Commentary
Study brings oil sands away from the fringe and into the centre of energy supply
On May 18, 2009, CERA (Cambridge Energy Research Associates) released a new study on the expanding role Canada’s oil sands will play in meeting increased world energy demand, maintaining North American energy security and fostering economic growth.
The report, Growth in the Canadian Oil Sands: Finding the New Balance, is particularly relevant to in situ producers because it underscores the importance of technology and innovation in tackling the environmental challenges facing the industry and global energy consumers. We agree that innovation is key to developing the oil sands more efficiently. Our IOSA producers actively seek new technology to improve efficiency, reduce or eliminate fresh water use and reduce greenhouse gas emissions to lessen the environmental footprint of the oil sands. It is important to point out that SAGD with solvent technology, which addresses these environmental issues, is currently being tested by our members. The CERA report confirms this technology to be first to commercial development in less than five years.
We are pleased that a credible third party organization like CERA initiated this important research on the future of the oil sands. Because we have witnessed the oil sands debate becoming increasingly polarized over the years, IOSA members took the opportunity to support this research process by participating in a series of workshops hosted by CERA. This participation was an extension of our belief that it is time to talk about specific solutions to the many challenges the oil industry faces. We believe an improved dialogue between industry, government and energy consumers will help us achieve the solutions we seek and this is one of the reasons it is so important to share some key concepts from the report.
The study astutely addresses increased concerns about the energy intensive process of oil sands development, a concern that continues to motivate the evolution of in situ technology, and makes inroads on clearing up the confusion over comparisons of GHG emissions. Many people mistakenly believe that oil sands are two to three times more energy intensive than conventional oil. This is true only in terms of the extraction process. However, that is only one part of the equation. First, CERA points out that the total “well-to-wheels” greenhouse gas emissions, from extraction and processing through combustion of refined products, is only five to 15 per cent higher for the oil sands compared to the average crude oil processed in the United States. The majority of GHG emissions (about 70 to 80 per cent) for all oil sources are released during the combustion of refined products such as gasoline and are not related to the origin of the crude.
Second, the average oil processed in the United States is getting heavier as there is less lighter conventional oil available. This report provides a basis of current and relevant data recognizing that the average crude oil consumed in the United States is getting heavier as the available new supply brought on-stream is the heavier marginal barrel.
Third, CERA recognizes that more accurate measurement, verification and reporting requirements are important components of policy development and implementation. These are all important statements that must be acknowledged in any balanced dialogue.
The report also explores the issues surrounding fresh water use in oil sands development. With in situ oil sands operations, little fresh water is utilized for steam generation and in situ does not require tailings ponds. For new developments, no fresh water is required. However, we disagree that the hydrology in the area is not well understood. There is substantial data and knowledge regarding ground water resources. We are continually conducting our own research, and reviewing academic studies. The industry has made a great deal of progress and will continue to study this.
The CERA report outlines the tremendous economic benefits of more than $150 billion spent from 2000 to 2008 on oil sands development and related activities. This has led to approximately 240,000 jobs directly or indirectly being related to the oil sands and more than $30 billion in government revenues in the same time period. These are tremendous statistics that deserve a strong presence in the oil sands conversation.
Development of Alberta’s oil sands is fundamental for a secure energy future, and in situ development will play an important role. It is important to recognize Canada’s position as the number one foreign oil supplier to the United States, a role which will become increasingly critical as conventional oil supplies decline.
The report highlights the need for stakeholders to work together to plan for and address the infrastructure and cost pressures facing the industry. Collaboration between the industry, community stakeholders, and government combined with research, technology, and innovation will enable more responsible development and better cost control. Increased investment by government towards new research and innovations will help us ensure we advance needed oil sands technologies. Historically, industry/academic partnerships have been successful. SAGD was developed between 1986 and 1998 and is the result of collaboration between the Alberta Government, the Alberta Oil Sands Technology and Research Authority (AOSTRA) and industry. In 1999-2000, a number of the original development partners were licensed to use SAGD technology and announced commercial ventures worth a total of over $3.4 billion.
The oil sands industry is one that was built on continuous improvement in technology and we believe this is the way forward. The CERA report asserts quite rightly that oil sands will move away from the fringe of energy supply and towards the centre. Productive conversations around balancing energy security, our environment and the economy will also require increased attention towards oil sands and the solutions offered in this industry. In situ technologies represent a vast portion of those solutions as the world looks to Canada’s oil sands increasingly in the upcoming years.