The Future of Oil: Canadian Oil Sands
Oil sand Image:Technology Review
However valid the theory of peak oil may be, one aspect is certain: the crude oil reserves the world currently relies on as the main source of energy are running low. So where will the oil of the future come from? Many industry experts and investors will give a simple answer: the oil sands of Alberta, Canada.
Most of the oil that has been extracted from the ground since petroleum first became a valuable fuel has come from “conventional” sources: drilling rigs that pump crude oil up from naturally-formed underground reservoirs. As those reservoirs are depleted, oil producers have had to look for “unconventional” sources of oil, the best known of which are oil sands.
Oil sands are basically what they sound like: a thick and sticky mixture of sand, water, and an extremely dense and rich form of petroleum called bitumen. Extracting the oil sands (also known as “tar stands” or “bituminous sands”) from the ground is easy–producers basically scoop it out of the ground and carry it away to production facilities on an enormous dump truck (see video of oil sand excavation from a 2006 “60 Minutes” story here). The “unconventional” part of oil sands as a resource is the reclaiming process that extracts the bitumen from the sand. The process of separating the bitumen from the clay, sand, and minerals is complex and expensive. The extraction process is also inefficient: the production of one barrel of crude requires two tons of raw tar sand and large quantities of water (several barrels) and heat (source: ostseis.anl.gov).
The inefficiency of the extraction process makes it expensive–as Deutsche Bank AG analyst Ryan Todd stated today in an article on Bloomberg.com, “The oil-sands oil typically tends to be the most expensive barrel to produce out there.” The high expense is the main impediment to large-scale oil production from oil sands right now. The market price for crude must be between 90 and 100 dollars per barrel to make oil sand excavation and extraction economically viable. With oil currently hovering around $60 a barrel, planned production expansions in the oil sands of Canada have been postponed across the board.
Environmental impact of the excavation and extraction processes also make oil sand resources less desirable. Although mining companies often pledge to restore mined areas, open pit and strip mining methods are used to clear thousands of tons of oil sand a day from open spaces, decimating the landscape. Strip mining also creates bitumen- and clay-saturated ponds that are deadly to waterfowl and other birds. Furthermore, the processing of the sand also releases substantial amounts of greenhouse gases into the atmosphere.
Oil sand mining Image: CBS
Despite economic and environmental problems, oil sands will undoubtedly increase in prominence as a source of the world’s crude oil. The expanse of oil sands in Canada is immense–they are estimated to contain 173 billion barrels of oil–the second-largest oil reserves on earth, after Saudi Arabia. The sheer quantity of this resource cannot be ignored, especially at a time when American “oil independence” is such a hot political topic. Oil prices will inevitably rise again, and oil sand extraction and production will again be a profitable business. We can only hope that by then, technological advances will have made extracting crude from oil sands a cleaner, safer, and more efficient process.
