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Page added on September 29, 2017
The oilsands at 50: How much life is left in the resource?
On Sept. 30, 1967, the Great Canadian Oil Sands facility opened north of Fort McMurray, Alta., with much fanfare, bunting and speeches by politicians.
It was the first large-scale commercial operation of the oilsands, and the result of a gamble taken by Philadelphia’s Sun Oil and its chief executive, J. Howard Pew, and by 100,000 Alberta households who invested $1,500 each to buy a bond to fund construction of the facility.
Alberta’s premier at the time, Ernest Manning, stood on a podium and declared, “This is a historic day for the province of Alberta, and it is fitting that we are here today to dedicate this plant not merely to the production of oil, but to the continual progress and enrichment of mankind.”
While this is typical political hyperbole, Manning nailed at least the first part of his statement — it’s hard to think anything else that has so affected the economic direction of Alberta in the past half century. But it’s doubtful that any of the dignitaries or oil workers that day could have predicted the rocky road ahead.
See Alberta’s oil sands as they appeared in 1967, when they first opened for large-scale commercial operation1:21
Not just the economics, which have always been touch and go, but the shifting place that the oilsands hold in the Canadian consciousness, from being considered crucial in the era of the OPEC oil embargo to the current discomfort many Canadians feel about the resource in the era of climate change.
Sun Oil takes a flyer
Decades of research went into how best to separate bitumen from sand, research that continues today.
The Great Canadian Oil Sands operation itself was the story of Alberta wanting to demonstrate the economic viability of the oilsands and Pew’s Philadelphia’s Sun Oil being willing to take a flyer in 1960s, according to Paul Chasko, an oilsands historian at the University of Calgary.
“Not because this was going to produce anything tangible for the company in the short term,” said Chasko. “But because Pew had a sense this was important and had to be done, and because this was going to pay dividends in the long run.”
Pew’s gamble appeared unwise in the first few years of development. CBC News archives contain stories of Sun Oil taking hits on its oilsands projects through much of the 1970s. The project lost money for many years, and according to the biography of former executive Rick George, the Canadian oilsands were considered “Pew’s folly” even into the 1990s.
An oil worker holds raw oilsands near Fort McMurray, Alta. (Jeff McIntosh/Canadian Press)
The Trudeau factor
Great Canadian Oil Sands was not the only player in Fort McMurray in the 1960s. The Syncrude consortium, which began as a research project, was also applying for permits in the late ’60s and nearly fell off a cliff as its costs doubled during the construction phase to more than $2 billion. One of the backing companies, Atlantic Richfield, pulled out because it wanted to develop its oil discovery in Alaska’s Prudhoe Bay.
This all probably sounds familiar to anyone who has watched the oilsands over the past decade, as escalating costs and foreign oil companies with priorities outside of Alberta are a constant theme.
- Could the oilsands really be phased out? Here are the possibilities
- Shell sells out of the oilsands. Was it climate or costs?
But in 1973, Prime Minister Pierre Trudeau stepped in to save Syncrude. With Atlantic Richfield out, the project’s other partners were sent scrambling, and the federal government took a 15 per cent stake in Syncrude. Ontario’s government took 10 per cent, and Alberta a further 10 per cent, saving the project from falling apart.
This may seem surprising now, but in the early ’70s, oil seemed scarce and Ontario bought its energy from offshore sources, where prices were spiking because of moves by OPEC. For his part, Trudeau wanted lots of fossil fuel development in Canada. The conflict between Alberta and Ottawa at that time was over pricing and ownership of the resource.
“The tremendous concern at the time was that oil was the scarce resource,” said John English, historian and former Ontario MP.
“We needed it, there was no concerns at that time about climate change; if there was any fear, it was nuclear winter. The result was that this was a bet on the future by a province that needed cheaper energy.”
Steve Williams, Suncor’s president and CEO, says he expects the oilsands to still be producing in the next century or more. (David Thurton/ CBC)
What now?
The question now is around the future of the resource. Despite prognostications of doom, there are many factors that keep the oilsands in the game. Hundreds of billions of dollars have already been spent to bring online what’s expected to be nearly three million barrels a day of production in 2018.
As well, oilsands production, once started, remains relatively stable for decades. It would take an even sharper drop in oil prices than we have seen in recent years for producers to shut in their production.
“I do think that many of these assets have been built for 20- or a 40-year life, and I think they will produce to the end of their useful lives, said Jackie Forrest, director of research at the Arc Energy Research Institute. “The oilsands represents about three per cent of global supply. It’s a major component of the oil market today and will continue to be so for a long time.”
200 years of oilsands?
Steve Williams, the chief executive of Suncor, has said that his company will stay in the oilsands for 100 or 200 years, solving carbon technological problems as it goes.
“We will earn the right to be here for the next 100 or 200 years. We have an absolutely world-class resource that’s been given to us Canadians,” said Williams at an anniversary event in Fort McMurray.
That’s the supply side of the equation. There are significant questions about the demand side and when we will hit peak oil demand. And that’s tricky to forecast.
“It feels like in Alberta, we’re in a bit of a bubble, in terms of international news,” said Simon Dyer, regional director of the Pembina Institute. You have countries like France and the U.K. announcing that they’ll be banning the combustion engine by 2040. You’ve got China and California musing about doing the same thing.
“The idea that the oilsands are going to continue for another 100, 200 years, I wouldn’t invest in that.”
34 Comments on "The oilsands at 50: How much life is left in the resource?"
dave thompson on Fri, 29th Sep 2017 12:24 pm
Oil Sands or Tar Sands have never and will never be an energy positive resource.
MASTERMIND on Fri, 29th Sep 2017 4:55 pm
Shale oil fracking and tar sands mining is evidence we are scraping the bottom of the barrel.
Boat on Fri, 29th Sep 2017 6:31 pm
mm,
You don’t get to decide what a barrel looks like, I do. Take your toys and go home.
Mick on Fri, 29th Sep 2017 7:28 pm
But won’t all that sand clog my injectors when pour it into my fuel tank
DMyers on Fri, 29th Sep 2017 9:01 pm
I think MM has given a concise and accurate statement of the situation, although the metaphorical use of the word, barrel, does somehow become problematic in this context.
Dave Thompson nails it. The lack of net positive should be an automatic breaker. But this is about converting the source into something which springs eternally from the pumps at BP. The losses in production phase are outweighed by an ultimate value in utility. That’s the only possible rationale for such an otherwise irrational project.
“Ain’t worth nothin’, if you can’t take it for a drive.” That’s the way I would describe this final disposition. We value utility so much, that we overpay in other denominations to get it. We’ll squeeze combustible right out of a pile of asphalt, because combustible is all that really matters.
The short of it, utility value. Factor it in. It’s the missing balance.
Plantagenet on Fri, 29th Sep 2017 11:49 pm
Suncor stock is up 50% over the last year and a half.
Cheers!
GregT on Sat, 30th Sep 2017 12:17 am
Boat spewed,
“mm, You don’t get to decide what a barrel looks like, I do.”
The most asinine comment that Boat has made yet. Good work Kevin, you’ll’ve outdone yourself, once again.
Cloggie on Sat, 30th Sep 2017 4:16 am
Oil Sands or Tar Sands have never and will never be an energy positive resource.
Are you seriously suggesting that folks like apneaman are so stupid that they can’t even do a simple back-on-an-envelope EROI calculation to figure out that it costs more than 1 barrel of oil to harvest a single barrel of shale oil?
Is apneaman really THAT stoopid?
Geez! You learn something new every day.
OK, back to reality… this story illustrates once again that there is enough fossil fuel left to complete the energy transition. The Alberta oil sands operation will eventually stop, in say 30-50 years, not because they will run out, but because they will be phased out by the #ParisAccords and rising renewable energy production.
rockman on Sat, 30th Sep 2017 11:32 am
Cloggie – “…they can’t even do a simple back-on-an-envelope EROI calculation to figure out that it costs more than 1 barrel of oil to harvest a single barrel of shale oil?” Not sure if by “cost” you mean monetary value or Btu value? But as we all should know by now EROEI has nothing to do with monetary value. And while some argue that the oil sands require more Btu input then the output generates (which I have not seen supported with DOCUMENTED evidence once) that’s not relevant to the process. More specifically not relevant to those making the investment decisions. Collectively if the process were not profitable the Canadians wouldn’t be producing 3 million bbls per day. Anyone arguing otherwise is so delusional as a result of their feelings about oil sands production it’s a waste of time debating the issue with them IMHO.
As Myers points out the critical factor is utility. Or more specifically the value of that utility. Regardless of the Btu input/output dynamic as long as the MONETARY VALUE (including an acceptable profit margin) of the output exceeds the cost of the input the oil sands will be produced. Which is no different the the dynamic controlling the extraction of any commodity. As explained in detail many times (so won’t bother again) the drilling and production of oil/NG will never INTENTIONALLY produce a very low EROEI…say lower then 5 or 6. Despite so many arguing that drilling/producing oil/NG wells consumes a large amount of fossil fuels they don’t…not even close. What keeps the EROEI relatively high is that the costs to drill (excluding the fuel component) is so much higher then the value of that fuel. Typically 10X to 20X as much.
Which is the reason all those who have argued that the EROEI of the development of oil resources will automatically decrease over time have had that false “logic” blown out the water the last few years. As a result of lower oil prices the same well drilled today (with the identical Btu input) as a well drilled 3 years ago has to produce more oil to deliver the same rate of return. IOW a well that was justified to drill recovering 300,000 bbls of oil in 2013 needs to recover at least 500,000 bbls recovery for a well drilled in 2017. Same well = same Btu input producing more oil = a higher Btu output = a increased EROEI.
Which easily explained why the rig count dropped so much with the price of oil: there were fewer prospects with HIGH EROEI’s to drill. What should seem obvious to those who understand little about the petroleum business: if you’re getting paid less for your output per unit you can only develop projects that produce more units. Essentially the same for any “manufacturing” business.
rockman on Sat, 30th Sep 2017 11:36 am
Cloggie – “…but because they will be phased out by the #ParisAccords…” The Paris Accord has no ability to force the Alberta govt to stop producing the oil sands. OTOH anytime the majority of Alberta citizens want oil sands production to end it would do so whether the Paris Accord existed or not.
dave thompson on Sat, 30th Sep 2017 11:47 am
OK Rockman, No documentation you say? Here is an article that took all of two seconds to find. https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiJsfbqrc3WAhVjh1QKHa4tD-IQFggrMAA&url=https%3A%2F%2Finsideclimatenews.org%2Fnews%2F20130219%2Foil-sands-mining-tar-sands-alberta-canada-energy-return-on-investment-eroi-natural-gas-in-situ-dilbit-bitumen&usg=AOvVaw3FgO20vnFF4Fsb9nyUPsvu
dave thompson on Sat, 30th Sep 2017 11:49 am
And another one. http://energyskeptic.com/2016/tar-sand-eroi-2013-poisson-and-hall/
dave thompson on Sat, 30th Sep 2017 11:51 am
And another
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=12&cad=rja&uact=8&ved=0ahUKEwiJsfbqrc3WAhVjh1QKHa4tD-IQFghfMAs&url=http%3A%2F%2Fwww.mdpi.com%2F1996-1073%2F6%2F11%2F5940%2Fpdf&usg=AOvVaw29woW8-rKdenHcfFayu7oO.
Cloggie on Sat, 30th Sep 2017 12:27 pm
Not sure if by “cost” you mean monetary value or Btu value?
I obviously meant “Btu” since I was talking barrels. But of course money and “Btu” are strongly related, although not 100%
And while some argue that the oil sands require more Btu input then the output generates (which I have not seen supported with DOCUMENTED evidence once) that’s not relevant to the process.
I kindly advice you to take notice of the premier on this planet authority on all things related to EROI, I mean of course peakoil.com, the creme de la creme really, especially its world-famous comment section:
http://peakoil.com/production/energy-return-on-investment-of-canadian-oil-sands-extraction-from-2009-to-2015
These folks link to a study promoted by an academic publisher MDPI and bring a graph that says that EROI is between 10-40, depending on the fossil fuel sort you are using as input.
More interesting is that EROI is substantially increasing with time, hand in hand with developing technology, like doubling over merely 7 years.
This is more likely than what doomers profess, like the notorious Charly Hall, who is 20 years overdue in retiring.
Cloggie – “…but because they will be phased out by the #ParisAccords…” The Paris Accord has no ability to force the Alberta govt to stop producing the oil sands. OTOH anytime the majority of Alberta citizens want oil sands production to end it would do so whether the Paris Accord existed or not.
I’m not up to speed with the intricacies of Canadian politics. What I do know is that Trudeau strongly supports #Paris and I am sure that as the Canadian PM he has, as the Soviets of former fame loved to say, the ability to discipline the poor Albertlans if necessary.
GregT on Sat, 30th Sep 2017 12:48 pm
“I obviously meant “Btu” since I was talking barrels.”
So Cloggie, are you saying that you believe that every barrel of oil has the same Btu content? Are you talking EROI, or EROEI? Because they are not the same things.
And what makes you believe that the Paris Accords will be any different than 1992 Earth Summit, The Kyoto Protocol of 2002, or the Copenhagen Accords of 2009? All
of which Canada did not even remotely come close to meeting it’s targets.
https://www.canadiangeographic.ca/article/brief-history-canadas-climate-change-agreements
GregT on Sat, 30th Sep 2017 12:52 pm
“What I do know is that Trudeau strongly supports #Paris and I am sure that as the Canadian PM he has, as the Soviets of former fame loved to say, the ability to discipline the poor Albertlans if necessary.”
Now that’s funny Cloggie. Trudeau is a politician, and politicians do what their corporate overlords tell them to do. The tail does not wag the dog.
rockman on Sat, 30th Sep 2017 1:34 pm
Dave – Mucho thanks for proving my point. None of your links (including the links contained in them) DOCUMENT a single example of the EROEI or profitability of any specific oil sands project. Perhaps you don’t understand what I mean by DOCUMENTATION. It’s not studies that develop conclusions that don’t contain any documentation of the metrics of any specific project. IOW one cannot say all the numbers add up X and expect that answer to be accepted as DOCUMENTED if you don’t provide the individual numbers used to calculate X. As pointed out in one of your links a specific oil sands expert claims his calculation showed its EROEI was 15+ but provided no specific documentation. Which the author of your also fails to do. And I’m pretty sure none of the authors of your links have such documentation because if they did they would have included a table naming specific projects with columns for energy input, production, etc. Such data is a POWERFUL method of garnering support for one’s argument.
IOW show me any report that names a specific oil sands project that shows documentation of how much energy was used to produce however much production was recovered. None of your links show proof that the data from even one oil sands project agrees with its conclusion.
So to make it simple: name a specific oil sands project that you can show proof that it used X Btu’s of energy to recover Y Btu’s of energy. That would be DOCUMENTATION. But reading reports making any claims about the EROEI of oil sands production, positive or negative, that don’t provide supporting data is pointless IMHO. I’ve revued many hundred of drilling proposals in the last 41 years. And if INDEPENDENTLY verifiable data isn’t included in a proposal it was tossed. I’m not in the business of drilling unsupported interpretations…that’s how you fail in my business. Thus unsupported ESIMATES of oil sands metrics, positive or negative, are of no interest to me.
Of course, if you think about it: even if you can come up with the DOCUMENTATION of any oil sands project it still won’t answer the question about the play. Even coming up with several specific projects won’t do it: every play has very successful projects as well as very poor ones. So in order to properly characterize the EROEI and ROR of the entire play you need to gather specific data on a large number of projects that represent a valid cross section of the oil sands play.
But let’s start off easy: show me the energy used in one specific oil sands project (good or bad…your choice) and the amount of bitumen it recovered doing so. Then we’ll have some DOCUMENTATION to start talk about.
Dan on Sat, 30th Sep 2017 2:07 pm
The oil sand is a clean product you getting the best of synthetic crude oil like no other countries can produce, offer mining is completed the land refund cleaner and better for farming logging etc and this is Canadian product the oil sand have supported the country for the last decade we need oil sand and more pipelines
rockman on Sat, 30th Sep 2017 2:09 pm
Cloogie – An outstanding catch!!! Mucho thanks. Exactly what I was just explaining about documentation. And while they don’t include the actual data they provide references where it can be found.
And to save folks time reading the report, from their mouths:
“Our results indicate that during the time period from January 2009 to December 2015, the EROI of Canadian mining oil sands fluctuated in the range of 3.9–8, with a general upward trend; the EROI of in situ oil sands also demonstrated a trend of steady increase.”
But if anyone wants to see a great graphic illustrating that point check out their chart showing the significantly increasing energy output vs a relatively constant energy input.
Bottom line: this DOCUMENTED analysis not only shows the oil sands have had a positive EROEI but that it has showed a steady increase until 2015 where the data stops. But the author is also of the OPINION that the EROEI of the oil sands will increase in the future.
Of course if anyone has DOCUMENTED evidence that conflicts with this reports please show us.
Also Cloggie: if I’m wrong anyone please correct me: Alberta has sole authority of how its oil sands are developed (or not) and not the Canadian govt. Regardless at this point in time the Canadian govt might say it supports the Paris Accord but I haven’t noted any actual changes in the country’s fossil fuel production, export/import or refining activities. Again please let me know if I missed something.
Cloggie on Sat, 30th Sep 2017 2:24 pm
So Cloggie, are you saying that you believe that every barrel of oil has the same Btu content? Are you talking EROI, or EROEI? Because they are not the same things.
Have you data concerning your suggestions that the energy content differs significantly from one barrel to the next. Much obliged.
Cloggie on Sat, 30th Sep 2017 2:27 pm
Also Cloggie: if I’m wrong anyone please correct me: Alberta has sole authority of how its oil sands are developed (or not) and not the Canadian govt. Regardless at this point in time the Canadian govt might say it supports the Paris Accord but I haven’t noted any actual changes in the country’s fossil fuel production, export/import or refining activities. Again please let me know if I missed something.
Conflicting signals:
+++
https://deepresource.wordpress.com/2017/09/15/2-gw-offshore-windpower-planned-for-british-columbia/
—
https://thetyee.ca/News/2017/01/19/Tar-Sands-Kill-Paris-Targets/
GregT on Sat, 30th Sep 2017 2:52 pm
Conflicting signals?
The intention for a wind farm off of the coast of BC, is to generate power for liquefied natural gas production. The Haida Nation voted 505-181 against the proposal.
http://www.4coffshore.com/windfarms/project-dates-for-naikun—haida-energy-field–ca01.html
There are no conflicting signals in regards to Alberta tar sands production. The bitumen must stay in the ground if the world is to remain below 2º C. Which isn’t going to happen anyways. It’s already too late.
Cloggie on Sat, 30th Sep 2017 3:15 pm
he Haida Nation voted 505-181 against the proposal.
That with Chief Seattle was in 2012.
Probably bought off with fire water by DONG.
Cloggie on Sat, 30th Sep 2017 3:30 pm
I stand corrected by Rockman. The EROI is indeed in the 4-8 range, not 10-40 as I posted earlier. But the most significant take-away point is the rapid increase in EROI. Another 7 years and the value could surpass 10 and this sludge could help contribute to complete the energy transition.
dave thompson on Sat, 30th Sep 2017 3:52 pm
OK Rockman you want a single documented play and the energy return. You could be right that one specific case study does not exist.
Having said that I still contend that mining tar sands in general, out of Canada, is a losing proposition going by the pdf study of the entire sector.
Oh sure there might be money being made, but it seems to be a mirage if people think tar sands can replace what conventional oil has accomplished in the past 100 years. https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=12&cad=rja&uact=8&ved=0ahUKEwiJsfbqrc3WAhVjh1QKHa4tD-IQFghfMAs&url=http%3A%2F%2Fwww.mdpi.com%2F1996-1073%2F6%2F11%2F5940%2Fpdf&usg=AOvVaw29woW8-rKdenHcfFayu7oO
GregT on Sat, 30th Sep 2017 4:30 pm
“That with Chief Seattle was in 2012.
Probably bought off with fire water by DONG.”
LNG production proposals in BC are dead Cloggie. No more need for that wind farm.
Cloggie on Sat, 30th Sep 2017 4:35 pm
These 2 GW offshore wind can replace a lot of fossil fuel burning. They can for instance fuel all these e-cars that will populate our roads in rapidly growing numbers in the coming years:
https://deepresource.wordpress.com/2017/09/30/largest-european-battery-plant-to-be-built-in-sweden/
https://cleantechnica.com/2017/09/30/51-british-motorists-expect-motoring-electric-vehicle-within-5-years/
GregT on Sat, 30th Sep 2017 4:55 pm
That wind farm would require a 1000 km long transmission line to Vancouver. There isn’t much going on in the area around Prince Rupert, other than the proposed LNG terminal.
Anonymous on Sat, 30th Sep 2017 11:01 pm
This is why I never took the run out of resources concerns of the peak oilers seriously (at least in our lifetimes). There is just a metric shit-ton (technical unit used in refineries) of oil in the sands of Canada and Venezuela. It just needs access and price to get it out. But there is a huge tranche of resource there that can be eaten out at something like $100/bbl. It was pretty obvious that could keep us on a high price plateau for decades.
Anonymous on Sat, 30th Sep 2017 11:03 pm
Of course the fucking shale boys came in and ruined everyone’s little party. Crashed the world price. OPEC, tar sands, XOM, all taking their lumps.
Rockman knows what that is like. Already had the Marcellus crash gas prices and eject his ass out of GOM gas drilling.
Davy on Sun, 1st Oct 2017 5:29 am
“There is just a metric shit-ton (technical unit used in refineries) of oil in the sands of Canada and Venezuela. It just needs access and price to get it out.”
Geeze, nony, what part of price and access don’t you understand. You act like the economy will be there to do these things. This is the same argument of the other techno optimist with renewables and EV’s. How affluent must society be to have the price and access to bring all the product to market? Just because it is there argument does not mean price and access will be. This is a very dangerous situation then and points to the economy and human cooperation as the key variable. That is the scary duo we must rely on to save us? The technology and product is there but in no way is it a given the economy will be. In fact the economy is looking very dated as is the very important cooperative aspect of the global system. I would be far more humble about price and access. You can kick up your heals on the techno solutions that can work if the price and access is there but you can’t party on price and access.
rockman on Sun, 1st Oct 2017 12:46 pm
Dave – “…but it seems to be a mirage if people think tar sands can replace what conventional oil has accomplished in the past 100 years.” Well, the oil sands are providing about 1 billion bbls of heavy oil per year which replaces 1 billion bbls of oil per year which we used to produce from old conventional US heavy oil fields that are now depleted. Heavy oil that is critical to our refining industry to blend with our abundant domestic light oil/condensate to yield the 32° API oil the refineries require. The gasoline molecules cracked from Alberta oil sands production blended with Eagle Ford condensate is no different then the gasoline molecules delivered by the refineries in the 1950’s. The only big difference in what you put in your car to day then what went in 50 years ago is no lead. And the fact that 50 years ago virtually all gasoline in the US came from domestic oil production and today much comes from foreign producers.
As been noted many times before: typical Americans don’t think about where their gasoline came from as they fill up their tanks. All they tend to fixate on is the price.
BTW do you have a guess what % of fuel in your car right now might have come from a Canadian oil sands blend? Depending on where you live and what brand you buy it might be significant.
davy on Sun, 1st Oct 2017 12:52 pm
“All they tend to fixate on is the price.”
I don’t pay attention to price. I pay attention to how much I drive.
GregT on Sun, 1st Oct 2017 1:00 pm
“All they tend to fixate on is the price.”
While completely ignoring the correlation as to why they are living pay check to pay check, and continue to go further and further into debt.
Of course it has nothing at all to do with The Oil Glut™, and all of that super ‘cheap’ gasoline.