Canadian Oil Sands Supply Costs  and Development Projects (2009 - 2043)

Study 121

David C. McColl

Mellisa Mei

Dinara Millington

Martin Slagorsky

This year will mark the release of the Canadian Energy Research Institute’s (CERI’s) fifth annual oil sands industry update, examining production, supply costs, and constraining factors for oil sands development. The past year can be characterized as uncertain, and a “blood bath” for the global oil and gas industry. Fortunately, the dire predictions of a recession that is “worse than the Great Depression” have proven to be off the mark, as the North America economy is showing signs of an economic recovery. The recovery is already raising hopes that oil demand will once again surge and prices will follow.

While announcements have been made by Imperial Oil that they are staying course and proceeding with the Kearl oil sands projects, other major producers such as Royal Dutch Shell and Total have raised concerns that current oil prices are insufficient to justify new oil sands projects. The critical word is current. As the developed world moves forwards with its economic recovery and the BRIC nations (Brazil, Russia, India, and China) return to high levels of growth, it does not take much of an imagination to see oil prices (WTI) pushing north of US$80 to US$90 per barrel. This CERI Report provides an up-to-date assessment of oil sand production and supply costs, and will answer the question of “what is the trigger price that will bring Alberta back to a period of oil sands expansion?”  Our previous edition was a best seller; the 2009 updated version will be available November 3, 2009.

CERI monitors and reviews all the announced oil sands projects (used in the unconstrained case), but also develops a more realistic assessment—the CERI Reference Case—based on likely timing conflicts, contingencies, and project delays and deferrals.

• How have costs of production changed over the past year?
• What is CERI's long term view on oil sands capital and operating costs?
• What other cost areas have significantly changed?
  • How depressed natural gas prices impact oil sands costs could over the next decade, and what is CERI's view of long term natural gas prices?
• What are the implications for production levels and timing?
• What are the implications for the economic viability of the oil sands?

CERI calibrated the supply costs for the gamut of development systems—SAGD, cyclic steam stimulation (CSS), surface mining recovery, and bitumen upgrading—comparing updated costs with previous study results and industry operating costs.

For more information please contact Roxanne Rees rrees@ceri.ca or download order form

Economic Impacts of the Petroleum Industry in Canada

Study 120

The Issue

Last year was a tumultuous year to the say the least. The first half of 2008 saw a global rise in commodity prices, most notably oil and natural gas. The Canadian dollar appreciated against its US counterpart to levels not seen in decades. While certain sectors benefited from the rise of commodity prices and concomitant rise in currency values, others faltered. The second half of the year, however, saw commodity prices plunge dramatically, amidst a global financial crisis.

In the wake of these developments, the Canadian (and American) public is expecting policy-makers to set energy and environmental policies that make appropriate tradeoffs. However, to aid the process of rational decision-making and attitude towards the petroleum industry, policy-makers and business leaders require a clear understanding of the value and contribution of the petroleum industry to the economy. Their decisions will certainly impact the level of private investment and have wide-ranging effects across various, seemingly unrelated, industries. As the petroleum industry is frequently characterized by capital-intensive projects that generate single-purpose facilities, even small changes in policies may well have large impacts on investment levels.

The recent spate of publicity surrounding environmental impacts has overshadowed the fact that Canada’s petroleum industry is a significant contributor to the country’s GDP. The petroleum industry has widespread economic impacts that extend far beyond the province of Alberta–-Canada’s largest producer of oil and gas. Investments in new developments and expenditures in ongoing operations provide jobs that generate income-multiplier effects and economic spin-offs, benefiting the provincial and national economies.

The Research

The Canadian Energy Research Institute (CERI) conducted a comprehensive assessment of the role of the petroleum industry in the provincial and national economies, currently, and 25 years into the future. Utilizing an Input–Output (I/O) modeling approach, this study fills a knowledge gap that currently exists with respect to the quantification of the economic contribution of the petroleum industry, at the provincial, territorial, and national levels.   The primary objective of this study was to measure the incremental impacts of the development in the oil and gas industry and the resulting impacts on the province, the other provinces and territories, and total Canada.

This timely and significant study sheds light on the Canadian petroleum industry and its importance to the Canadian economy, assisting both policy-makers and business leaders to make informed decisions regarding this industry. Furthermore, it informs the public about an important industry that is often misunderstood.

The Main Report and Summary Report   are available for download. Printed copies are available for the price of shipping and handling, contact Roxanne Rees rrees@ceri.ca  for pricing.

GREEN BITUMEN:
The Role of Nuclear, Gasification and CCS
in Alberta’s Oil Sands
Study 119

The development of oil sands is a critical component in both the provincial and national economies. While oil sands development is expected to grow over the coming decades the amount of greenhouse gases (GHGs) emitted during the extraction and upgrading of bitumen is a drawback that left unattended could hinder development.

CERI has completed a multipart study that examined expected changes to Canada’s regulatory regime as it relates to the costs associated with emitting GHGs. These changes are expected to have significant impacts on current and future oil sands projects, in addition to upgraders that transform raw bitumen into synthetic crude oil (SCO). The impacts will initially be felt by operators and proponents as their supply costs are forced upward by the need for carbon mitigating equipment or alternative technologies that produce less carbon – such as nuclear or carbon capture and storage (CCS), with or without gasification of a hydrocarbon. Various scenarios are explored in this study as they relate to carbon costs, alternative technologies and the timeline for deployment of alternative technologies.

This study focuses on nuclear energy, gasification and to a degree CCS as the most likely methods to reduce or eliminate anthropogenic emissions as the first step on the road from Green Bitumen to Green Gasoline.

The five part study is available for download below. Printed copies are available for the price of shipping and handling, contact Roxanne Rees rrees@ceri.ca   for pricing.

Summary Report

Part I - Introduction and Overview

Part II - Oil Sands Supply Cost and Production

Part III - Supply Costs of Alternative Fuels

Part IV - Alternative Fuels for Oil Sands Development Beyond 2020