The Canadian Energy Research Institute (“CERI”), an independent research organization, stated in a report Tuesday that oil prices would have to climb to $105 per barrel to cover the costs of integrating technologies so greenhouse-gas emissions so they are more comparable to conventional oil sources a necessary cost in order to comply with climate-change legislation that is being lobbied for in the United States. These increased costs will further solidify the oil sands as the most expensive oil source to develop.
Lower oil prices has already put a squeeze on oil sand production margins and results in the postponement our outright cancellation of many oil sands projects. Additional costs will put more projects in jeopardy. According to David McColl, Research Director at CERI;
“The oil sands are not going to be the big boom that everyone thought it was”.
Meanwhile, massive new supplies of clean burning natural gas from shale deposits in the Horn River basin and other shale deposits across North America is gaining increased attention and importance within the energy sector.
Mr. Randy Eresman, CEO of EnCana Corp., along with several industry leaders met last week with the Steven Chu, U. S. Energy Secretary, to state their case that while shale gas is still a fossil fuel, it is also is an extraordinary source of clean energy.
According to Mr. Eresman, the change is so new and so sweeping few have caught on.
“People are very quickly coming to the same conclusion that we have come to: That natural gas is going to be abundant for a very, very, very long time, and it should be now part of the overall debate for both energy security purposes and for the benefits you get because of the lower environmental footprint”.
As legislation is passed in the US, production costs will increase in efforts to reduce the carbon footprint of oil produced from the oil sands. When and by how much industry can reduce the carbon emissions is undetermined. But it is likely safe to say they will not be able to meet the aggressive legislation time lines proposed in the USA and that is because the technologies are still unproven and the rate of investment into these technologies is partly dependent on the market prices for oil. Eventually the technology will be there and the oil sands’ carbon footprint will be comparable to conventional oil. However, this only addresses the carbon emissions associated with production and does not address the carbon emissions associated with oil as the source to burning gasoline in our vehicles and other end product emissions.
A greater focus of importance will be given to natural gas as an abundant, secure and clean source of energy in North America and is going to became a more important contributor to the energy mix. In Canada, British Columbia’s Horn River basin will lead the way to surpass Alberta as the number one producer of natural gas, and the energy companies know it. In the last few months billions of dollars have been invested into land acquisition, infrastructure, gas plants and pipelines to tap into, extract and ship Horn River gas to Canada, the USA and Asia. This is just the beginning.