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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (9833)	7/26/2004 5:27:43 AM
From: Wyätt Gwyön	Respond to of 116555

the excellent properties of Syncrude are no secret. but if you look at the aggregate production Canada touts for the tar sands (which it calls "oil sands"), about half of the total is apparently just bitumen. OK for paving a road, but you wouldn't want to put it in a gas tank. as noted in this article by John Busby: *The operators have included crude bitumen in their production statistics and in reality only provide around half of the figures claimed as synthetic crude oil* which total 0.16 Gb. asponews.org SC, you wrote: the problem I have is the relationship between the energy required in the form of NG to produce the syncrude. It seems to cancel much of the leverage a regular producer would have to increased oil price. i agree, although it should be noted that techniques which reduce reliance on NG (for extraction) are in development and maybe implemented to some extent. Canada has proclaimed its reserves second only to Saudi Arabia based on its tar sands. it raised its proven reserves estimate by a FACTOR OF 36 from 2001 to 2002! however, according to Colin Campbell, the amount of NG required to produce the proclaimed reserves exceeds the total natural gas in North America--and that assumes none of the remaining NG is used for anything BUT the tar sands. this is obviously unrealistic. the other long-term option is to import LNG for use in tar sands production, but this is also more expensive--besides, there are gas-to-liquids production techniques which are a more efficient use of NG (for producing petrofuels). as Campbell writes: The global industry is turning to natural gas for synthesis of petrol, diesel and jet fuel. Indigenous gas production will be supplemented by importing liquid natural gas: to use some of this to extract bitumen from underground and upgrade it to synthetic crude oil for subsequent refining into liquid fuels, rather than convert the gas directly to liquid fuels does not seem to be optimal. Campbell puts the NG reliance of tarsands production into perspective: Assuming that 10% of the USA and Canada’s remaining natural gas could be earmarked for oilsands synthetic crude oil extraction, i.e., 0.69 tm3 - only 14.4 Gb of synthetic crude oil could be extracted from the oilsands reserves by its use. For comparison, the USA, Canada and Mexico together consumed 8.6 Gb of crude oil in 2002 - i.e., the recoverable oilsands synthetic crude limited by gas availability would provide only 1 ½ year's crude oil consumption in the North American market. asponews.org having said that, it seems likely to me that tar sands production will continue to occupy a niche in a world of growing oil demand and declining production--coupled with new extraction methods that minimize NG consumption (although this does not address the hot water and hydrogen issues). but from a peak oil perspective the issue is not whether tar sands are viable long term per se; but rather, the extent to which they can compensate for the decline in conventional oil production elsewhere. consider the situation at Suncor, according to Mish's article: Suncor's Williams says the economics make sense as long as oil stays above $20 a barrel: "Our plans are to grow as fast as we can." But the growth will require massive amounts of capital — $1.5 billion a year or more over the next seven or eight years to get Suncor from its production rate of 225,000 barrels a day to its target of 500,000 barrels a day by 2016. a ramp-up of just 275Kbpd is going to take 12 years and something north of $10 billion investment! how much conventional production will be lost in the meantime? probably Ghawar alone will lose several Mbpd. even if NG is not a long-term issue, i think the ramp-up from tar sands is "too little, too late" to save the world from expensive oil in the future.