Our Dirty Little Oil Secrets

- September 8th, 2010

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Okay, okay, they aren’t secrets: There’s a glut of information out there — some true, some not true — about Canada’s petroleum industry.

And for every bit of information, there’s analysis, argument, spin and counterspin.

In the end, there’s just too much information about Canada’s oil business clogging our intake channels. We end up drowning in data and losing our grasp of what the big picture is, our grasp of what the real relationship is between Canada as a country and Canada as an oil producer, our grasp of just who really controls Canada’s oil supply, and our grasp of what the future will bring for Canada and its oil.

So there may not be many secrets revealed here, but I hope this blog post ends up giving you a clearer picture of what oil means to Canada — what the current situation is, what the potential benefits and dangers are — so we can better decide how we want our oil future to unfold.

(I think I’m going to have to break this thing up into three parts. Please bear with me.)

WE’RE BIG

Canada is one of the major oil producers in the world — No. 7, in fact — so we’re a big player, bigger in fact than we actually give ourselves credit for.

(Numbers 1 to 6 are: Saudi Arabia, Russia, U.S., Iran, Mexico and China. You understand a few geo-political dynamics now, don’t you?)

But we’re even bigger than that: Canada has proven oil reserves of roughly 180 billion barrels.

That gives us the world’s second largest confirmed, accessible oil deposits — right after Saudi Arabia.

That gives us well over 10% of all the known, feasibly exploitable oil in the world, if the U.S. government’s 2008 estimate of 1.4 trillion barrels of proven world oil reserves is accurate. (And it may not be: Some estimates place the Athabaska-Athabasca oil sands reserves alone at 1.6 trillion barrels — although only about 20% of that is accessible with current technology and methodology.)

REFRESHER: A U.S. barrel of oil is an industry standard. One barrel contains 42 U.S. gallons. It takes 7.33 barrels to make a metric tonne, which is basically the same thing as an Imperial/U.S. ton, so don’t worry about the chump change.

SOUNDS PRETTY GOOD. WHAT’S THE DOWNSIDE?

We’ll get to that in a moment.

First, let’s look at where the oil is.

Canada’s oil is found is three main geographic locations.

(Ontario isn’t one of them, despite the fact that Canada’s petroleum industry began here about 150 years ago and Ontario WAS the Canadian petroleum industry for the better part of 100 years. Tough luck, Ontario — you ran Canada for a century; now move over.)

The Alberta oil patch is, of course, the current Big Daddy of the Canadian petroleum industry, with a strong offshore industry in the coastal waters of Newfoundland, and the greedy gleam of potential oil riches sparkling like sun off a melting iceberg in Canada’s Arctic.

772px-TerraNovaOil

There are dribs and drabs of oil in other places like British Columbia, Saskatchewan and Nova Scotia, but in the long run they just don’t amount to a hill of beans compared to the Big 3: Alberta, Newfoundland, Arctic.

ALBERTA FIRST

Alberta’s got oil wells coming out the yin-yang: Up to 100 new wells a day are spud (that thar be oil patch language for “drilled” or, in my simple lexicon, “dug.”) in Alberta.

But here’s the big, dirty secret that isn’t so secret: The oil wells are nice, but they aren’t Alberta’s oil-producing future.

We all know about the Alberta tar sands/Athabaska-Athabasca oil sands up in the northern part of the province: We know the tar sands/oil sands are big, expensive, environmentally dirty, provide tons of jobs and are the subject of an attempted hip-store boycott in the U.S.

But I don’t think most of us realize just HOW BIG the tar sands/oil sands really are, both geographically and as the most important component of the Canadian petroleum industry.

Athabasca_oil_sands

The Alberta oil sands (okay, I’ve given up on the “tar sands” thing despite the fact that they really are tar mixed in sand — bitumen, a hydrocarbon semi-solid or semi-liquid substance somewhere between coal and crude oil) are Canada’s oil present and future — for the time being.

You want a real sense of just how big the dirty, expensive oil sands are in the Canadian oil picture?

I told you before that Canada has 180 billion barrels of confirmed oil reserves, second only to Saudi Arabia.

WELL, 173 BILLION OF THOSE BARRELS ARE IN THE OIL SANDS. THE REST OF CANADA — INCLUDING CONVENTIONAL ALBERTA OIL WELLS – HAVE 7 BILLION BARRELS. THAT’S IT. DIDDLY SQUAT.

HALF OF ALL THE OIL CURRENTLY PRODUCED IN CANADA COMES FROM THE OIL SANDS.

The oil sands are everything — all or nothing. You have to understand that before you understand anything else.

LET’S LOOK SOUTH

The Alberta oil sands exist because the United States eats oil like Popeye eats spinach (come up with your own damn analogy if you don’t like that one).

Almost all of the expensive, dirty oil dug or steamed out of the tar sands (I actually wrote “tax sands” the first time. Har.Har. Ahem. Har.) goes directly into the hungry American maw.

Now here’s where the glut of information out there becomes a problem.

Canada produces somewhere between 2.75 million (Canadian Association of Petroleum Producers) and 3.3 million (the U.S. Central Intelligence Agency) barrels of oil each day.

That’s a pretty broad range, but I know two things:

(1) Canada consumes roughly 2 million barrels of oil a day and the U.S. consumes about 20 million barrels a day — which makes sense since the American population is 10 times the size of Canada’s. We’re both still glutton nations, but at least we can diet together.

(2) Canada exports more than 2.4-million barrels of oil each day (again, the source is CIA 2008 estimates), almost all of it to the U.S.

Figures (1) and (2) add up to roughly 4.4 million barrels a day, which is way over the 2.75 million-3.3 million barrels/day production numbers I was citing earlier. The difference is the 1.165 million barrels a day we import from other countries.

So we’re net exporters but we still import. Go figure.

(By the way, Canada’s oil industry tells us the Alberta oil sands have enough proven reserves to supply Canada for the next 250 years. What good is that hypothetical position if it all goes south of the border?)

Look, I know all these numbers are starting to make your brain shut down — and that’s what we’re trying to avoid … so take a deep breath and we’ll get through this.

LOOK SOUTH AGAIN

Everybody’s focused on the Gulf of Mexico right now, what with the Deepwater Horizon explosion/blowout/disaster and all.

There’s so much talk about how important the Gulf of Mexico deepwater drilling is to American oil security.

800px-Deepwater_Horizon_offshore_drilling_unit_on_fire_2010

Get this: The Athabaska oil sands give America as much oil as the entire Gulf of Mexico does.

The difference (apart from the fact that Canada is Canada and the Gulf of Mexico is under water and shared by the U.S. and Mexico) is that the oil sands’ dirty, expensive oil is almost limitless and the Gulf of Mexico is a dying oil source.

Yeah, the G of M oil is cheaper — but it’s getting more expensive every day as the oil companies have to go into deeper and more dangerous zones to find undersea oil.

Right now the U.S. imports 62% of its oil (almost two-thirds for the world’s third largest oil producer — that’s just wrong). Most of the imports  now come from Canada and Mexico as the U.S. tries to “secure” its energy sources. Only a dribble of U.S. oil still originates in the Middle East.

Here are some points of reference you should know:

(!) Gulf of Mexico oil production peaked in 2002.

(2) OPEC oil production peaked in 2004.

(3) Saudi Arabia oil production peaked in 2005.

(4) Worldwide oil production peaked in 2008.

(5) Athabaska oil sands production will peak somewhere between 2020 and 2050.

So that’s it. “Our” oil sands are environmentally devastating — correct me if I’m wrong, if you can do it with a straight face — but they are crucial to U.S. economic and security interests — and will become moreso in coming decades.

So the chic-store boycott, the U.S. political façade of blocking oil pipelines, and all the rest are either bullshit or doomed interventions.

U.S. House Speaker Nancy Pelosi is in Canada this week doing a dog-and-pony show about American concerns over Canadian oil, especially the ecologically tainted oil sands.

You can ignore whatever quacking Pelosi does here: It’s all just political posturing. Besides, she’s a lame duck who will have almost no clout in Washington after the November U.S. elections.

And U.S. Secretary of State Hillary Clinton holding up a proposed new pipeline to push oil sands oil into the heartland of America? Forget it — there will be more huffing and puffing, then the state department will approve the pipeline.

WHY?

The U.S. wants its oil like a junkie wants his/her hit. That sounds like a cliché, but if you can comprehend how impossible it is to stop a junkie getting his/her fix, you’ll understand how impossible it will be to stop the U.S. from sucking up every ounce of the expensive, environmentally damaging oil it can get from northern Alberta’s oil sands.

No matter what kind of earth-friendly game Democrats talk in the U.S., they will eventually go along with the oil (and water too in a decade or so) grab — regardless of the consequences for Canada.

Of course we’re whores for letting them have their way with us, but that’s another discussion.

I’m not saying the U.S. and Canadian opponents of oil sands development are wrong. I tend to agree with them, but I don’t live in Alberta.

As Albertans keep reminding us, it’s their oil and they’ll damn well do with it what they please. That includes selling off more and more control on the Canadian oil industry to the Chinese government (through one surrogate or another).

There’s probably more I’ve forgotten to tell you, but I hate all these numbers and the technical stuff — my mind is bruised and in pain.

IceberyLassoed

I can’t do it anymore now. I’ll tell you more stuff about offshore drilling in Newfoundland and the very scary prospect of Arctic oil development in a few days.

Ciao for now. Try not to use too much oil until then. Just in case.

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29 comments

  1. TIM DEVLIN says:

    IF THE OIL SANDS WERE IN THE U.S.A. THE REPUBLICANS WOULD LOVE THEM AND BATH IN THEM AND DAB IT BEHIND THEIR EARS AND BOW DOWN TO A STATUE OF CHANEY TO RECEIVE OIL EXPLOITATION BLESSINGS.

  2. davyboy39 says:

    Boo hoo, Oil isn’t going anywhere for the next hundred years, like it or not. Repent now you anti oil tree hugging nut bars.

  3. Michael Mortimer says:

    WHEN I SAY,” I LIKE THIS”, IT IS THE ARTICLE I’AM REFERRING TO. AN EXCELLENT AND INFORMATIVE READ. THE MORE PEOPLE THAT KNOW ABOUT THIS KIND OF STUFF THE BETTER. I NEVER KNEW CANADA WAS NUMBER 7. OH FOR SO LONG OUR HEADS HAVE BURIED BY POLITICAL B/S, INCLUDING MY OWN. JUST PUPPET’S ON STRINGS.

  4. davyboy39 says:

    Hey Nosey, I guess you don’t like comments that don’t side with you’re opinions… What a straight shooting unbiased reporter you are. Phhhhhht

  5. alan.parker says:

    Hey davyboy39,
    I didn’t know what the heck you were talking about until
    I checked and saw a few comments hadn’t been posted — including one of yours. I am not the one who usually puts up comments, but I’ll try to get the unposted ones up now (if I can). I always appreciate genuine comments — whether I agree with them or not — that’s what this whole discussion thing is about. I learn a lot from what people add in comments — and sometimes the new information even makes me change my mind.
    Alan

  6. davyboy39 says:

    Right on Alan, I will call off my dogs. And may I add while I’m here ; There was a ethanol plant that was to be built in Hensall Ont. Now it has ben put on the back burner for who knows how long, chances are it won’t happen at all now! Big oil and government in my mind put an end to this proposed plant. Oil = not going anywhere anytime soon.

  7. ~m says:

    And how long do you figure it will be before the US uses some excuse (or not) to just come and TAKE the rest of our oil and water, whether we like it or not?

    According to McQuaig in Holding The Bully’s Coat, the last seriously planned invasion of Canada by the USA was in the 1970s, but I guess we kowtowed eventually on whatever the demand was then, so we squeaked through for the moment.

    It won’t last for long. Any Canadian PM that tries to stand up to the US in a contrary position to what they seriously want will be the last PM of a (sort-of) free and independant Canada. We’ll be toast.

    I think we’re already toast and just don’t know it . . .

  8. Craig says:

    A great read for sure. For seven years, back in the Eighties, I worked for The Esso Arctic Operations Group. We explored on-shore and up to Sixty feet of water. Past us was Shell from 60 feet to 90 feet of water and Dome/Gulf farther out. The Arctic, obviously, has its own significant problems while thinking of exploration/developement. I know that ESSO has proven reserves of Natural Gas that rivals alot of other countries reserves alone. This field is called the Tagleu Gas field at the mouth of the Makenzie River Delta. A Large part of this field also resides Below a Wildlife Sanctuary. In the past, ESSO was very concerned (workers like myself included) that we left as small a footprint as possible. Be interesting to hear the Arctic story from Nosey.

  9. steve says:

    OIL.OIL…alright.. ROCKEFELLAR.. the god of oil. no not roca wear or rocafella like jay-z the american rapper. although its obvious there’s a connection. who’s rockefellar? only the first name in american history to recieve the first ever OIL conspiracy to monopolize. sound funny??? google it.
    okay, sorry…i need direction here…SERIOUSLY LOL. from credible journalists….how can i not look like a crazy-guy who put together 1700+ videos on youtube in 2010 under lilshook1′s channel… and ask a toronto sun journalist to research/investigate::: WHY!–>> the president of iran, president of venezuela, several news channels online and others….seem to believe the u.s has created a weather mod weapon called H.A.A.R.P. and has used it on haiti -earthquake, us – katrina, indonesia- tsunami etc. etc

    Steve
    Hamilton,ON
    1981

  10. alan.parker says:

    Steve, you should stop believing everything the president of Iran says. It will turn your brain weird and make you post hundreds of videos on YouTube.

  11. alan.parker says:

    Hey davyboy39,
    Ethanol is a massive con — it’s probably more destructive to the overall Canadian environment than the oil sands. Ethanol requires a huge — absolutely huge — amount of energy to produce. Plus it uses up — and drives up the price of — great amounts of corn that could be feeding humans and animals. And corn production is really hard on the soil. Corn should be cycled from field to field, so the fields have a chance to recover by bearing a couple of cycles of more benign crops — but that doesn’t happen when bio-fuel corn is making so much money for the grower. People seem to have caught on to the fact that ethanol is not an environmentally friendly alternative to petroleum, but it’s still being produced in large amounts and still being added to much of the gas going into your tank (read the note on the pump about how something like 8% or 10% of the gas you’re pumping could be ethanol. And it’s the oil companies that are making — and profiting from — the ethanol anyway, so it really doesn’t matter to them where their profits are coming from. And they get to pretend they’re being green. Sheesh.

  12. dogcat says:

    I like the read….good to see it in print but figured it out years ago……however I believe that Canadians need and will in the future stand up for the right reasons and demand a big share of the wealth for all canadians re; health care,Canada pension etc. this will happen faster if the control of the companies are in off shore such as china….everyone should pay more attention to who really profits the most… from selling out of the countries resources we canadians don’t make a big profit but others do……

  13. Andrew says:

    Why isn’t there an oil pipeline on Candian soil from Alberta to Eastern Canada? Surely this is one of the most glaring paradoxical situations where pipelines snake through Western Canada (BC to Manitoba), yet all of Eastern Canada imports from tankers. We keep hearing from companies such as Enbridge about the need for ‘markets’ to build pipelines, yet they do not build a pipeline out east. Something is just wrong here.

  14. Jeff Boiss says:

    of course, the major oil consuming province in Canada is…you guessed it…Ontario. So – by all means – let’s stop oil sands production. This will, of course, mean hundreds of millions of dollars LESS in the gross domestic product of Ontario – but that’s fine – they can sponge of the federal government for employment Insurance or possibly transfer payments. Wait – that might not work…once we’ve stopped producing the oil…Maybe we should plant trees that grow money instead.

    The point is – the oil sands are good for Canada. They are not perfect – no industry is – including Hydro, solar, coal, wind, or any other energy source. But the producers are continually employing technological improvements in design and production that are reducing the environmental cost – as ALL industry should.

    We all need energy. Oil is incredibly useful because it is a means of storing potential energy until it is required – try that with any large-scale industrial battery that stores electricity, and you’ll understand quickly that oil is a wonderful thing.

    People – please investigate before believing what a semi-literate hack writes in an internet blog. This guy may semi-literately know how to string a sentence together (barely) – but he doesn’t understand the energy industry, and its potential remifications for Canada.

  15. Jeff Boiss says:

    of course, I meant RAMifications…semi-literacy is RAMpant, apparently. :)

  16. Kevin Arthur says:

    Hi
    Here is another factor to throw in to the pot , Why are we sending them raw crude ??
    Why are we not building our own plant on our soil ? Creating Jobs & revenue
    Lets say build it out of the Alberta trust fund & invest in our selves.

    And as an oilfeild worker , having traveled & worked overseas , Our operations are very clean well managed oilfields . There are also other forein Industries that are not so enviromentaly friendly as well .
    Maybe the people judging the tar sand should do a little more research

    Just my2 cents

  17. Grant says:

    Andrew, oil is almost useless as a raw material so it is piped to production facilities (refineries, and lately more predominantly petrochemical plants). To pipe western oil to the east would be expensive and useless much the same as would be piping eastern oil west. Natural gas, used in almost unrefined raw form as energy, is piped all across Canada from one coast to the other.

    Alan, you are definitely following political rhetoric. I wonder if you’re a good enough investigator to find the truth about oil, and if you are do you have the balls to write about it.

    Food for thought:

    Why did every oil company, globally, shelve all new projects in the fall 2008 and then restart engineering in 2010?

    In 2006 the Consortium of Oil Sands producers stated in an in house publication that the projects slated for completion in 2012 (at the present, 2006, rate of cost and completion) wouldn’t finish until 2025 and would be astronomically greater than the original budgeted costs. This was echoed throughout the oil producing world.

    Maybe look at the Middle East’s need for Water and LNG (used for power generation and production)

  18. Anuj says:

    This guy needs to learn more about the Alberta Oil Sands projects. Has he visited the area?

    Ask the workers who are up there, and they will tell you that what is going on up there is taking toxic oil out of sand. When the oil is processed from the sand, all that is left is sand. The water usage is bad, regrettably, but usage has become more economical and is certain to improve. The author of this article should have also done some research on Carbon Capture and Sequestration technologies and their implementation in Alberta before attacking it.

  19. Joe says:

    Enbridge does have lines in Eastern Canada. The three initial Enbridge pipelines were created in the 1950s and ship oil to the great lakes region. Andrew should really do his homework.

  20. Virgil says:

    Good write alan,, but that Tim Devlin’s comments sounds like a whiney Canadian American basher.

  21. Mike says:

    Very good and informative read, Alan.

    Andrew asked : “Why isn’t there an oil pipeline on Candian soil from Alberta to Eastern Canada?”.

    The fact is that hundreds of thousands barrels (or more) are piped into southwestern Ontario’s Chemical Valley in Sarnia from out west every day. Some of this oil is also routed to Montreal via a recently reversed pipeline. Pipelines in North America are a very complex intricate web that also snake back and forth across the US / Canada border. The issue is capacity. There’s more demand from processing facilities than western sourced pipeline capacity which is why there is a mix of western Canada / US / and tanker crudes. The refineries are also tooled to accept certain kinds of crudes of which there are many. It’s a very complex business.

    It is true also that the recovery of bitumen from the tar sands has a substantial environmental price tag locally. It should be pointed out however that the processes are becoming less taxing to the environment as technology improves and reclamation efforts from open pit type operations are having great success.

    I personally would like to see a quantification on the environmental cost of a barrel of oil through its entire life cycle – from R&D right through to consumption. This perspective would reveal that the difference in global impact between oil sand and conventional oil sources is miniscule. Remember that by far the greatest damage is done when the refined products are used as designed – driving our cars, producing our electricity, fueling our industries, heating our homes, producing our plastics and building materials, etc… The real culprit of environmental damage is the demand and consumption. This far outweighs the footprint from production – tar sands or conventional. Oil Sands recovery is responsible for a much smaller percentage of the overall negative effects but gets a hugely disproportionate share of the bad press.

    As your blog aptly suggests, oil will be around for a long time. We can only hope that technology will enable us to be better at minimizing the damage from both consumption and production.

  22. alan.parker says:

    Hey Joe,
    You must be from Ontary-hairy-ario (as I am too much of the time) if you consider Ontario and Quebec “Eastern Canada.” To the rest of Canada, Ontario and Quebec are “Central Canada.” Yes, Enbridge now owns the former TransCanada Pipeline that reaches from Alberta to Toronto and Montreal (after taking a shortcut through the U.S. from Manitoba to Sarnia — how´s that for a “secure” national energy supply?). But , by “Eastern Canada”, I think Andrew meant Antlantic Canada — four provinces which consider themselves to be “Eastern Canada” while charitably allowing Quebec honourary membership in the designation on occasion.
    I´ve been putting off writing about the oil situation on the East Coast for several weeks now, mainly because “life its ownself” — as my cousin Jim the southern gentleman, retired CIA officer and crackerjack author refers to it — got in the way. But I see I´ll have to get out the notebooks, refresh my aging memory and deal with it over the weekend. Look for a Nosey Parker blog post on Monday (maybe Tuesday) about Newfoundland´s oil conundrum, why there´s no pipeline to feed Canadian oil to Eastern Canada and why the Irving family (or should that be cartel?) has a lot to answer for in the Maritimes. Alan

  23. alan.parker says:

    Well, Grant, the worldwide economy started going south in 2008, demand for oil dropped off sharply, the price of a barrel in the immediate and mid-range future looked dicey, so the oil companies did what they normally do in those circumstances — they pulled in their horns, throttled back production and mothballed projects that would cost billions of dollars in coming years with no certainty of payback. In 2010, everyone has a clearer picture of where things stand: the economic crisis is not really over (look for another major downturn in 2011) but the panic is — so it´s back to business for the oil business.
    But why am I telling you this, Grant? You seem to be suggesting you are an expert in this field. We would all love to be enlightened in a clear, informative way by you instead of trying to decode little peek-a-boo Deep Throat hints. Alan

  24. alan.parker says:

    Anuj,
    You just said the water usage is bad. The tar sands are an ecological mess right now. Of course the extraction and separation technologies are improving and will improve over time, but for now they are sort of less crappy than they were 10 years ago. So the tar sands (I´m calling them that just because you bugged me) are now a mess and continue to be a mess. Let me put it another way: At some point in the future I will lose 20 pounds, but that doesn´t make me 20 pounds lighter right now. I´m fat and the tar sands are what I said they are. Alan

  25. alan.parker says:

    Kevin,
    The non-environmentally friendly oil operations in places like Africa and South America are owned and operated by the same oil companies that own and operate the “responsible” North American and European oil operations. It is those same companies that have for 60 years cut corners to maximize production and profit in their Third World operations — because they could get away with it. Nigeria has been devastated by oil disasters and it´s certainly not the Nigerian government forcing the international oil conglomerates to act as bad corporate citizens. The Nigerian government is just pocketing the cash to let the oil monoliths do the dirty work of their own choosing. What makes you realistically think they wouldn´t do the same things here if they could get away with them without penalty? If they would freely choose not to here, why don´t they choose not to there? Alan

  26. alan.parker says:

    Mike,
    Thanks. You make a lot of interesting points and, yes, the end-product use is the real killer. The tar sands are a lightning rod for criticism. But the tar sands are Canada´s oil future. The production techniques will keep getting better, the ecological impact will be reduced and the reclamation of devastated landscapes will happen on a faster, broader scale. But all that´s in the future. For the present, we pay a high ecological price to suck that tar/oil out of Alberta sand and ship it south to the U.S. Unless tar sands defenders admit that, we can´t move ahead with a realistic evaluation of the oil sands´(hopefully) brighter, cleaner future. Alan

  27. Chris Dowdell, Ottawa says:

    oh….and our other dirty little secret…Asbestos.

  28. Lidia says:

    Here’s a video featuring a Syncrude worker claiming that oil sands operation sites can be reclaimed and restored to their prior functions after the operation is complete. Post your opinions on:
    http://bit.ly/gtsdebate

    *please include the hastag#gtsd in your comments so that we may communicate all stated opinions directly to oil industry officials.

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