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Page added on July 25, 2014
Costs up for oil sands production
The costs of producing bitumen and synthetic crude in the Albertan oil sands have increased over the past year, says the Canadian Energy Research Institute in an annual report that projects steady growth in output.
Compared with last year’s report, estimated costs of production before blending and transportation are up 4.4% for steam-assisted gravity drainage, 1.6% for mining without upgrading, and 5.9% for integrated mining and upgrading (OGJ Online, May 29, 2013).
The new estimates of plant-gate supply costs: $50.89/bbl (Can.) for SAGD, $71.81/bbl for stand-alone mining, and $107.57/bbl for integrated mining. CERI estimates the cost of stand-alone upgrading at $40.82/bbl.
When the price of West Texas Intermediate crude is $100/bbl, the only economic production technology when blending and transportation are included in the estimate is SAGD, CERI points out.
After those adjustments, the WTI-equivalent supply costs at the Cushing, Okla., pricing hub are $84.99/bbl (US) for SAGD, $105.54/bbl for a stand-alone mine, and $109.50/bbl for an integrated mine and upgrader. CERI estimates the WTI-equivalent cost of a stand-alone upgrader at $41.44/bbl.
Production outlook
Average total production from the Albertan oil sands rose 10.9% last year to 2.1 million b/d. Of that, 1.9 million b/d came via in situ techniques and mining, and 300,000 b/d was from primary production and enhanced oil recovery in the oil sands area. Under CERI’s reference-case assumptions, oil-sands production via mining and in situ thermal and solvent extraction will increase to 3.4 million b/d by 2020 and 4.8 million b/d in 2048. Last year’s reference-case forecast was for 3.1 million b/d by 2020 and 5.6 million b/d by 2046.
The study’s scenario assumptions relate to global economic recovery and therefore demand for oil, emissions legislation, and the possible effects of technology on the rate of growth in oil demand.
In CERI’s high case, oil sands production excluding output by primary methods rises to 3.8 million b/d by 2020 and 5.7 million b/d 2048.
In the low case, production rises to 4.2 million b/d by 2030 and 4.3 million b/d by 2048.
CERI expects cold production from primary methods and EOR in the oil sands region to increase from 270,000 b/d in 2013 to a peak of 350,000 b/d by 2020 and slip to 200,000 b/d by 2048.
Capital and emissions
Total capital requirements during 2014-48 in the oil sands, excluding those for primary production and EOR, are $597.9 billion (Can.) in the reference case, $636.6 billion in the high case, and $590.2 billion in the low case.
CERI estimates an increase in natural-gas requirements for oil sands production from 1.474 bcfd in 2013 to 3.17 bcfd in 2046 in the reference case, 3.753 bcfd in the high case, and 3.87 bcfd in the low case.
Greenhouse-gas emissions in CERI’s projection rise from 55 million tonnes/year (tpy) of carbon dioxide-equivalent in 2013 to 144 million tpy in 2048 in the reference case, 165 million tpy in the high case, and 129 million tpy in the low case.
CERI forecasts cumulative emissions under the reference case during 2014-48 at 4.587 billion tonnes, 3.3% above the 35-year projection it made last year.
16 Comments on "Costs up for oil sands production"
bobinget on Fri, 25th Jul 2014 9:04 am
GE Energy hooked up with Suncor and others in order to lighten up on harming emissions.
It’s fair to say older, more established companies, like Suncor are producing oil at far less then numbers published above.
Inflation has hit many producers. Most, unable at this time to pass along extra costs.
paulo1 on Fri, 25th Jul 2014 9:05 am
Simply put in Canadian terms….it is keeping the economy going and remains one of the few countries with resources to count on. Water, crop lands, space, energy exports, social stability, so-so geverning options (but at least we can complain), good single payer medical system, decent education system including affordable post secondary, and opportunities for full employment provided one is willing to move to where the jobs are. Every day I give thanks to live here.
All of this is paid for by the export of resources and trade, including the much maligned Oil Sands products. Could they be developed better? You bet. Should the rate of development slow down? Certainly. Will development be stopped because of Keystone XL delays and other protests….not likely.
Plus, for the most part being neighbours with US has been mutually beneficial and rewarding. Until the recent Snowden revelations and failed US foreign policies, I think most Canadians treasured this relationship. Maybe with fewer imperial actions and a more isolationist outlook this could return. Our Canadian Govt. is a panting lap dog to US interests…the people not so much.
Thinking about this many many problems could be solved if the US would simply treat drug use as a medical and social problem as opposed to a criminal conspiracy. In such a scenario North and Central America could rebuild itself. Our stupid Canadian PM is trying to act like Bush and enacting his own war on drugs and mandatory sentencing. Time for leadership renewal in both countries, imho.
regards..Paulo
Davy on Fri, 25th Jul 2014 9:44 am
Paulo, definitely agree. I feel more Canadian in disposition than American. I see the US mellowing and turning isolationist as it’s decline quickens. This is actually a good thing for Main Street and means more power to localized efforts and less to the DC Mafia and their partners in crime Wall Street. Let’s face it when you are neighbors it is best to try to get along.
shortonoil on Fri, 25th Jul 2014 9:45 am
“The costs of producing bitumen and synthetic crude in the Albertan oil sands have increased over the past year, says the Canadian Energy Research Institute in an annual report that projects steady growth in output”
Or course cost are up, its called entropy production, and it is absolutely guaranteed to keep increasing. In our study “Depletion: A determination for the world’s petroleum reserve” we explicitly explain why non-conventional will be shut in before conventional. Bitumen production will not extend the oil age by a single day. Anyone depending on this stuff to pull our fat out of the fire is in for one big disappointment!
http://www.thehillsgroup.org/
JuanP on Fri, 25th Jul 2014 12:39 pm
I want to repeat Short’s point that costs have nowhere to go but up. It can’t be said enough, continued costs increases are relentless and unforgiving, and an essential part of POD.
JuanP on Fri, 25th Jul 2014 12:42 pm
Paulo, I have always wanted to visit Canada. I consider it one of the top three places to live, for a nature lover like me, in the world today, together with New Zealand and Australia.
And the setup you have sounds great. Much envy here. 😉
GregT on Fri, 25th Jul 2014 5:37 pm
Juan,
My wife and I travelled in New Zealand last fall. Reminded me of Canada back in the seventies. That being said, Canada is a great place to live, especially if you like nature. You really should make a point of visiting!
JuanP on Fri, 25th Jul 2014 6:06 pm
Greg, I probably will visit Canada in a couple of years, if it is still possible.
At a youth hostel in Cuzco, Peru, when I was 20, I came across a German who traded my Dostoyevski’s The Idiot for a first class Canada travel guide and it was my only reading material while I hiked to Machu Pichu and later hitchhiked to Valparaiso, Chile where I traded it for The Silence of the Lambs at another youth hostel. In those days I crossed Canada from coast to coast in my imagination and look forward to doing it with my wife in real life soon.
These past few days I have been watching Ray Mears’ Northern Wilderness series about Canada’s discovery, exploration, and settling by Europeans.
GregT on Fri, 25th Jul 2014 6:31 pm
Machu Pichu is on our bucket list of things to do. Always wanted to go there. I hear it’s insanely crowded now though.
Davy on Fri, 25th Jul 2014 6:38 pm
Greg, I really enjoyed Banf and Lake Louise. Stayed at the hotel on the lake
GregT on Fri, 25th Jul 2014 6:55 pm
Ya Davy,
I lived north of Calgary back in my 20s. Spent a ton of time backpacking from Banff, all the way north to Jasper. Absolutely amazing country. Highly recommended for anyone to see.
Davy on Fri, 25th Jul 2014 7:43 pm
Greg, a little funny about a guided trout fishing trip I went on while in Banf. This was back around 2000. The central banks had just had their big meeting. The guide told me Greenspan had another guide arrange for him to land a big trout previously caught and somehow readied for Greenspan to pull it in. That should say loads about his tenure as fed chair!!
JuanP on Fri, 25th Jul 2014 8:17 pm
Greg & Davy, That’s exactly what I want to do up there, some trout fishing, packrafting, and a lot of hiking.
Hiking to Machu pichu was one of the high points of my life. I hiked the Inca trail along the Andes for one week to get there. No train ride for me. It was like traveling back in time. I was very lucky that the railroad was flooded for several days and there were no tourists, except those that hiked the mountains, because the train couldn’t get through, so only overnight campers were there during the day. The place was virtually empty. If you go by train, you are forced to leave the same day.
Peru is amazing, It has the Amazon jungle, the Andes, the nazca lines, lake Titicaca, the Pacific, and many other interesting corners and great diversity and variety for such a small country.
Davy on Fri, 25th Jul 2014 8:28 pm
Juan, went there when the gas pipeline was being proposed. Spent a wild week in Lima. My family was trying to supply equipment for this pipeline. The deal didn’t pan out.
JuanP on Fri, 25th Jul 2014 8:39 pm
Davy, I’ve been to Lima, too. I had a great time there, but did not like the city. The downtown had men urinating in public on the streets all over, obviously normal behavior there at the time, and stank of urine and was very dirty and full of thieves. I was robbed twice in a week. Never had anything like that happen to me elsewhere and I’ve been around some edgy places, much worse than Lima. The one thing that really was surreal, was how all the cars were VW Beetles. I found Lima a strange place.
Davy on Fri, 25th Jul 2014 8:54 pm
Juan, I was in the best hotel and area so avoided the ugly. Was impressed by the garbage in the river. I wanted to go to machu pichu but work got in the way. I will say this the people are very friendly.