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Canada’s Oil Sands – Part 2

An enormous a part of the reason that Canada can export oil to the United States is the fact that it is importing oil on its East Coast for its personal use. When one seems to be at oil sands in relationship to its other oil sources (together with imports), oil sands oil is just about one quarter of the full. The non-oil sands portion is anticipated to lower in the future, so a major improve in oil sands manufacturing is required simply to offset expected decreases elsewhere. See my earlier put up about this.

Unless oil costs rise above today’s level, and stay larger, it seems unlikely that there will probably be a serious improve in oil sands manufacturing. Don Thompson from the Oil Builders Group advised us that with a purpose to justify new growth, the cost of West Texas Intermediate (WTI) crude have to be at the very least $80 a barrel. CERA indicates in a new report (free with registration) that more than 70% of proposed Oil Sands growth initiatives had been postponed, after the drop in oil costs in 2008. CERA quotes a needed WTI worth of $65 to $eighty five barrel to justify Oil Sands growth–but based on a rate of return of 10%–which might be not excessive enough.

Even beyond high oil prices, a significant ramp up would also require a huge quantity of investment funds. For example, if one needed so as to add 1 million barrels a day of upgraded oil by adding new mines and upgraders, it might require an investment of roughly $126 billion dollars, based on a CERA estimate of $126,000 per flowing barrel. It could also require an enormous quantity of credit availability and a veritable military of staff.

In the absence of a serious enchancment in technology (or perhaps even with one, since an enormous change in expertise typically takes a long time to implement), my estimate of the ramp up in oil sands production to 2020 is given beneath:

My tough estimate of Canada’s future oil sands production, other oil manufacturing, and overseas imports to their East Coast as proven in this submit.

I am forecasting that oil sands manufacturing will roughly double by 2020 (from 1.2 million barrels per day in 2008, to 2.Four million barrels a day in 2020). This forecast, partially, reflects Tony Eriksen’s (“ace’s”) calculation that tasks already permitted and in development are expected to convey production as much as 1.Ninety four million bpd. Progress beyond that is anticipated to be constrained for a lot of reasons, together with difficulty in acquiring adequate funding funds, want for a high value of oil to justify new building, issue in acquiring enough diluent, and the likelihood that royalties will probably be greater as governments discover that oil companies are among the few companies from whom greater taxes might be extracted.

Note that even with this improve in oil sands manufacturing, the entire provide of oil accessible to Canada (together with imports) dips considerably, and exports are prone to decline. My forecast for oil sands production to 2020 is similar to the typical of CERA’s two decrease manufacturing forecasts, taken from the new CERA report.

CERA forecast of Oil Sands manufacturing, from report cited above.
Even in CERA’s “Barreling Ahead” forecast, the ramped up production will barely make a dent within the 4 or six Saudi Arabias of latest oil production that Fatih Birol of the IEA has mentioned can be wanted if new production is to offset declines.

How much Canadian oil will the United States import
Canada’s exports to the United States, if it exports all the things that is left over to the United States

Based on the forecast I made for oil sands production, the quantity of imports to the United States are likely to drop somewhat, even when the United States continues to receive virtually all of Canada’s oil exports.

Will oil actually be exported to the US
But how possible is this state of affairs When one reads Canadian materials, it turns into clear that many Canadians would very much like to diversify the international locations it exports to, even when presently practically all pipelines lead from Canada to the United States. With the US as its only export companion, Canada has little leverage in bargaining over price. Additionally, there are details such as the US charging less for gasoline than Canada–why should Canadians be taxed to maintain their consumption down, and the identical time Individuals should purchase Canadian oil and sell it for much less NAFTA limits adjustments right now, however over the long run, that can be changed.

Canada is already working on an approach that may allow it to export oil in directions aside from the US, to help diversify its exports. The approach is a rail hyperlink that acts like a pipeline, and may be carried out gowin new energy group limited fairly quickly. China and others with few environmental issues are particularly favored as export partners. Canadian National (CN) additionally has tracks going East, so this method may be used to deliver oil from western Canada to eastern Canada.

CN’s revolutionary pipeline on rails
The Canadian National Railway has developed a transformative strategy it calls the “Pipeline on Rail” which might move oil sands manufacturing quickly and cheaply to markets in North America or Asia. . .

CN might gear up its capability to ship by rail up to 4 million barrels a day of oil at less cost and more shortly, bypassing the need to finance huge pipelines. By the top of this 12 months, the corporate will likely be shipping 10,000 barrels each day from producers whose reserves are now stranded.

Oils sands: Canada to China, Japan, India not US
This challenge, in its early stages, will remove three boundaries to the development of Canada’s huge oil sands: the fee, delays and financial risks concerned in constructing multi-billion dollar pipelines; the politics of obstruction south of the border from environmentalists and the danger of promoting oil to monopoly consumers in the U.S. which has, previously, resulted in contracts being ripped up when instances were powerful.

It also permits Canada to decouple from the American economic system when it comes to its most vital commodity which is oil merchandise. It’s because all the oil sands manufacturing can be routed to the west coast for shipment to Asia or wherever, thus avoiding monopoly pricing and bullying by the People. In addition to that benefit, oil sands are the nationwide trump card in the future and the American economy, now sputtering, will never be as sturdy as earlier than.

China is excited by investing within the oil sands. Simply immediately we learn that China is paying C$1.9 billion for an oil sands investment.

Alberta will ramp up oil sands, to the better of its capacity
Alberta could be very dependent on the oil sands trade, both for jobs and revenue. A report by Canadian Vitality Research Institute (CERI) signifies

. . .every greenback spent on large oil projects stokes nearly $2.50 in additional spending in Alberta, plus another roughly $2.50 in the remainder of Canada. In other phrases, a $10-billion decrease in power spending interprets into about $60-billion in misplaced financial activity across the country.

These revenues translate to tax revenues as effectively, so I find it tough to believe that Alberta will lower back oil sands production voluntarily, or even limit new production. If the US desires to chop again on imports as a result of it is sad about CO2 or different environmental points, I don’t see that as an enormous drawback to Canada. Canada will promote its oil elsewhere.

Potential Impact of Lack of Oil Sands Manufacturing on US
From the US viewpoint, the potential loss of oil sands oil might be problematic. Pipelines that feed the oil sands oil feed on to the Midwest. If oil sands oil is cut off, those likely to be hit the toughest hit are Midwestern American farmers. We all know from expertise that when there is a shortage of oil, it’s the parents at the top of the pipeline which might be hit. If the US decides it would not want Canadian oil, or if Canada cuts us off, it is likely the parents at the tip of the pipelines, away from Chicago and the Midwest that would be hit most–places like North and South Dakota.

We could theoretically import more oil (maybe from OPEC) to certainly one of our coasts, and pipe it to the Midwest. This may or may not achieve success. We don’t have a rationing plan to work around shortages of diesel gasoline within the Midwest at this level–possibly we must be eager about such a plan.

How big a problem is environmental concerns
Oil sands oil has quite a lot of environmental points. The one which is most apparent is the clearing of forests and taking over layers of overburden, storing them for many years, and then placing them again. This is an issue primarily with mining, slightly than in place (in situ) production. Mining additionally tends to provide tailings ponds that are polluted with bitumen which is missed within the extraction course of and with naphthenic acid. There is concern that water from this tailings water will escape, or will harm birds that occur to land in it. Companies use scarecrows and noise makers to attempt to keep birds away, however typically these precautions fail. There can also be concern about the quantity of water use, particularly if production of bitumen from the oil sands should scale up.

There are different concerns with the extracted sulphur, and whether or not it will get into the air, as sulphur dioxide fuel. As far as I know, the biggest issue with this is with upgrading operations, where the sulphur is separated out from the bitumen, reminiscent of that of Syncrude.

There are additionally metals that are found with the oil sands oil. This can be each good and dangerous. Bad as a result of they may probably be one other source of pollution, and good, if they can be used as a supply of uncommon earth minerals. We read:

It has been found that the tailings are a unique and wealthy supply of titanium (5-10 % on solids), zirconium (2-5 %) and iron and uncommon earth minerals (eight-12 %). These beneficial minerals are at current not being recovered.

The quote relates to a patent for a way of extraction of these minerals, by applying centrifuge strategies to tailings ponds. I anticipate we will see extra centrifuge methods used sooner or later, both because of the opportunity of monetary acquire, and because of a need to cut back the quantity of water stored in tailing ponds.

In situ production has much less direct environmental points than mining, as a result of it disturbs the soil much less, and since it leaves a few of the potential pollutants underground. In situ leads to far much less tailings ponds. Most of the problems from in situ mining result simply from the truth that it is a low EROEI course of, and makes use of a number of natural fuel in its manufacturing. Consequently, its carbon footprint is sort of high.

Whereas there are quite a couple of environmental points, I believe that what we hear may be exaggerated.

Scale-up Confusion

I think the difficulty of “scale up” is a matter of big confusion to environmental teams. How a lot worse will the environmental influence be, 10 or 20 years from now, if oil sands production continues to grow as forecast Will the dimensions up have 20 occasions the present environmental impression of the worst firm, or will the impression be fairly small, as manufacturing is shifted an increasing number of to in situ (in place) amenities, that don’t disturb the bottom except to lay underground pipelines to heat the bitumen, and as new environmental legal guidelines begin to have more impression

Suppose that production actually grows to the extent forecast by the Canadian Affiliation of Petroleum Producers (CAPP) in its “growth case”. (That is extra of a rise than I’m showing in my forecast earlier within the post.)

CAPP “Progress Case” forecast for Western Canada, together with conventional as well as oil sands production, from June 2009 Report.

With this forecast, mining will roughly double between 2008 and 2025, and in place manufacturing will triple. Mining is the problematic one, in terms of land disturbance, water use, and tailing ponds. At worst, it would seem to me that there shall be double the quantity of pollution issues in 2025 that we have now now, based mostly on the forecast increase in mining. However even this estimate is excessive–corporations can be getting rid of legacy technology that holds them again environmentally, and current legislation adjustments (reminiscent of one passed in 2009 requiring rather more rapid retirement of tailing ponds) will additional scale back the impact of increased manufacturing.

The amount of floor area that’s currently covered by oil sands mines amounts to about 200 square miles (518 sq. kilometers), in line with the CERA report. This corresponds to a sq. 14 miles (23 kilometers) on its aspect, which is smaller than the footprint of many cities. What we are talking about, primarily based on the CAPP mining forecasts, is, at worst, is doubling this footprint. The equal square would have an area of four hundred square miles, so would measure 20 miles (32.2 kilometers) on a facet.

Probably Space to be Disrupted by Mining
The confusion about scale up has led to very unusual statements. For example, I just lately obtained an e-mail from the Sierra Membership that stated (relating to the current approval of the Alberta Clipper Pipeline):

This decision is deeply distressing because tar sands development in Alberta, Canada is creating an environmental catastrophe, with toxic tailings ponds so large they are often seen from area and plans to strip away the forests and peat lands in an area the dimensions of Florida.

The complete space the place oil sands deposits are situated is the size of Florida. However the mines themselves are tiny compared–the size of a not very giant city. Maybe we are talking about doubling this by 2025. The tailing ponds are contained within this area. The percentage of this space coated by tailing ponds is now about 10%. This share might very well decrease, as new technology and new stricter laws are implemented.

When bushes are cut, we had been instructed that the trees are offered to the logging firms in the world, and thus offset different trees that might have been logged elsewhere. The peat moss is stored for later reuse, in line with the Province of Alberta.

Carbon Dioxide Emissions
One other question is learn how to measure carbon emissions. Do you look at emissions during their complete life cycle, or solely during extraction and refining One would count on emissions to go up with the price of producing oil (or decline in EROEI), and that is usually what a CERA research reveals. The vast majority of the emissions relate to burning the oil that’s produced, and these stay unchanged no matter how low the EROEI of producing the oil is.

CERA’s comparison of Greenhouse Gasoline emissions, on a properly to wheel basis.
Also, in terms of absolute degree, if one compares CO2 emissions from oil sands operations to these of coal fired power plants, the coal fired power plants seem to be a much larger problem. If Alberta’s oil sands emissions had been doubled (as would possibly presumably occur by 2025), they still could be lower than the coal fired electricity emissions of many US states.

Comparison of Oil Sands Emissions with Coal Fired Energy Plant Emissions, from Setting the Document Straight presentation by Don Thompson.

Athabasca River Pollution
One other source of confusion is pollution of the Athabasca River. The Athabasca River has been polluted for many years, and can proceed to be polluted, because the river runs proper through the oil sands area. In reality, the oil sands deposit was discovered because of water pollution.

Oil Sands Pure Leakage to Athabasca River.
The well being of rivers in the area is being monitored by Regional Aquatics Monitoring Program (RAMP), a multi-stakeholder committee which includes representatives from oil firms, Ft. McMurray First Nation, Ft. McKay First Nation, Health Canada, Alberta Pacific Forest Industries, Fisheries and Oceans Canada, and plenty of others.

Each year, RAMP points a scientific report. The indications of these reports appear to point out little problem with water pollution or overuse, except for a common mercury pollution drawback, which I understand is quite widespread, extending throughout the US and Canada.

Air Pollution
With all the pollution issues I had heard about, I assumed air pollution can be a real drawback. As a substitute, the air was very clear. Don Thomson of the Oil Sands Builders Group advised us the air in Ft. McMurray checks better than that in another main metropolis in Canada for air pollution, on virtually any frequent pollutant. This could also be partially because Ft. McMurray is a number of miles away from the mines.

I don’t have many details on air pollution, besides that this is without doubt one of the areas regulated by the province of Alberta. For example, Syncrude has undertaken a project called Syncrude’s Emissions Reduction Undertaking (SERP), designed to cut back stack emissions of sulphur compounds by 60% from present permitted levels by 2011, below an settlement with the province.

Political Football Game
It appears to me that the Oil Sands are an enormous political soccer sport, and a superb share of the environmental stories we hear are associated to the posturing occurring to win this soccer recreation.

Japanese Canada vs. Western Canada
First, Jap Canada knows that it’s prone to losing its imports from the East, due to peak oil. It needs the oil from Alberta, but so long as Alberta regulates the oil sands and exports the oil from the oil sands to the United States, (or to China), the East Coast is out of luck. So if Japanese Canada can present that Alberta is not doing a good enough job of regulating the oil sands, then it could possibly perhaps get management via new Federal regulation of the oil sands. With that control, the Jap a part of Canada might be assured of getting oil. Additionally, if they need to raise taxes, it is going to be useful to them. So we have experiences like the one by Ecojustice, advocating further Federal regulation.

US vs. Canada / China / Far East
Second, the US is the present recipient of the oil from the oil sands. If the United States may be satisfied that we don’t want it, because of environmental issues, that makes it all the simpler for Jap Canada to get it, or for Western Canada to export to China. Western Canada really would like to not promote to the United States, since the value it gets from the US is perceived to be not the very best, and the US is seen as a bully.

Consultants /Assume Tanks / Environmental Experiences
Because of the political scenario, there may be a giant “market” for reports by consultants and think tanks that present big environmental problems. There are also all kinds of the way one can legitimately present that there could be a problem. For example:

Undermining the Report Card: The Oil Sands Report Card by WWF and the Pembina Institute. This report compares the assorted oil sands tasks against one another on a quantity of different variables, and makes statements akin to, “If all corporations had as low emissions as [lowest firm], there would be a financial savings of __________ in emissions.” That’s attention-grabbing, however does not tell you whether there may be an issue in the first place.

Statements like “Toxic tailing ponds stuffed with liquid mine wastes already cowl more than 50 square kilometers,” additionally from Oil Sands Report Card. Fifty square kilometers corresponds to a square a little bit over 7 kilometers (four.Four miles) on a side. Having so many tailings ponds just isn’t great, but it is not as enormous an issue as it’s made out to be. Sooner or later, the amount is not likely to grow a lot, with more in-situ manufacturing, and with latest modifications in regulations concerning tailing ponds that require much faster ends to the ponds. Environmental Commissioner Renner instructed us that the oldest tailings pond (which is the one with by far essentially the most leakage points) is anticipated to be retired in 2010.

Pictures with captions like, “Oil sands operations take away rivers, forests, and wetlands with the intention to entry the oil sands beneath,” also from Oil Sands Report Card. The angle of the picture makes it appear like an enormous area is concerned, and the way the caption is worded makes it sound like there are not any steps being taken to place the pieces again in place based on present views of greatest environmental practices.

Statements by aboriginal groups that they’ve some most cancers above normal levels. Any of us who have studied likelihood know what the issue is right here. There are all kinds of little aboriginal teams with population of around 1,000. So should you take a look at enough of these groups, a number of the teams may have a handful of people with one or one other kind of cancer. There is pollution in the world–there at all times has been, because the river naturally runs by the oil sands. The background pollution level could elevate the probabilities of most cancers a bit larger. However there would not appear to be any examine showing an general downside.

Not for Profit Issues
Not for Revenue organizations are almost certainly underneath funding pressures. If they need donations, it is to their benefit to make issues sound as dire as attainable. If the leaders of the organizations really do not perceive the size of scale up issues, these organizations can simply make statements that inadvertently overstate how bad the future will likely be, relative to immediately.

Additionally, for sure, their analyses are not of the nature of a value/profit evaluation. They only inform you that there could be environmental costs concerned, not that the oil finally produced might present benefits.

These organizations also don’t let you know concerning the probably environmental consequences, if the substitute oil were extracted in a way more heavily populated space, reminiscent of one of many OPEC nations. The environmental impacts on the inhabitants would possible be worse–but rather a lot less reported, and quite a bit less regulated.

People trust Not for Earnings. In spite of everything, they’re “do good” organizations. An individual may suppose that somebody is looking over the shoulder of Not for Earnings to see that what they are saying is adequately supported by information, but I can not see that that is happening in any respect. This is difficult “stuff” to understand. If these organizations miss the boat, or slant issues in a strategy to get extra donations, nobody is probably going the wiser.

How the Politics Will Work Out
No one actually knows the reply to this–however we actually have numerous people who are prepared to take experiences at face worth, without considering the possibility that political maneuvering could also be distorting what we see. Since peak oil is just not within the newspapers, even Oil Drum readers assume “higher-ups” do not learn about peak oil. That is gowin new energy group limited just not true. They know that imports may be declining sooner or later, and discover Trojan horses through which to hide their causes.

There is one factor I am fairly sure of. No politician in Canada actually has any intention of stopping oil sands production based on environmental issues, though just a few might need to make sure it doesn’t develop too quickly. Mostly what politicians need is the oil, or the earnings from the oil, for themselves. If it takes an exaggeration or two about environmental points to succeed in this finish, so be it.

Be aware: Oil sands vs Tar sands. The province of Alberta and CAPP want oil sands, so that’s the terminology I’ve used. Oil sands can also be far more commonly used, in keeping with Google.

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