Friday, August 04, 2006
Tar Sands Are Not A Solution
The closer we get to a global oil crunch the more longingly governments and oil companies are looking at tar sands, oil sands and oil shale deposits around the world. Many of those see such unconventional reserves as the hope of the future as conventional oil reserves slide further down the depletion slope on the far side of Hubbert's Peak. Canada, of course, has the Alberta tar sands. Venezuela has the Orinoco oil sands. The US, Australia, Russia and various other countries play host to large reserves of undeveloped oil shale.
The most extensive exploitation of any of these resources is in Canada's tar sands. Billions of dollars of investment have been pumped into the Northern Alberta economy in massive projects like Syncrude. But there are serious problems developing even here, and most certain to be repeated if similar exploitation of the world's other oil sand and shale reserves. Cost overruns on tar sands projects have ranged anywhere from 50% to 200-300% and more. Total have today announced a three year extension on their tar sands development, pushing the projected completion date out from 2010 to 2013, based on severe over-runs on anticipated development costs.
And what comes out of the tar sands is not oil! It is a precursor to oil which requires extensive and very expensive processing to even turn it into a low-grade crude which the majority of North American refineries cannot process. Tar sands processing, at this stage, depends very critically on natural gas as a processing energy source, natural gas which itself is in decline despite record investments in exploration and development. Various of those projects are looking at alternatives to the natural gas, including coal to liquid conversion and nuclear, as the depletion curve on our natural gas reserves accelerates.
The current rush of investment funds into Alberta's tar sands is being sunk into new projects that will, even by the most optimistic estimates, come on line anywhere from five to twelve years in the future. We have already passed the peak in global conventional oil production and are clearly on the downhill slide. Unless there is a tremendous global spate of new refinery development of the type of refinery that can handle heavy sour crude, a global peak in overall oil production becomes increasingly meaningless. If the world's oil producers are no longer capable of supplying the type of crude that the world's refineries can process, even a dramatic increase in production will mean nothing if it can't be turned into the gasoline, diesel and 300,000 other products that are today produced from oil and oil derivatives. We will, for all practical purposes, be well past "peak useable oil" long before the new tar sands projects come on line. Even if miraculously we can ramp up tar sands production to 5, 7, even 10 million barrels a day, it will be of the wrong grade of crude and will not come near offsetting the fall off in production of useable oil that will have occured by the time they do come on line.
Governments the world over are now finally starting to accept that we are facing a looming global oil supply crisis. That is a remarkable shift from the level of political awareness even 2-3 years ago. The problem is that all the political dialogue centres on where to turn for an alternative energy source to replace the energy lost as the global oil supply declines. Thus far governments are not daring to ask the only question that will prepare us for the energy deprived future ahead of us: "How to we reduce our energy consumption?" Alternatives are not the answer. They only buy us some time. We have known for at least a half a century that sooner or later the oil would run out. We have wasted that half century in an ever-increasing binge of oil usage. We have done nothing about a change of direction, developed and sold to the people any new paradigm, at least at the levels that would have any meaningful impact on the future problem. As long as governments continue the pursuit of a business-as-usual agenda, tar sands, oil sands, and oil shale will not be able to fill the void.