Green oil would cost US$105 a barrel: CERI
COMMENT: "Green bitumen"? How green would this stuff really be? Even if the carbon emissions involved in production of oil from the tar sands could be reduced to something rivalling conventional oil, what kind of achievement is that? Huge carbon emissions remain. The environmental disruption and pollution remains. The cancers and habitat collapses downstream from the tar sands remain. And a new source of spent nuclear fuel and nuclear pollution rises from this ecological mess.
By Claudia Cattaneo
Financial Post
May 12, 2009
Oil sands can meet environmental challenge, but at a cost, study says
 Suncor's operations in the oil sands. Oil prices would have to climb as high as US$105 a barrel to pay for the cost of turning "dirty oil" into "green bitumen," according to the Canadian Energy Research Institute (Photograph by: Courtesy of Suncor) |
Canada's oil sands can meet the challenge of turning "dirty oil" into "green bitumen," but oil prices would have to climb as high as US$105 a barrel to pay for the cost of integrating new technologies, according to a study by the Canadian Energy Research Institute.
With policymakers in Canada and the United States pushing for aggressive reductions in greenhouse gases, CERI took a look over the past 18 months at what it would take to reduce greenhouse-gas emissions from the oil sands to below those of conventional oil.
"Going green is not a cost-saving measure," according to the study, which was made public on Monday. "The benchmark crude would have to be close to US$110 a barrel (or US$105 a barrel under today's exchange rate) for new oil sands projects to go green."
CERI, an independent energy research organization based in Calgary and funded by industry and governments, said the transition to green bitumen could be made by using existing technologies -- widespread adoption of carbon capture and storage for plants using natural gas as a power source, or by replacing natural gas with gasification or nuclear technologies.
Study co-author David McColl, research director at CERI, said carbon capture and storage would be the cheapest option, costing an additional US$2.25 to produce a barrel of bitumen and suggesting oil prices would have to be US$85 a barrel for projects to be economic. Carbon capture would involve capturing carbon at the source and piping it into depleting reservoirs for storage, or into producing reservoirs to enhance hydrocarbon recovery.
Gasification, a new technology that is being pioneered by Nexen Inc. and OPTI Canada Inc. at their recently completed Long Lake oil-sands project, would add US$13.50 a barrel, suggesting oil prices would have to be about US$95 a barrel for projects to be economic. Gasification involves producing synthetic gas from bitumen waste, eliminating the need to use natural gas.
Nuclear power is the most expensive option, adding US$19 a barrel and requiring oil prices in the US$105 range to be economic when using smaller nuclear plants. A large plant could be less costly, adding US$10 a barrel.
"We wanted to provide a sober second thought," Mr. McColl said.
In all cases, the oil price would have to be far higher than it is today, or around US$55 a barrel.
While carbon capture and storage is the most cost-effective and greener alternative because it would achieve the biggest reductions in greenhouse gases, billions in investment would have to be made by industry and governments to build a new pipeline network.
"It really would require cooperation between industry and government, where we are investing in new pipeline capacity very aggressively," he said. The Alberta government has pledged $2-billion to fund a handful of projects to get the technology off the ground.
Even in that case, widespread implementation would take almost 20 years and the complexities of making such a move may drive developers to continue the search for new technologies, he said.
Meanwhile, the cost of emitting carbon would have to rise from current levels to push the oil sands industry to become green, or to $65 per tonne of CO2 equivalent, compared with Alberta's current cost of $15 per tonne.
"As the world moves toward lower-emitting sources, the oil sands will pay a vital role, it's one of the largest resources we have, but the trick is, what is going to be the right mixture of technologies and options to bring the emissions down?" Mr. McColl said. "A benefit of this global recession is it has slowed down the oil sands, it has given people an opportunity to take pause, and it has also reduced growth of emissions over time."
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Posted by Arthur Caldicott on 12 May 2009