Posts Tagged ‘Canadian oil production

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.

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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.

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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.