Wednesday, August 10, 2011

Oil Sands Reserve Estimate Has The Potential To Increase But Future Developments Could Face Obstacles Due To Environmental Concerns

Alberta Energy Board's reserve estimate for the oil sands assumes a 20% recovery rate but companies using Steam Assisted Gravity Drainage to recover in-situ crude have a recovery rate in excess of 60% (Infomine: Oil Sands Mining In Canada Industry Review) meaning that reserves located within the oil sands district could climb much higher in the near future (total resource is around 1.6 trillion barrels or 18% of the world's total, energy board reserve estimate is 173 billion barrels). Since the estimate was made, other technologies like Petrobank's Toe To Heel Air Injection method have been introduced, raising production efficiencies even further (THAI is 17% more effective than SAGD, Petrobank is so confident in its technology that it has invested heavily in regions with great quantities of resource but little reserves (Kerrobert, Dawson) (McDaniel and Associates Consultants Ltd.)

When production was 726,000 bpd in 2007 (60% as much as it was in 2008, 22% as much as it is expected to be by 2020) the oil sands released 1 billion ft3 daily of carbon through the burning of natural gas used in various stages of production and upgrading. That accounted for about 40% of Alberta's and 5-8% of Canada's greenhouse emissions. If production triples in the next decade those emissions consequently will be higher and given Canada's commitment to the Kyoto Protocol, future oil sands projects could be at risk if a less tolerant government is elected (Canada's current opposition party (2011, NDP) was led by someone who opposed the oil sands on environmental grounds). ( Layton would slash oilsands subsidies (March 31, 2011) Canada ranked 7th in emissions in 2008 up from 8th for most of the previous decade but it only ranks 15th in per capita emissions (2008). By 2045 oil sands will produce close to 11M bbls/d and that will continue for a century. Between 2012 and 2020 oil output from the tar sands will double (1.7 mbpd --> 3.4 mbpd) and triple in the next 25 years to 5.1 million barrels per day. Tar sands crude is over five times more expensive to extract than middle east oil however with oil prices up more than 400% since 2001 and Alberta continuing to charge one of the lowest royalty rates in the world (fell from $3 to $2/bbl between 2001 and 2009) there is much profit to be made.
According to Alberta's 2012 budgetary report, total oil production will reach 3M bpd by 2014, 2.4M of that is from non-conventional sources like bitumen (bitumen royalties totalled $5.7B in 2011 will be $9.9B in 2014).  2011-2012: non-conventional oil production was at 1.78 million barrels per day.  Conventional oil production will be 500,000 bpd in 2013.  Provincial royalty revenue:  Bitumen contributed $5.7B of the $6.5B total which includes conventinal, in 2012, 30% higher than the $4.4B earned the year before.  Total will be around $12.2B in 2014.
Furthermore, energy consumption experienced the biggest yearly increase since 1973 in 2010, in 2010 it was up 5.6% largely due to China (up 11.2% surpassing the USA) and non-OECD nations (63% higher than 2000 levels). (World energy consumption up 5.6% in 2010, biggest rise since 1973: BP) Oil accounts for about a third of the world's energy needs (about 140 out of 420 million BTU's (2011 pace as of August).

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