Canada
The tar sands
Heavy machinery is digging up Canada's ace in the hole.
The industry says the oil sands, as it likes to call the tar
sands, makes Canada's conventional oil pale by comparison.
It contains 300 billion barrels of oil, as much as Saudi
Arabia, the greatest petroleum power on Earth. If all the oil
were recoverable, the tar sands could satisfy world demand
for a decade.
ottawa.cbc.ca
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Canadian oil companies have long been known as innovators
with a talent for finding and extracting oil in the most
unlikely places.
In 1990, when Federal Energy minister Jake Epp announced
the Hibernia oil project, it became the jewel in the crown of
Canada's oil industry, not just a Newfoundland dream.
Hibernia symbolizes
everything the Canadian oil
industry prides itself on. It
was a new oil frontier where
no one else thought to look.
It is a triumph of engineering
in the middle of a harsh ocean.
In his announcement Epp said, "Hibernia heralds a new era.
The effects of this development will be long-lasting."
But "long-lasting" is a relative term.
Canada produces about three per cent of the world's oil,
only slightly more than we consume. Hibernia increased
Canadian oil production by five percent in 1999.
Workers at Hibernia will pump about 140,000 barrels a day
every day for 18 years.
But in all that time, Hibernia will produce enough oil to
satisfy world demand for just under eight days.
Faced with a global challenge of oil depletion, Hibernia is
just a drop in the bucket.
The Western wells
Most Canadian oil has always come from Western wells. But
the Western Sedimentary Basin just isn't pumping what it
used to in the mid-80s.
Greg Stringham is vice-president of the Canadian Petroleum
Producers Association (CPPA).
He says oil companies know the days are gone when oil
gushed cheaply.
"We've produced about 60% of the oil that's deemed to be
recoverable, so we've got some more to work on there. But
eventually it is a non-renewable resource. There's only so
much of it there," says Stringham.
How much exists is a matter of debate. The National Energy
Board estimates 40 billion barrels of conventional oil are
recoverable in theory, onshore and off.
Those estimates can be found in the bible of the oil
business, the BP/Amoco Review.
France's Jean Laherriere is one the world's leading oil
consultants. He worked in the Alberta oil industry. He
believes BP's Canadian numbers are inflated.
When they produce the review, the assumption is that if
they get no reply, there is no change. For the last report
Laherriere says, "Canada did not reply. So if you look at the
reserves for oil and gas you will see that it has not changed
at all. So for me it is just a joke."
Getting the oil out
A young oilfield is under huge pressure. You only have to
stick in a tap, and the oil bursts from the ground. But in
Canada, most of that easy oil is long gone.
These days oil companies are
relying increasingly on
expensive technologies to
flush the oil out of aging
wells.
Greg Stringham with the CPPA
says, "It used to be that we would only recover about 15
to 20% of the conventional reserve and the rest of it would
just stay in the ground because is was too hard to get out.
New technologies are going after that remaining 75-80%
that's in the ground."
But many now believe little can be done to cheat depletion
in an old field at the end of its natural life.
Alan MacFadyen is a professor of oil economics at the
University of Calgary.
"If you look at conventional oil pools, I think the recovery
percentage, which is roughly a third on average, has been
unchanged for a couple of decades now. So in that sense
we're not really recovering more out of any particular
deposit."
Geologist and oil consultant Jean Laherriere says Canadian
companies are counting on the technologies to squeeze the
oil out faster. But at the end of the day, they won't get
more oil out of the ground.
"Economists always say new technologies - 3-D, horizontal
drilling - will increase. But it is already used for the past 20
years. For me they are talking about the new technology of
the past."
The tar sands
Heavy machinery is digging up Canada's ace in the hole.
The industry says the oil sands, as it likes to call the tar
sands, makes Canada's conventional oil pale by comparison.
It contains 300 billion barrels of oil, as much as Saudi
Arabia, the greatest petroleum power on Earth. If all the oil
were recoverable, the tar sands could satisfy world demand
for a decade.
But there's an important distinction in the view of Alan
MacFadyen.
"Oil in Saudi Arabia is producible probably somewhere
around a dollar a barrel, most of it. And in the tar sands
you're looking at somewhere around $20 a barrel."
Some Canadian companies are now
learning to make tar sands oil
profitable, bring the cost down to
about $12 a barrel. Tar sands projects
like the one at Cold Lake now account
for a quarter of Canada's oil
production.
But most of the oil in the tar sands
isn't easy to extract. It needs gas
prices over a dollar a litre just to break
even.
Still, Stringham says tar sands oil could make Canada a
major world player.
"It certainly has the potential to do that. As we progress
through the next ten years, we may see that shift start to
happen. But further out we will have significant role to play
not only in the Canadian economy, but in the world
economy."
Unfortunately, some of the world's most respected oil
analysts say no more than 60 of the 300 billion barrels in
the tar sands will ever be economical to extract under any
circumstances.
Colin Campbell is a partner in Petroconsultants, the world's
biggest oil reserve databank.
He says, "It's a mistake to consider these huge tar sands
and heavy oil Deposits, such as you have in Canada, as
homogenous. They're anything but that. And as of today,
only the most favourable locations have been viable, and
they only just viable, even though the resource itself is
huge."
The world market, and not Canadian oil companies, will
determine how much comes out of the tar sands. Canadian
producers already pay more to produce their oil than most
of their competitors. So Canadians will pay the world's
going rate, or the oil will go to people who will.
The higher the price goes, the more tar sands oil becomes
viable. But cheaper alternatives are coming. And once the
price gets high enough for the tar sands to really take off,
world demand for oil is likely to shrink.
So the would-be oil sheikhs of the prairies probably
shouldn't count their camels just yet.
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