The development of the Canadian Oil Sands has a considerable and growing impact on the environment. This report is an overview of the current environmental impacts of oil sands development and progress and efforts that have been made to mitigate impacts. Current extraction processes are energy intensive, and by year 2020 the oil sands will be the second largest single contributor to Canada’s greenhouse gas emissions after transportation. Absolute greenhouse gas emissions are growing along with increases in production, although some progress has been made to reduce the amount of greenhouse gases emitted per barrel of produced bitumen or synthetic crude oil. Burning of fossil fuels for energy also produces other air pollutants such as criteria air contaminants, the impact of which have been examined in the region. Use of fresh water is another concern in oil sands development, and efforts to reduce reliance on fresh water and increased recycled water use have been particularly successful for in situ extraction. Finally, land use impacts, biodiversity, reclamation, and improvements to environmental monitoring are discussed.
For the first time in many years, Canadian crude oil production (excluding oil sands) has reversed its downward trend due to technological advancements able to unlock hard-to-produce shale oil resources. With continued innovation and technology, combined production of crude oil (including condensate and pentanes plus volumes) and oil sands for Canada averaged 3.5 million barrels per day in 2013. This growth was impressive given the lengthy list of issues facing the industry: rising project costs, skilled labour shortages, rising tight oil production in the US, offshore competition, shifting demand, transportation infrastructure constraints, pipeline approval delays, the lack of market diversification, widening basis differentials, and the challenges to development from environmental groups and the general public. Although the future for oil production growth in Canada still looks favourable, these and other issues could significantly impact the future of the Canadian oil industry.
Taken together, an array of national, continental and global challenges could limit the growth, profitability and competitiveness of the Canadian oil industry. Looking out to 2030, a key question is: “How can industry, government and others work to understand and address an array of supply, demand, transportation, environmental and social issues with a view to improving the societal value of oil development, which itself provides a significant contribution to the Canadian economy?” The Canadian Energy Research Institute (CERI), in collaboration with ICF International, and Scenarios to Strategy Inc. (S2S) developed four plausible pathways, or narratives, of the future of the Canadian oil industry.
Canadian Oil Sands Supply Costs and Development Projects (2014-2048)
Production and capital investment forecasts for the oil sands industry are estimated to continue to increase well into the future, and there are some major projects still to be constructed, but currently many producers are reporting a bit of a pause in new contract awards and backlog. However, this may be a function of the change of the pace of development more than an indication of downward pressure on the sector. The nature of new project development in the oil sands has changed. Ten years ago the industry was dominated by megaproject mines and upgraders each built by several thousand people; the sector is now transforming into more manageable phased in situ growth.
Albeit uncertainties around market access and competition from the US tight oil projects, oil sands production is expected to reach three million barrels per day (MMBPD) around 2017. This means the industry is expected to add approximately 1 MMBPD of production in less than 5 years, from both mining and in situ operations. In addition to several in situ projects/phases currently underway or expected to get the necessary approval in the near term, at least three mining projects are considered for major growth. This includes the 100,000 barrel-per-day second phase at Kearl, which is under construction, the staged integrated mining/upgrading expansion at Horizon to 250,000 barrels per day, and the long-awaited 190,000 barrel-per-day greenfield installation at Fort Hills.
Each year the Canadian Energy Research Institute (CERI) publishes its long-term outlook for Canadian oil sands production and supply in conjunction with an examination of oil sands supply costs. This is the ninth annual edition of CERI’s oil sands supply cost and development projects update report. Similar to past editions of the report, several scenarios for oil sands developments are explored. In addition, given the assumptions for the current cost structure, an outlook for future supply costs will be provided.
Economic Analysis of TransCanada's Energy East Pipeline Project
The Energy East pipeline project is a proposed conversion of a portion of TransCanada’s Canadian Mainline natural gas pipeline to oil in order to transport oil from Western Canada to Eastern Canada. With 1.1 million barrels per day in pipeline capacity, this pipeline will help alleviate transportation constraints as well as provide tidewater and Eastern Canadian refinery access. With an estimated capital cost of 11.3 billion dollars this project is expected to generate significant economic benefits. The Canadian Energy Research Institute (CERI)’s study number 139, An Economic Analysis of TranCanada’s Energy East Pipeline Project, summarizes the economic impacts as calculated from CERI’s multi-input-output (MIO) regional model. The results of the analysis are presented for the major economic variables GDP, employment, compensation, and tax revenue.