[Darbkin]

Some look to the huge oilsands deposits in northeastern Alberta as the salvation of the world's need for oil, specially North America. Currently, the proven reserves that are recoverable are around 275 Billion barrels, with another 1.2 Trillion that are not recoverable.

The current producers like Syncrude, Suncor, Shell, and others are currently producing about 600,000 barrels per day with more being developed very quickly. But at huge expense:

Those big Cat 797 haul trucks which can haul 400 tons, use a prodigious amount of fuel. Each truck (and Suncrude has 36 of them) uses 65 gallons of fuel per hour to power their 3400 horsepower engines...that works out to more than 500,000 gallons per truck/year. These trucks run 24/7 except for scheduled maintenance.

It takes about 1-2 tons of oilsand to produce one barrel of crude oil, and from that, about 20% of the oil can be refined as diesel fuel.

So, just to produce enough fuel for their own use, these trucks must haul enough sand to provide the 12,000 barrels of diesel they use in a year.

[DanH]

Which they do. So there is no problem...

[Aaron]

Not without government subsidies they don't

[Guest]

I'd be more concerned about the vast amounts of natural gas used to extract and process the tar.

The amount of energy used in those processes makes the amount used by those dump trucks virtually negligable.

[Grasshopper]

Research and early development may have been subsidised, but are they subsidised now? This Alberta government website reports that it received over $180 million in royalties in each of 2002, 2003.
[url]http://www.energy.gov.ab.ca/com/Room/Public+Reference/Commodity-Info/Oil_Sands.htm
[/url]

[backstop]

Grasshopper -

my (inexpert) calculation shows those royalties to be about 82 cents per barrel.

I guess its a moot point whether this level of payment for a finite resource is still a massive subsidy compared to market resource prices.

Also I'd be interested to know if they're paying market prices for the gas that is used up.

I don't want to seem picky, but over the years I've come to recognize that big oil runs on Viking economics :

"Trade when you must; Pillage when you can"

regards,

Backstop

[Aaron]

Moreover, incentives often favour the worst kinds of
projects. That is the case with the tar sands production, where
royalties are reduced from 25% to 1% (about $1 per barrel) until
the company recovers its capital costs. In addition, companies
pay no federal income tax until the tar sands project has
written off its capital costs.

Newfoundland’s Hibernia offshore oil project will earn $1.5
billion for taxpayers during its life span--less than the amount
the governments of Canada and Newfoundland invested to
support the project.

http://www.islandtides.com/Oil7OilandGasinCanada.pdf

[Grasshopper]

Fair enough, foregone taxes might be considered subsidies.
It looks like Island Tides is anti-free trade (or at least anti-NAFTA), so maybe they mention subsidies in the hopes that the Americans have a knee-jerk reaction and stop importing Canadian oil and gas, like they try to do with softwood lumber, wheat and other agricultural products that they claim are subsidised. (ha-ha) I am sure the Island Tides folks wish the oil sands were still undisturbed under the forest.

Considering foregone taxes, it might be argued that the USA, by not having a fuel tax anywhere near the rates in most other developed countries, is subsidizing the transport sector, and by extension nearly every other sector of the economy, as regular readers of this forum would know. If one was implemented, demand would drop, hence oil imports to the USA would drop, and the government would have more resources to address the deficit, among other pressing needs, possibly even funding research on alternative fuels or renewable energy supply.

Regarding the natural gas used, I expect the oil sands consortium manages to negotiate a price break, due to the immense quantity used. I noticed on one of their websites that they were conducting research on obtaining hydrogen from other sources, I would guess water. Of course, many people are already concerned about the amount of water used in the process.

[Oslo]

Quote from "The Case for Cheaper Oil" by RBS Group Economics 13
January 2006

For example, as Canadian oil sands have become economically viable,
Canada has surpassed Saudi Arabia as the country with the most proven reserves.
The conversion of Alberta's heavy tar sands into crude oil is very
capital-intensive and requires scarce skills; nevertheless production
could reach some 3.5 million barrels per day within a decade at a cost
of less than $20 per barrel. Once the capital equipment is in place,
reserves are virtually unlimited.

Is this information for real or is it vested interest spin?

[linlithgowoil]

reserves will usually always grow, but the whole point is that the extraction rate isnt enough. isnt it? 3.5mb a day isnt enough from the tar sands. you could have a zillion barrels of reserves but if your production is limited to a few million barrels, then it doesnt really matter.

[gnm]

I guess he doesn't live in a finite world then...

more idiot economics.

-G

[MD]

If I were a young person living in North America, I would seriously consider moving to Alberta. The local economy will likely prosper well into the future.

[ubercynicmeister]

OH, goody! This means that the Santa-Claus-And-The-Elves-Will-Come-To-Our-Rescue-After-All? (tune in next week, when you'll hear the Doctor say...)

Well, this is reasurring that a Cornucopian Flat-Earth Clueless Economist can be so upbeat about our energy future. I was getting worried, fer a while there. (insert patriotic music, here)

[elroy]

Good analogy: Congratulations! You won the powerball lottery, 500 million dollars! And we're giving it to you in daily payments of 1 dollar. You're rich!

[Daryl]

I think the extraction rate from the Colorado shale oil is even worse. So the best we can expect from North American alternative oils is 4 million barrels a day, and that's a decade from now. I guess it's save to assume that demand growth alone with dwarf that supply by then. What's US consumption now, 20M a day?

[dub_scratch]

I think the extraction rate from the Colorado shale oil is even worse. So the best we can expect from North American alternative oils is 4 million barrels a day, and that's a decade from now. I guess it's save to assume that demand growth alone with dwarf that supply by then. What's US consumption now, 20M a day?

Excluding Colorado shale --which likely is not viable and certainly won't be producing 1mb/d in ten years-- I would have to question whether that remaining 3mb/d will be enough for Canada by then. Isn't their conventional oil in decline too? I don't know what the figures are but Canada ain't gonna be our big exporter of oil. No way.

And oddly enough an oil crisis will retard the growth of tar sand oil. We won't likely see the rate of production people are counting on. But the stuff will, more or less, last forever. Big & slow resources do that.

[RacerJace]

It gets me everytime... Oh we're saved [hands clasped in front of chest looking to the sky].

Even my very knowledgable uncle, who once worked for Bechtel, Shell and the likes as a Project Director recently claimed Alberta tar sands will see us through our children's lifetime. It just needed oil proces to rise to $40 a barrel! I promptly pointed out that higher fuel cost raise the cost of extracting oil from tar sands so you are stuck with a positive feedback problem..

[just guessing the figures here for the sake of clarifying my point]
So we get to.. say $67 a barrel and guess what? It would now require oil to costs $90 a barrel for tar sands to be economically feasible not to mention the disapearing supply of NG required to heat the stuff up. Then we see the same problem happens when we get to $90 a barrel unless they use something like portable nuclear breeder reactors to generate the required steam.

I don't believe it's likely to produce much marketable oil.

.

[Oslo]

If you read the whole article it gives a ridculously benign impression about oil prices, oils supplies and their economic impact. Are these guys told to lie or are they just thick?

It is so confusing how all these mainstream "experts" seem so unconcerned.

(I believe there is a peak oil problem so am not defending them.)

[thor]

I promptly pointed out that higher fuel cost raise the cost of extracting oil from tar sands so you are stuck with a positive feedback problem..

This is what I usually tell to people who believe that oil prices must rise before alternatives become viable. Oil is needed for everything we do, so if oil becomes expensive, everthing becomes expensive to manufacture, produce and maintain. In your words: positive feedback, or unstability so to speak. So when oil prices rise, windfarms become more expensive, nuclear stations becomes more expensive and so forth and so on.

[elroy]

I think they're not just lying to us, but to their higher ups. If they told the truth the higher ups wouldn't invest and they'd be out of a job, or at least, less work.