Rescuing the frog

Yesterday, I had a lengthy Twitter discussion with Green Party Leader Elizabeth May, on the subject of oil pipelines and energy security.  A few things in the discussion surprised me, and it also forced me to think a lot more about oil infrastructure in this country and to put some numbers to the question, “What would it take for Canada to be oil self-sufficient?” What would we have to put in place to supply all of Eastern Canada’s refineries with Canadian oil?

Let’s be clear on a couple of things up front – first, I don’t necessarily think that oil self-sufficiency is the right goal. If we can supply ourselves with oil at a lower net cost by exporting west or south and importing from the east, as we have for years, that’s likely the preferred solution.  Second, I’ll have to leave a lot of details out of this post in terms of oil grades, refinery compatibility, etc. Third, I’ll assume that we run the existing Canadian refinery stock at nameplate capacity, regardless of Canadian domestic refined-product demand, with the balance of production going to export. Finally, I’m going to ignore the fact that the Enbridge mainline system runs through the US, and treat it as a potential bullet line from Western to Eastern Canada.  More to come on each of those elements in future posts.

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After my 1700 word rant the other night, I thought I’d tell you the same story with two figures.

The first figure shows you two things – the difference between crude oil prices in the Midwest US (WTI in PADD 2) and the US Gulf Coast (Brent or LLS in PADD 3) is shown in blue, with the widening Brent-WTI spread as the rising portion on the right. In red, you see the difference in gasoline prices, in $/gallon, scaled on the right axis. Through 2011, averaged weekly, crude oil in the US midwest was $15.75/bbl LESS expensive than on the Gulf Coast, while gasoline was, on average, 11.1c/gallon MORE expensive. The historic depreciation in crude oil in the midwest over the past year actually coincided (correlation, not causation) with higher gasoline prices. The real story, however, is that gasoline differentials do not track local crude differentials.

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I’ve read a lot of wild exaggerations in the debate surrounding the oilsands, and specifically around the Keystone XL pipeline, but I think this study from the Center for Global Development takes the cake.  The study, in effect, equates 21% of the effects of climate change due to projected global emissions between now and 2100 to oilsands development.  No, really – here’s the direct quote:

The Alberta Energy Resources Conservation Board currently estimates the deposit’s potential yield at 1,804 billion barrels of crude oil (AERCB 2011). For this analysis, I assume that the entire deposit will be mined and the extracted crude oil burned by 2100. Using standard conversion factors, full combustion would produce an atmospheric release of 209 gigatons of carbon, which would in turn raise the atmospheric CO2 concentration by 99 parts per million.2 This is 21.3 percent of scenario A2’s projected global increase of 464 ppm by 2100.

So, let’s put some of these numbers into perspective.  In order to extract and burn 1.8 trillion barrels of oil between now and 2100, you’d need average production of 54 million barrels per day.  That’s more than the combined production of OPEC, Russia, Canada, the US, Mexico, and the United Kingdom. It’s 6 times current Saudi Arabian production.  Current Canadian oilsands production is 1.7 million barrels per day. Despite this, somehow the authors feel comfortable assuming, for the sake of illustration, that Canadian production might average 3300% above today’s levels between now and 2100 – a sustained rate of annual production growth of 25.2% per year.

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