Petroleum Economist Op-Ed - Global view/Oil sands

Contributed to The Montreal Gazette
Greg Stringham
Vice President of Oil Sands
Canadian Association of Petroleum Producers
June 04, 2013

Just over 87 million barrels - that's how much oil the world uses every day in one form or another. That's about 13.8 billion litres of oil, or just under two litres per person, if everybody in the world had access to it.

The International Energy Agency predicts worldwide oil consumption will reach 100 million barrels a day by 2035. And even at that level, more than one billion people still won't have electricity or clean fuel for cooking.

It's a startling reminder of the world's widespread energy poverty and a clear signal worldwide demand for oil is not going down any time soon.

Oil isn't the world's only source of energy, of course. There are other fossil fuels like coal and natural gas; and nuclear, biofuels and renewables like solar and wind energy. All energy is important and all will be needed to meet the world's growing demand.

But most of the world's energy comes from fossil fuels, a fact not expected to change in the foreseeable future even while renewable energy supply continues to grow.

Canada's oil sands - the world's third-largest source of oil with 169 billion barrels of proven reserves - are uniquely positioned to help meet the energy demand challenge over the next several decades.

Energy makes progress possible and oil products are the most effective, efficient type of portable energy man has created so far from the world's storehouse of raw materials.

Oil heats and cools our homes. It allows us to live, work and play wherever and whenever we wish. It helps grow our food. It gives us a host of life-improving products from computers to bulletproof vests.

Growing demand draws investment in developing new supplies. We expect total Canadian crude oil production to rise steadily from the three million barrels per day (b/d) to more than 6 million b/d in 2030. The oil sands will contribute most of this new production, growing from its current 2.2 million b/d to about five million b/d by 2030.

Canada's petroleum industry is targeting eastern Canada, the US Gulf Coast and growing economies in Asia for this new production. Several pipeline projects in Canada and the US are proposed to help connect the supply with the demand.

Higher Canadian production will reduce North America's need for foreign-sourced oil so those supplies can help meet demand in other parts of the world. There is also an opportunity for oil sands to play a direct role in meeting the needs of other markets via offshore exports from Canada.

Our industry is focused on energy security and reliability, economic growth and environmental performance. Our goal is to ensure we continue to develop the oil sands responsibly, including continuous improvement in environmental and social performance.

We want to be the preferred supplier - the most reliable, open, transparent, responsible oil producer in the world - and as global investment in Canada shows, we are on the path to get there.

Of course, every human activity comes with hazards and no industry gets a free pass. The challenge is to make the most of the benefits and minimize the hazards.

Something you may not know: Canada produces about two per cent of global greenhouse gas (GHG) emissions. The oil sands account for just 1/600th of global GHG emissions.

Despite these low levels, our industry knows it must reconcile production growth with expectations for a global energy system that addresses GHG emissions.

Reducing emissions intensity, or the volume of CO2 emitted per barrel of oil produced, makes good business sense. In the past 20 years, the oil-sands industry cut per-barrel GHG emissions by 26 per cent and it continues to develop new technology for more reductions.

For example, companies are testing the use of light hydrocarbons together with and instead of steam, and they're developing new extraction techniques that reduce the need for water and settling ponds. And just like other energy consumers, we are finding ways to use less to achieve the same production.

The newest oil-sands mine produces oil with GHGs only two per cent higher than the US average for oil. GHG emissions at the newest oil-sands drilling operations are only five per cent higher. These new technologies are the becoming normal and they set the bar for projects yet to come.

Something else you may not know: oil-sands companies already pay a government emissions levy in Canada. Industry must reduce its GHG emissions by 12% over the life of a project or pay a price of C$15 per tonne under Alberta government legislation - about three times the price paid under Europe's CO2 trading regime.

The money paid under this regulation - about C$300 million to date - goes into a technology fund earmarked by the government for investing in technology to store and reduce emissions.

Policy for GHG emissions from oil is being contemplated in the EU and much criticism is levied because of Canada's opposition to the wording of this Fuel Quality Directive.

But let's be clear: our industry doesn't object to CO2 reduction policies. What we object to is unfair discrimination.

At present, the proposed FQD singles out Canada's oil sands for unfair discriminatory treatment, based on a comparison of its emissions to the light conventional oil used in Europe.

Yet the oil sands' carbon footprint is similar to that of the EU's other globally sourced heavy oils and conventional oils produced with associated natural gas flaring. Nor does the directive encourage transparency from countries not reporting their flaring and it does not apply the full suite of available science-based data, which shows a spectrum of carbon values.

Technology and innovation, not discriminatory policy, are the best levers to help bring down GHG emissions. The Canadian industry's work to seek equitable rules will continue as the EU prepares to make a decision on its FQD.

The oil sands are a global success story in which we take great pride. They represent a tremendous opportunity for Canadians and a tremendous untapped source of reliable energy for the world.

Oil-sands technology and innovation will continue to enable more development, a reduced environmental footprint and lower costs.

We're bringing a safe, reliable, responsibly developed source of oil to help meet the world's energy needs.

Greg Stringham is vice-president of markets and oil sands, for the Canadian Association of Petroleum Producers

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