STOP: Stop Tar Sands Operations Permanently

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Pinch Points in the tar sands

Posted by mhudema on June 19, 2008

Oil-Sands Projects Slowed by Scrutiny, Group Says (Update1)

By Ian McKinnon

June 18 (Bloomberg) — Labor shortages and increased regulatory scrutiny are slowing development of Alberta’s oil sands, home to the largest reserves outside the Middle East, Canada’s largest producer group said.

The country’s daily production is estimated to reach about 4.47 million barrels a day by 2020, or 5.7 percent below last year’s estimate, the Canadian Association of Petroleum Producers said today in a statement. The Calgary-based group predicted 4.74 million barrels in 2007.

Questions about Alberta oil-sands royalties and federal rules on capturing carbon dioxide, a gas linked to global warming, are also lengthening schedules, Greg Stringham, a vice president at the lobby group, said today in Calgary.

Project sponsors “are making the $1 billion decisions, they just need a little more certainty to make the $10 billion decisions,” Stringham told reporters at an energy conference. “The ultimate potential for the oil sands remains unchanged, it just means we’re going to take longer to get there.”

About C$20 billion ($19.66 billion) will be spent in 2008 on projects to extract and process heavy crude from Alberta’s oil-soaked sand, the group said. The oil sands hold about 173 billion barrels of oil, according to government estimates.

Record oil prices, which reached $139.89 a barrel on June 16 in New York, are boosting interest in oil-sands projects and attracting international companies including BP Plc of London and Paris-based Total SA.

Slower Pace

Oil-sands output is pegged to rise to 3.54 million barrels of oil a day by the end of the next decade, up from 1.2 million in 2007, the forecast said. The year-earlier estimate predicted oil-sands production of 3.77 million barrels a day by 2020.

“It’s not a cancellation of projects or anything that has driven” the reduction, he said. “The pace is slowing more than anything else.”

New and expanded pipelines are forecast to boost transportation capacity by 1.1 million barrels a day by 2010, and the additions should be able to accommodate rising oil- sands output until 2013, the report said.

Pipeline projects after that date will likely target Gulf of Mexico refiners, Stringham said. The region accounts for about half of U.S. refining capacity, and Canadian oil exports could displace supply from Venezuela and other countries, he said. Lines to Eastern Seaboard plants, which can use synthetic crude processed from oil sands, may also proceed, he said

Production in Canada, the leading supplier of crude and fuels to the U.S., averaged 2.7 million barrels a day in 2007.

Competition for Workers

Competition for skilled workers such as welders and pipefitters also is boosting construction costs for oil-sands development, companies including Nexen Energy Inc. and Canadian Natural Resources Ltd. have said.

Environmental groups including Alberta-based Pembina Institute have challenged in court government permits granted to companies with oil-sands projects and urged the province to slow the pace of development.

The report was issued by a group whose members account for more than 95 percent of the country’s oil and gas output, according to the organization’s Web site.

To contact the reporter on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net.

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