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September 27, 2012
Canada's oil sands: riches with risks

In situ recovery of oil from oil sands in western Canada is progressing at an impressive rate, reports the U.S. Energy Information Administration (EIA), but not without major environmental concerns.  Canada is the world’s sixth largest oil producer, and virtually the entire nation’s oil exports flow to U.S. refineries.  

According to the EIA, Canada produced almost 3.7 million barrels per day (bbl/d) of total oil in 2011, an increase of nearly 200,000 bbl/d from 2010, a rate that is expected to continue through 2012 and 2013.  The EIA forecasts that Canadian production could grow to 6.6 million bbl/d by 2035 because of expansion of output from oil sands. 


Unconventional extraction

In its natural state, oil sands are permeated with bitumen, a form of petroleum in solid or semisolid form that is typically found blended with sand, clay, and water.  Extraction requires unconventional techniques that differ from the use of conventional oil wells.  Historically, the dominant approach with oil sands has been surface mining wherein bitumen-rich earth is shoveled into trucks and carted to processing facilities for separation.  But the use of surface mining is decreasing because approximately 80 percent of bitumen reserves are situated too deep.  This necessitates in situ extraction, which involves injection of steam into underground formations to soften bitumen that can then be pumped to the surface.  Once extracted, viscous bitumen cannot be moved through pipelines until it is diluted with condensate or other light oils or upgraded by complex processing.

High costs

Given the complex technologies required, delivering oil from oil sands to the market is costly.  The EIA cites common break-even prices at $40 to $70 per bbl for new in situ projects.  Consequently, oil sands investments are uniquely sensitive to sustained changes in oil prices, says the EIA

Notwithstanding cost fluctuations, the EIA notes that at least 14 companies are conducting or planning to conduct in situ projects in Alberta.  Actual or estimated production for individual projects range from 10,000 bbl/d to over 300,000 bbl/d. 

Environmental impacts

Critics have called surface oil sands projects in western Canada among the most destructive energy projects on earth, disturbing hundreds of square kilometers of Alberta’s boreal forest.  Oil companies counter that surface projects have disturbed only 3 percent of the 140,000 square kilometers of land in Alberta where oil sands deposits are located.  In situ projects, which are needed for about 80 percent of oil sands recovery, require much smaller footprints than surface mines.

The EIA has acknowledged the environmental consequences.  “Calculations of the climate impacts of oil sands development are complicated and often yield different results,” says the EIA, “but, caveats and exceptions aside, well-to-tank greenhouse gas [GHG] emissions are typically higher for oil produced from oil sands than oil produced through conventional means.”  (Oil sands opponents have more explicitly stated that oil sands production releases three times the GHGs as conventional oil production.)

Other environmental concerns, note the EIA, relate to land use, water use, water quality, the impacts of toxic tailing ponds, and the possibility of oil spills from pipelines emanating from producing regions. 

Those risks have figured into the wide opposition to U.S. approval of the Keystone XL pipeline, which would transport product from unconventional Canadian production such as oil sands projects. 

“All forms of oil and gas development pose environmental challenges and risks,” states the EIA, “but concerns about the environmental implications of oil sands production are unique and in some respects more acute.”

Read the EIA’s assessment of current oil sands recovery in western Canada.

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