More on the oil sands

Post ImageA 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.

Please Canada, develop the oil sands of Alberta!

Post ImageI have long thought that we as a country should be investing more money in energy, including properly developing Alberta’s vast oil sands. Canada could become the most important region in the world for oil if we were able to extract it efficiently enough – and while it may not the best for the environment, it would certainly be a welcome change to have the oil capital of the world in a democratic, peaceful place for once. A new report from CIBC World Markets seems to support the idea of developing the oil sands, suggesting it will become the most important source of new oil by 2010:

Alberta will sit on one of the most valuable energy sources in the world by that time, and one of the few still open to private investment, said Jeff Rubin, chief economist at CIBC World Markets, the bank’s wholesale banking arm.

He added that conventional oil production around the world apparently peaked in 2004.

Energy companies are finding new oil, but most of it will come from non-conventional sources. Ocean oil rigs are the primary source of new oil today, with Alberta’s oil sands tomorrow, with expansion projects rivaling those of Saudi Arabia.

If we were able to properly develop the oil sands, without ceding too much control to the United States, Canada could become very rich, and the world would have oil for longer than is currently projected. This means two things would happen; first, the push for alternative energy sources may be slightly delayed and second, Canada could use its new wealth to invest in those alternative energy sources to be prepared for the time when no more oil can be extracted. If we sit back and choose not to increase production, the world will shift to other sources of energy more quickly, and we might one day be left with a bunch of useless oil, or at least, much less valuable oil.

One of the problems with the oil sands is that our technology is not good enough to efficiently extract the oil on a large scale. There has been some progress, but not enough. So how do we solve that problem?

  • We could just hope that Syncrude, Suncor, and the other companies involved figure it out.
  • The Canadian government itself could hire lots of researchers, engineers, chemists, whoever it takes, to try and improve the technology.
  • Canada could sponsor a research competition, kind of like NASA or DARPA’s popular programs in the United States. Challenge people to develop the most efficient, least harmful process for extracting oil from the oil sands. This is probably the best way to get some quick, meaningful innovation.

The point is that problems are not insurmountable.

There are lots of people who want Alberta to be the only one to profit from our reserves, but I don’t think there’s any reason that Alberta cannot be properly compensated and still have the entire country benefit. We don’t want Trudeau’s NEP, but we do need a national policy that recognizes Alberta and benefits all.

Unfortunately, our political parties do not seem that interested in developing such a policy. Vitality Magazine has a good round up of the “green” platforms the parties have announced for Monday’s election. There are quite a few mentions of alternative energy sources, but no mention of the oil sands. I think if we’re serious about alternative energy, we need to invest a lot of money into it, and what better way to obtain that much money than by fully exploiting the oil sands?

The oil sands offer our country very unique possibilities for the future. Let’s do something with the oil sands and take advantage of those possibilities!

(For more information, read these notes I took during a September 2005 conference that included some discussion on Canada, the oil sands, and the need for a national policy on energy.)