June 1, 2010 at 7:45 pm #2647
4 drums cokerParticipant
Canadian Oilsands Will Be Main Source Of U.S. Imports This Year
The Canadian oilsands are expected to become the number one source of crude oil imported by the United States this year, says new analysis from IHS CERA.
Last year, Americans imported 1.9 million bbls of crude oil (conventional and oilsands) from Canada which was the largest supplier to the U.S. and accounted for 21% of all oil imports. Canadian oilsands imports could ultimately grow to between 20% and 36% of U.S. oil and refined product imports by 2030 from eight per cent last year, according to the first report issued under IHS CERAs Canadian Oil Sands Dialogue.
The fact that oilsands 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, Daniel Yergin, IHS CERA chairman, said in a news release. 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.
In 2000, the U.S. imported 1.5 million bbls a day of oil from Saudi Arabia (the leading supplier country) which accounted for 17% of U.S. imports. By 2009, Canadian imports of 1.9 million bbls a day made up 21% of U.S. imports while Saudi Arabia with production of 1.1 million bbls a day was in second place, comprising only 12% of imports.
Chart: Supply of Heavy and Medium Crude Oil to the US Market
Over the past decade, production from Canadian oilsands more than doubled to 1.35 million bbls per day in 2009 from 600,000 bbls a day in 2000, more than offsetting declines in conventional Canadian production. By 2030, Canadian oilsands production could grow to a between 3.1 million and 5.7 million bbls per day by 2030, according to the report.
Faced with declining supplies of medium and heavy crudes from Mexico and Venezuela and increasing coking capacity that will result in a tight markets for at least the next five years, U.S. refiners will increasingly be looking to Canadian bitumen as a secure source of oil supply, says the new IHS CERA analysis.
U.S. coking capacity is expected to increase by more than 300,000 bbls per day between 2009 and 2013, according to the Cambridge, Massachustetts consulting firm. To capitalize on these costly upgrading investments and maximize refined product production, U.S. refiners will need heavy medium crudes, it says.
The existing tight market is not expected to ease until the 2015-2016 period when stabilized Venezuelan production and increased Canadian oilsands supply will be joined by additional heavy and medium supply from the United States, Brazil and Saudi Arabia.
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 worlds largest oil consuming market over the next two decades, the report says.
The oilsands 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 oilsands offer the possibility of increasing oil supply security while offsetting reduced supply from some of the United States traditional suppliers.
Chart: Range of WTI Threshold Costs for New Crude Supply
Canadian bitumen can provide an important part in providing feedstock for U.S. refineries, says the report. Because it is heavier than most other crudes supplied to the United States, it could offer feedstock flexibility to refiners. When bitumen is blended with conventional crudes, the resulting mix fits well into a refinery configuration for conventional heavy crudes. The volumes of produced transportation fuels are maintained and, in many cases, increase and diesel volumes often are boosted. Some refineries, though, would require modifications to process higher volumes of bitumen.
In addition to their contribution to energy security, oilsands 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.
The growth of oilsands production in the past decade is a testament to Canadas open investment climate, said IHS CERA Director Jackie Forrest. The oilsands are among a group of oil development opportunities that are accessible to oil companiesprojects in which firms can openly and securely invest.
Oilsands, 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 five to 10 years shows that numerous projects are in the same range as oilsands, the consulting firm said.
For example, to meet the threshold 10% return on investment, oilsands in situ projects require an average price of just over $60 (U.S.). While that is more than required by existing agreement Brazil ultra-deep offshore play, it is comparable to Arctic shelf costs. The threshold price of just under $70 per bbl WTI for the average oilsands mining project would be less than that required for U.S. Gulf of Mexico, Russia onshore and new estimated production sharing Brazil ultra-deep offshore projects.
The IHS CERA report also identifies environmental questions around oilsands development which include water and land use and the reclamation of tailings the fine silt-like waste material produced during oilsands production. At the project level, government regulation of oilsands activities is highly developed and is as strong 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 CERAs previous multi-client study, Growth in the Canadian Oil Sands: Finding a New Balance found that the total well-to-wheels greenhouse gas emissions from oilsands from extraction and processing through combustion of its refined products are approximately five to 15% higher than the average crude oil processed in the United States. But comparison to an average can be misleading, the report noted. Emissions from oilsands 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 oilsands story. The pace of technological innovation in the production of oilsands 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. Co-operation 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 oilsands development. The dialogue addresses a range of topics that have the potential to shape the future growth of oilsands. The report is the first of four to be released this year.
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