The Canadian oil sands have increasingly become an important source of global oil supply growth and are now poised to become the number one source of U.S. crude oil imports in 2010, according to new research from the IHS CERA Canadian Oil Sands Dialogue. Oil sands imports could ultimately increase to a range of 20 percent to 36 percent of U.S. oil and refined product imports by 2030 from the 2009 level of 8 percent, according to the Dialogue's first report, The Role of Canadian Oil Sands in U.S. Oil Supply.
'The fact that oil sands by themselves-were they a country-are set to become the largest single source of U.S. crude oil imports this year, emphasizes the importance they have attained as a supply source for the United States,' said IHS CERA Chairman and Pulitzer Prize-winning author of The Prize, Daniel Yergin. 'This ranking demonstrates the impact of investment and innovation over the last decade. It also shows how integrated Canada and the United States are in terms of energy, as in their overall economies.'
Oil sands production, combined with exports of Canadian conventional crude oil, has already put Canada in the position of number one foreign supplier of oil to the United States. Over the past decade, production from oil sands more than doubled from 600,000 barrels per day (bpd) in 2000 to 1.35 million barrels per day (mbd) in 2009, more than offsetting declines in conventional Canadian production. But the potential is much larger and oil sands growth could be three or four times greater than today to a range of 3.1 mbd to 5.7 mbd by 2030, according to the report.
While oil demand in the United States is not likely to return to its 2005 peak, the U.S. will maintain its position as the world's largest oil market over the next two decades, the report notes.
'The oil sands will play a key role in meeting future world oil demand,' said IHS CERA Managing Director Jim Burkhard. 'Oil will continue to play a critical role in U.S. energy supply and the oil sands offer the possibility of increasing oil supply security while offsetting reduced supply from some of the United States' traditional suppliers.'
In addition to their contribution to energy security, oil sands projects constitute billions of dollars in spending, and the economic benefits radiate far beyond the borders of Alberta, creating jobs in both the U.S. and Canadian economies, according to the report.
Energy trade is an important part of the overall relationship between the United States and Canada, each of which is the other's largest trading partner. Canada and the United States have a highly efficient and integrated energy trade in oil, natural gas and electric power via an interdependent network of transmission grids and pipelines.
'The growth of oil sands production in the past decade is a testament to Canada's open investment climate,' said IHS CERA Director, Jackie Forrest. 'The oil sands are among a group of oil development opportunities that are accessible to oil companies-projects in which firms can openly and securely invest.'
Oil sands, like other complex oil projects, face the challenge of high development costs, the report notes. However, a comparison of the economics of some of the largest sources of new supply-ones with the greatest ability to add new productive capacity over the next 5 to 10 years-shows that numerous projects are in the same range as oil sands.
The Role of Canadian Oil Sands in U.S. Oil Supply identifies the environmental questions around oil sands development.
Environmental footprint concerns related to oil sands development include water and land use and the reclamation of tailings-the fine silt-like waste material produced during oil sands production. At the project level, government regulation of oil sands activities is highly developed and is as robust as in many other oil-producing regions in the world, the report finds. However, high growth will require further advances in water management practices and the pace and scale of tailings management and site reclamation.
IHS CERA's previous multiclient study, Growth in the Canadian Oil Sands: Finding a New Balance found that the total 'well-to-wheels' greenhouse gas emissions from oil sands-from extraction and processing through combustion of its refined products-are approximately 5 to 15 percent higher than the average crude oil processed in the United States. But comparison to an average can be misleading, the report noted. Emissions from oil sands can be higher, lower or on par with other crude oils processed in the United States.
The Role of Canadian Oil Sands in U.S. Oil Supply notes that innovation is a central element of the oil sands story. The pace of technological innovation in the production of oil sands has been substantial in the past, with major technological strides in optimizing resources, innovating new processes, reducing costs, increasing efficiency, reducing GHG emissions, and reducing its environmental impact. However, new techniques and technologies will be needed to continue to grow production sustainably. Cooperation between the Canadian and U.S. governments and the private sector will continue to be crucial to the continued advancement of new technologies, the report finds.
The Role of Canadian Oil Sands in U.S. Oil Supply is the first report from the IHS CERA Canadian Oil Sands Dialogue, which brings together a wide variety of stakeholders to participate in an objective analysis and open exchange on the benefits, costs, and impacts of various choices associated with Canadian oil sands development. The dialogue addresses a range of topics that have the potential to shape the future growth of oil sands. The report is the first of four to be released this year.
The complete report is available for download at the dialogue's homepage, www2.cera.com/oilsandsdialogue