The resource base of the Canadian tar sands is large indeed, but the adage still applies: it’s not the size of the tank which matters, but the size of the tap.

The tar sands do not contain actual oil, but rather a hydrocarbon known as bitumen, which is a solid at room temperature and is more like a not fully-cooked version of oil. The process of turning bitumen into synthetic crude requires enormous inputs of natural gas, water, and diesel fuel. Accordingly, the cost of production from tar sands is high, needing oil prices above $65 a barrel to justify continued investment.

Tar sands production currently stands at about 1.3 mbpd.

Canadian tar sands production. Source: Stuart Staniford

The Government of Alberta expects the production of synthetic crude from tar sands to reach 3 mbpd by 2018, and the EIA’s Annual Energy Outlook 2010 forecasts tar sand production reaching 5.5 mbpd by 2035.

However, we believe that the availability of water and natural gas, high production costs, and increasing environmental concern about the impact of tar sands production will ultimately limit its output to perhaps 3.5 mbpd or less.

If the greatest increase that can be managed from tar sands is indeed 2.2 mbpd over eight years, then it will be little help against the decline of mature fields, which removes 3-4 mbpd from world supply every year.

See also

Kjell Aleklett, “A Crash Program Scenario for the Canadian Oil Sands Industry

Chris Nelder, “Tar Sands: The Oil Junkie’s Last Fix

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