Canada’s oil sands cannot stop Peak Oil

The term “Peak Oil” was used for the first time in January 2001. It was then that Colin Campbell wrote his first newsletter for ASPO, the Association for the Study of Peak Oil and Gas. A month later the “Focus” (Brännpunkt) the Op-Ed column of Svenska Dagbladet, Sweden, published the first debate article on Peak Oil. In the debate that followed, Tommy Nordin, the then head of the Swedish Petroleum Institute (now the Swedish Petroleum and Biofuel Institute) advanced the view that we did not need to worry about Peak Oil since huge oil sand resources exist.

When the Global Energy Systems research group was founded 10 years ago at Uppsala University, research into Canada’s oil sands became one of our first projects. The initial scenario for the analysis was maximal production where economic conditions were not a limiting factor. Such an analysis had been sought in a report to the US Department of Energy. In the book “Peeking at Peak Oil” I compare our analysis with what the International Energy Agency (IEA) regarded as possible future production in their World Energy Outlook report of 2011. For 2020 (that we will discuss in more detail below) we predicted 3.8 million barrels per day (Mb/d) and the IEA 2.7 Mb/d of production from Canada’s oil sands. This can be compared to the world’s current total oil production of 83 Mb/d (according to BP Statistical Review of World Energy).

IHS CERA has just released a special report on “Future Markets for Canadian Oil Sands”. The complete report is only available to its customers but an abbreviated report can be downloaded from their website and it is quite good. They discuss the conditions for transport of increased production from the oil sands and which refineries can handle oil sands products. It is revealed that production of shale oil is a problem and limiting factor for this. The report discusses the oil characteristic °API. This unit describes how dense (and viscous) the oil is. If the °API of oil is less than 10 then it will not float on water. The raw product from oil sands – bitumen – has a °API value that is less than 10 and is very dense. This product cannot be transported in pipelines. To make the product transportable a variety of methods are used. One is to process the bitumen into synthetic crude oil (SCO) that is comparable to conventional crude oil. Some bitumen is blended with light, low-viscosity hydrocarbons (condensate) to form “Dilbit”. Some bitumen is also blended with SCO to form “Synbit”.

Production of bitumen is currently 1.7 Mb/d and the IHS CERA report states 3.2 Mb/d as a possible level of production in 2020. That is less than our estimated maximal production level but more than what the IEA estimates. Alberta, where oil sands are mined, lies east of the Rocky Mountains but still lies in what is regarded as western Canada. Currently, there are pipelines with limited capacity to Vancouver and to the Midwestern USA. The pipeline limitations have meant that increasing amounts of oil sands products are moved by rail but the transport capacity of rail cannot be compared with that of pipelines. At the moment there are several projects underway to increase pipeline capacity. One is a second pipeline to Vancouver and a new one that is to pass through the northern part of the province of British Columbia, the “Enbridge Northern Gateway”. Another is the controversial Keystone XL pipeline to the USA and the Gulf of Mexico. Last year President Obama blocked the Keystone XL project and we will see if he changes his mind this year. The oil transport capacity of rail will also increase. If all these projects are completed then by 2020 it would be possible to transport 2.4 Mb/d to refineries in the USA and other nations. However, to reach 3.2 Mb/d additional pipelines are required. At the same time as IHS CERA confirms this, they also note that shale oil will not make the USA independent of the need to import oil. Production from the Canadian oil sands will also be needed in the USA.

Approximately one third of oil sands production is consumed in Canada and 80% of exports end up in the American Midwest. The rest of exports from the oil sands are distributed to other markets in the USA. The products that come from the oil sands are so unusual that the capacity to refine them in US refineries is limited. Previously, every upgrading of refineries in the USA has increased the capacity to handle Canadian oil sands products but the rise of shale oil will change this pattern. The Gulf of Mexico coast of the USA has the world’s largest refinery capacity at 8.6 Mb/d but in 2011 only 0.07 Mb/d of this refinery capacity was used for the Canadian oil sands products that reached this area. If all the projects to increase the flow between Canada and the Gulf of Mexico go ahead then there will be the future potential to refine 2 Mb/d but the eventual reality will probably be somewhat lower. The region’s refineries can accept 2.4 Mb/d of such heavy oil and currently 2 Mb/d of this oil is imported from Mexico, Venezuela, Columbia and Brazil. Thus, the spare capacity for refining oil from the Canadian oil sands is actually only 0.4 Mb/d. Greater volumes from Canada’s oil sands means that imports from other parts of the world will decrease. The refineries on the US west coast already accept the maximum amounts of oil sands products that they can. The conclusion is, therefore, that refinery capacity limits the possibilities for expansion of importation of Canadian oil sands products into the USA.

The rest of the world has limited possibilities to accept oil sands products since this would require the building of new refinery capacity. In principle, today it is only China that plans to expand its refinery capacity. Together with Venezuela they are already planning a refinery that will be able to accept 0.4 Mb/d of Dilbit from Venezuela. China has large interests in Canada’s oil sands and is also willing to finance the Enbridge Northern Gateway. This can take 0.5 Mb/d of Dilbit to harbour on the west coast. If construction of the pipeline is stopped this will have consequences for future refinery construction in China.

To return to the beginning of this article we should reassess the statement that the oil sands will save us from Peak Oil. As early as 1998 Colin Campbell and Jean Laherrère stated in an article in Scientific American that global crude oil production would reach a maximum in around 2005. The IEA now considers that conventional crude oil production reached its maximum in 2008 and that it will decline by 2035. We, the IEA and IHS CERA all agree that crude oil production from currently producing fields is declining by 0.4 Mb/d per year and that the oil industry will not be able to compensate for this decline with new conventional crude oil production. We see that the total of current production and planned new production from the Canadian oil sands gives a level of possible production in 2020 of 3.2 Mb/d. This means that 15 years of expansion of Canadian oil sands production does not replace even one year’s decline in production from existing conventional crude oilfields. At the same time we can note that it is doubtful if, in 2020, there will be sufficient refinery capacity to handle 3.2 Mb/d.

Canada’s oil sands will not stop Peak Oil.

ASPO

7 Comments on "Canada’s oil sands cannot stop Peak Oil"

BillT on Sat, 19th Jan 2013 1:39 pm 



Sounds to me like it is dead in the sand, so to speak. You can have an ocean of it, but if it is landlocked to the region, it is worthless. Let Canada build the refineries if they want to sell the oil, and let them build them in Canada. NOT the US! No new pipelines in the US anywhere!

econ101 on Sat, 19th Jan 2013 4:54 pm 



Irrational economic policies have led in large part to the economic problems we have now. We can see from the results economic policy is not an area where angred villigers should be given much policy input.

Of course oil sands arent going to save the world but they will be a critical supplier of energy over time. It will be produced and it will be used.

The groundless and blatantly political move to block the Keystone pipline will certainly make plane tickets to the Philippines more expensive but should serve to keep wages in that country down and economic hardships a reality for most, just as it will do in this country. Maybe, if we stop all pipelines, somebody can employ them on a banana plantation? Or better yet just give them all welfare.

Dmyers on Sat, 19th Jan 2013 11:39 pm 



This tar sands phenomenon is a study of EROEI. Transporting tar sands by rail for example, requires huge energy input. The heavy, low energy cargo gets transferred by shovel rather than valve. Most of what’s being hauled around will have to be discarded, and they will run out of places to put it, and it will end up in a subway car riding forever beneath the streets of Boston. From ground to gas tank is clearly a much more energy intensive situation than the same sequence with conventional oil.

Where the EROEI rubber really hits the road is at the refinery, and that is where a slack is forming in the massive throughput required. Refining tar sands is going to be a lot harder than refining real oil. It will take more energy and yield more toxic and obnoxious by-products.

This is not an inviting arena. And it’s probably a lot worse than it even looks. The reality of EROEI comes into clear focus. From that, we get no investment and a refinery crunch, and presumably, therefore, the potential loss of all that oil supply which is already included in the numbers.

It seems tar sand oil extraction and refinement requires lots of conventional oil input and bears a resemblance in that respect to the various so-called alternative energy sources. Liquifying the sands also requires the input of other hydrocarbon distillates, and these could become a limiting factor.

I think the article makes its point. The increase in tar sands oil will not keep pace with the decline in conventional oil.

Yikes on Sun, 20th Jan 2013 1:05 am 



Dmeyers:
Wow! investigate what your talking about. Nobody is sending the oilsand by rail. They’re talking about bitumen by rail.

BillT:
refineries in Canada? How will they send the refined products to us?

Folks, we need the oil. The President should approve keystone by saying just that. But he should also challange the country to force the pipeline dry due to lack of DEMAND. But I doubt that we have the will to do it.

Feemer on Sun, 20th Jan 2013 4:26 am 



the economy of the US and the world over is based on limitless growth, supplied by limitless energy, it would be nice to just strip mine a forest the size of florida for oil and build many many pipelines, and emit even more greenhouse gasses, all so our economy will grow 1% in a year, but the reality is our economy isn’t just based off of limitless energy like we thought, its off the environment. and Climate change, which humans are contributing to is reaking havoc, already in colorado dryer and warmer conditions have lead to many forest fires, and increased drought and heatwaves have destroyed farming. Theres also super storms like sandy and katrina which cause billions of dollars of damage, THAT is what hurts the economy, when food prices skyrocket, wood prices skyrocket because all our forests have been cut down or burned

Feemer on Sun, 20th Jan 2013 4:26 am 



the economy of the US and the world over is based on limitless growth, supplied by limitless energy, it would be nice to just strip mine a forest the size of florida for oil and build many many pipelines, and emit even more greenhouse gasses, all so our economy will grow 1% in a year, but the reality is our economy isn’t just based off of limitless energy like we thought, its off the environment. and Climate change, which humans are contributing to is reaking havoc, already in colorado dryer and warmer conditions have lead to many forest fires, and increased drought and heatwaves have destroyed farming. Theres also super storms like sandy and katrina which cause billions of dollars of damage, THAT is what hurts the economy, when food prices skyrocket, wood prices skyrocket because all our forests have been cut down or burned

BillT on Sun, 20th Jan 2013 6:26 am 



econ/sos, you’re blind to reality. Even if oil doubles in price my ticket to the US will not double. And, who says I want to come to the US? When the SHTF, I will just stay here. No problem.

The Western world is where the most pain will reside, not the 2nd and 3rd world where they don’t have or need all the waste of the 1st world. Yes, YOUR future is bleak. As it is for about one billion others, but for the other six plus billion, it will be the same or better. Enjoy it while you can.