Oil sands will shrug off enviro castigation
By: Matthew Hill
23rd April 2010
Make no mistake about it, the Alberta oil sands development will roar on.
While shareholder groups of oil multinationals Shell and BP have recently tried to force those companies to pull out of Alberta, politicians like Sarah Palin are shouting slogans such as: "Ramp up development."
And looking at the bigger political picture, it is clear to see why.
The reason why the tar sands have generated so much controversy is because it takes a lot of energy to convert the bitumen found in the soil into synthetic crude oil. This means more greenhouse gas emissions than conventional oil extraction.
In fact, environmental group Forest Ethics calls it "the dirtiest oil in the world".
There has been growing environmental pressure on the US, which consumes over 90% of Canada's oil. According to figures from the US government, the country sources more than double from Canada than any other country.
And when shareholders of giants such as BP and Shell start telling them to get out of Alberta, the tar sands must be reaching the end of their road? Not likely.
Palin was quoted by Bloomberg News last week telling an Ontario audience "There's an inherent link between energy and security."
This was in the same week as the US Department of Defence (DoD) published a report stating that "a severe energy crunch is inevitable without a massive expansion of production and refining capacity".
According to the report, titled The Joint Operating Environment, surplus oil production by 2012 could entirely disappear, with the shortfall reaching nearly 10-million barrels per day by 2015.
That's about the same as Saudi Arabia's daily oil production.
Economic and population growth mainly in China and India mean the world's population will grow by some 60-million people a year, reaching eight-billion by the 2030s, the DoD predicts.
Surely much of the growing populations energy needs can be catered for by renewable energy and nuclear, particularly given the green imperative?
While renewable energies will play a part as fossil fuels become more difficult and expensive to extract, their role will be a minor one. The DoD report says: "Fossil fuels will very likely remain the predominant energy source going forward."
Green energy will struggle to compete with the still relatively cheap fossil fuels.
So, environmental campaigners and shareholders will continue to put pressure on oil companies and politicians to avoid the Athebasca oil sands, but this is not likely to altogether stop new investments there.
The Alberta, and Canadian, governments are dependent on the oil sands as a major source of revenue. This is important as the economy recovers from the recession, while government has to pay down deficits.
The Canadian government expects to post a C$49-billion deficit in 2010/11, which is 21% of projected federal revenue.
Canadian Energy Research Institute estimates oil sands will generate over C$307-billion in tax revenue across Canada over the next 25 years.
The DoD predicts production of liquid fuels could quadruple to over four-million barrels a day in the next few years. It does, however, add that "legal constraints may discourage investment".
What has become an important theme in the development of the oil sands, is that if North American or European companies shy away from them because of shareholder pressure, Chinese companies would most likely be more than willing to take their place.
While China is leading green energy development, the country's government realises the importance of fuel security if it is to achieve its growth targets.
There may be some bumps and ugly public relations fights along the way, but the tar sands are there to stay.
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