Canadian petroleum and United States needs

Saturday, August 24, 2002

By: Maurice B. Dusseault

Summary

The United States reached its peak oil production in 1970. World production of conventional oil*1 will likely peak around 2004-2005, and competition for oil resources will become more intense. Does the United States have reasonable alternatives to increased imports from the Middle East, South America and Africa?

An alternative exists in the Canadian heavy oil*2 deposits. There is enough oil in these reservoirs to provide over 100 years of full energy security with no foreign imports to the United States and Canada. The technology to do this economically has been developed in the last 20 years.

Oil Consumption

World conventional oil production will soon peak: all major land basins have been explored, new large discoveries are increasingly unlikely, and per-barrel finding costs are rising, driving discovery rates down*3. Offshore oil does not represent salvation: deep offshore projects will contribute 8-15% to conventional oil reserves, these projects are expensive, and only large finds can be developed profitably. In developing countries, demand will continue to rise for the foreseeable future.

New technologies and higher oil prices will affect the rate of decline, but it is unlikely that the coming decline in conventional oil production will be reversed. Aggressive conservation could reduce demand, as happened temporarily in 1977-1980, but continued global economic development will increase it; therefore, energy sources other than conventional oil will be required. Natural gas will help fill the gap, but that too will peak and decline, likely within 15-20 years.

Why is US consumption important? American daily consumption is about 17 million barrels, or 22% of world supplies; Canada consumes less than 10% of the US rate. The US imports one-third of its natural gas, all from Canada, and more than 50% of its oil, with Canada the largest foreign supplier to the US. Saudi Arabia and Venezuela (#2 and #3) supply about 15% and 14% of US oil imports, and Canada supplies about 16-17%. Incidentally, Canada imports oil on the East Coast of Canada, but overall, Canada produces about 2.2 million barrels per day, and our net exports are about 700,000 b/d, although our gross exports to the US are about 1.6 million b/d. Thus, most US imported oil comes from politically unstable countries via long and potentially vulnerable sea transportation routes. This is of concern to the US.

Canadian Oil and Canadian Technology

Could Canadian oil possibly meet all of US needs? Because of the vastness of Canadian heavy oil deposits and the stability of the country, the answer is yes. Alberta and Saskatchewan heavy oil and bitumen resources are massive: the total resource is estimated to be around ~2.5x1012 (trillion) bbl. It seems that about 25% of this can be extracted, and many believe that 40% will be attainable with emerging and future technologies. These simple facts lead to a dramatic conclusion: Canadian heavy oil resources can provide about 100 years of secure oil supply at 100% of current consumption rates. Also, Canada is a stable, democratic, and developed society, and land access means pipelines, rather than more vulnerable supertankers.

At an oil price of US$25/bbl, about 20-25% of Canadian heavy oil can probably be extracted profitably using existing technologies. These technologies include:

  • Cold heavy oil production with oil sand, now producing 460,000 barrels per day in Canada
  • Steam-assisted gravity drainage, with many large projects recently initiated
  • Pressure pulsing, an emerging aid to production that is already commercialized
  • Mining, which has already produced more than two billion barrels of oil and which can be used to access the shallowest 6% of the total resource (perhaps another 50-75 billion barrels from mining alone)
  • Vapor-assisted petroleum extraction and in situ combustion using horizontal wells, both still at the conceptual stage

These advances have removed technological barriers to increased production, but sustained rapid expansion of heavy oil production will need price stability and environmental vigilance. Heavy oil is rich in carbon: coking and hydrogenation*4 are needed to convert it into a product that can be refined into gasoline and diesel fuel. This requires numerous large heavy oil upgraders, and these expensive facilities must also remove sulphur and heavy metals (Ni, V, Ti) safely during processing. Upgraders generate solid wastes such as coke, and some production technologies (e.g. mining, producing oil with sand) generate mineral tailings and wastes that must be disposed of properly.

Thermal production technologies require that up to 40-50% of operating expenses be spent on heat. The current heat source is natural gas, which is valuable as a resource in its own right as well being a hydrogen source for upgrading. Many interesting energy trade-offs are possible in this area.

Most of these issues appear to have been solved with existing environmental and refining technology, and heavy oil production can be increased rapidly if needed.

American Energy Policy

North America is not running out of oil; it is only running out of cheap conventional oil. Possible solutions include conservation, alternative energy sources, increasing imports, or production from non-conventional oil resources. The vast Canadian heavy oil deposits represent an economically attractive option; these deposits are already being exploited, and because of recent technological advances, more rapid development is feasible. This option could provide a secure, land-based energy source for the US and Canada for the foreseeable future. 
Development of the Canadian heavy oil deposits should be the cornerstone of any American policy that seeks to guarantee a stable, secure, and economic long-term petroleum supply for the United States. Canadian politicians and technical experts should acknowledge this, and study its implications carefully. It will be one of the most economically interesting and important issues to arise in this generation.

 

Footnotes:

*1. Conventional oil is defined here as oil having a gravity of > 20¼API or a reservoir viscosity of < 100 cP. 
API = American Petroleum Institute. ¼API is a measure of density: a value of 10¼ (API is equivalent to the density of water, and is a very heavy oil. A light oil would have a value of 35¼API to 42¼API, and this would be a very light hydrocarbon with low viscosity, and a specific gravity of perhaps 0.71 - 0.75 

*2. Heavy oil is defined here as all oil < 20¼API gravity, or all oil with a viscosity 
>100 cP. One may assume that in heavy oil, natural flow rates cannot sustain economic exploitation, and improved oil recovery methods must be used.

The units cP are centipoises, an expression of viscosity (or Òthickness). The viscosity of water at room temperature is 1 cP (centipoises). Glycerine in a bottle has a viscosity of 500 cP. Liquid honey has a viscosity of 15,000 to 50,000 cP. Roof tar has a viscosity of 50,000,000 cP. Heavy oil has a viscosity from 100 cP to 10,000 cP. The oil being mined in the oil sands by Syncrude has a viscosity of 500,000 to 1,000,000 cP.

*3. Deffyes, K. 2001. Hubbert's Peak, Princeton University Press, NJ. (A "must-read" if you are interested.)

*4. Hydrogenation means H must be added; the cheapest source is CH4, also the principal component of natural gas.

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