reasonable cost! That’s key to my argument – we need to work on ways of fostering that research and development.
“I think it’s bigger than a gold rush. We’re expecting $100 billion over the next 10 years to be invested in this area – $100 billion in a population that, currently, is 70,000 people,” says Brian Jean, who represents the region in Canada’s parliament.
There’s a lot of money coming in too. More than I expected, to be honest. However, I am still not convinced that big corporations are going to be the ones who find a way to improve the technology and thus the ROI. Sure companies make progress in a lot of areas, but more often than not, it’s an individual or smaller group of individuals that find a way. Corporations then either copy or acquire.
For more commentary on the piece, The Oil Drum has a very good post with a ton of interesting comments too.
The 60 Minutes episode makes it seem as though China currently doesn’t have much interest in the oil sands, though not for lack of desire. A press release I found yesterday though tends to suggest that the country is starting to make investments:
What is certain is that global demand for oil – especially from Asia – is far outstripping the ability of companies to meet current demand and replenish their diminishing reserves. These factors are being exacerbated by global political uncertainty. The oil sands are increasingly on the U.S. radar screen as they focus on reducing their reliance on oil producing countries outside of North America. The Chinese have become increasingly involved in the oil sands with the China National Offshore Oil Corp., recently investing $150 million in MEG Energy Corp., a private company engaged in the oil sands.
In a different press release, I learned that Purvin & Gertz, an independent energy consulting firm, made available a study that analyzes the challenges and opportunities presented by development in the oil sands.
Producers face issues of growing existing and new markets for oil sands crudes. The need for diluent to transport heavy crude will increase with bitumen production. Upgrading in Alberta could reduce diluent demand, but requires major capital investment and does not eliminate the market risks associated with marketing SCO.
I’d have thought that with the increasing demand for oil there would be little or no risks associated with marketing synthetic crude oil! I’m not an expert though, so maybe I’m missing something. You can find out more on the study at the Purvin & Gertz website.
I need to dig around a little more, but I would not be surprised if much of the $100 billion that has been announced turns out to be nothing more than a foot in the door for the companies making the investments. If you’re in the oil business, you don’t want to miss out on the oil sands. In order to benefit though, we need to get better at extracting and refining the oil!
I guess one reason Canada wouldn’t be all that interested in sponsoring research and development is that so much of the oil sands has been sold to foreign investment (at least that’s how it appears). Like I said, more research is needed, but if that’s the case, it’s potentially a major loss for Canada.