Keystone XL Pipeline
Canadian Oil Sands
(tar sands)
Proven reserves
170,400,000,000 bbl
Potential reserves
315,000,000,000 bbl
Saudi Arabia’s minister of Oil and Mineral
Resources Ali al-Naimi at the OPEC headquarters
in Vienna, on December 4, 2015
Estimated Oil
Price Required
to Balance 2015
Budget
Tun
= 208 to 256 gallons
Pipe or Butt (1/2Tun)
= 105 to 126 gallons
PuncheonorTertian(1/3T)= 70 to 85 gallons
Hogshead (1/4Tun)
= 52.5 to 63 gallons
Tierce (1/6Tun)
= 35 to 42 gallons
Barrel (1/8 Tun)
= 26.25 to 31.25 gallons
Rundlet (1/14 Tun)
= 15 to 18 gallons
Weight Portions
3 to 5%
75 to 80%
10 to 12%
Economic Drivers
2002
Economic Impact in Alberta and other Provinces
2012
2035
$116 Billion Foreign
$32 Billion Foreign
$68 Billion Domestic
$248 Billion Domestic
Royalties
Export Oil, Field
equipment & services
39,700 jobs
2002
62,800 jobs
2012
2035
ABC OIL CO
Investment of $100 million to yield 2000 BBL/day oil sands producing unit
Assume $25 million is debt at 8%/year
Sales of 2000 BBL/day x 300 days/year x $70/BBL yields revenue of
$42,000,000.00
Operating expenses are
$15,000,000.00
Maintenance expenses are
Operating profit
$5,000,000.00
$22,000,000.00
Interest on debt
$5,000,000.00
Royalties (@$3.33/bbl)
$2,000,000.00
Depreciation
$5,000,000.00
Net taxable income
$13,000,000.00
Taxes @ 30%
Profit to stock holders
Return on equity $9,000,000/$75,000,000 = 12%
$4,000,000.00
$9,000,000.00
INVESTMENT PERFORMANCE OIL SANDS
VS OIL PRICE
60.0
50.0
Return on Equity %
40.0
30.0
20.0
10.0
0.0
-10.0
30
40
50
60
70
80
90
Market price $ per BBL
100
110
120
130
140
Canadian Oil Sands Royalty examples:
Based on the price of West Texas Intermediate weight crude oil
(WTI) in Canadian dollars per barrel, i.e., C$ 70/bbl of WTI
Royalty
WTI < C$ 55/bbl fee is 1% of gross revenue or 25% of net
revenue
WTI = C$ 70/bbl fee is 2.85% of gross revenue or 28.46%
of net revenue
WTI = C$ 125/bbl fee is 9% of gross revenue or 40% of
net revenue
US Royalties on BLM land equal a 1/8 share or 12.5%
Third-quarter results for North Americafocused crude oil producers
Team Line Up
For
•
•
•
•
•
Canada
Province of Alberta
China (Nexen)
European countries
Oil Companies (In Field;
Husky, Shell, SunCor, SynCrude,
Nexen, etc)
Against
Oil Extraction Technology
Under development
Tailings pond or
reinjection to old well
Brackish
water
Natural gas fuel
Oil
WATER OIL
SEPARATOR
COMPRESSOR
Oil Pipeline
West Texas Intermediate
Crude plus ground water
Traditional Oil recovery system
Tailings pond or
reinjection to old well
Brackish
water
Natural gas fuel
Oil
Water oil
separator
Compressor
Oil Pipeline
West Texas Intermediate
Crude plus ground water
Traditional Oil recovery system
Diesel fuel
Tailings pond or
reinjection to old well
Natural gas fuel
Fresh water
COMPRESSOR
Brackish
water +
chemicals
Oil
MIXER
WATER OIL
SEPARATOR
COMPRESSOR
Crude plus water &
chemicals
Fracking sand
Oil Pipeline
Fracking chemicals
High pressure water &
chemicals and sand
Fracked shale Oil recovery system
Surface Mined Oil Sands
Natural gas fuel
Fresh water
WATER HEATER
Hot water
Solids from mine
Natural gas fuel
SEPARATOR
Hot Bitumen
Natural gas fuel
Brackish water
Natural gas fuel
COMPRESSOR
UPGRADER
Wet sand
Natural gas liquids
pipeline
Synthetic crude
Pipeline
Trucks operating in the oil sands of Alberta, Canada (380 to 400 ton/load)
In Situ Bitumen Extraction
CHOPS - cold heavy oil
production with sand
CSS - Cyclic steam (huff & puff)
VAPEX - Solvent injection partial
upgrade in situ
THAI - Toe to heal air injection
COGD – Combustion overhead
gravity drainage
SAGD - Steam assisted gravity
drainage
Natural gas fuel
Natural gas fuel
Fresh water
Light oil
or NG liquids
Tailings pond or
reinjection to old well
Brackish
water
Hot Bitumen plus
steam water
Bitumen
UPGRADER
Steam
STEAM
GENERATOR
WATER OIL
SEPARATOR
Natural gas fuel
Synthetic crude
Steam
COMPRESSOR
Hot Bitumen plus
steam water
Pipeline
Oil Pipeline
Tar Sand Oil recovery system “SAGD”
Sunrise Energy Project
Deer Creek Joslyn Commercial SAGD facility
Team Line Up
For
•
•
•
•
•
Canada
Province of Alberta
China (Nexen)
European countries
Oil Companies (In Field;
Husky, Shell, SunCor, SynCrude,
Nexen)
Against
• First Nations (Alberta)
Keystone Pipeline System
Keystone XL
The Keystone facility in Hardisty, Alberta, Canada.
U.S. Crude Oil Refineries
Team Line Up
For
•
•
•
•
•
•
•
Canada
Province of Alberta
Montana
South Dakota
China (Nexen)
European countries
Oil Companies (In Field;
Husky, Shell, SunCor, SynCrude,
Nexen)
• Nebraska Governor
Against
•
•
•
•
•
•
Saudi Arabia
Venezuela (Citgo)
Heavy oil Refineries
First Nations (Alberta)
OPEC
Bold Nebraska (property
owners)
Environmental Concerns
The Big Delay
A tailings pond connected to operations of Alberta tar sands giant Syncrude Canada.
Suncor Energy oil sands operation in Alberta.
Team Line Up
For
•
•
•
•
•
•
•
Against
Canada
Province of Alberta
Montana
South Dakota
China (Nexen)
European countries
Oil Companies (In Field;
•
•
•
•
•
•
Husky, Shell, SunCor, SynCrude,
Nexen)
• Greens
• Democratic Party
• President Obama
• Republican Party
• Nebraska Governor
Saudi Arabia
Venezuela
Heavy oil Refineries
First Nations (Alberta)
OPEC
Bold Nebraska (Property
Owners)
Delay and Alternates
Railroad Transport of Oil
In rail transport, the U.S. DOT-111 tank car,
also known as the CTC-111A in Canada,[1] is a
type of unpressurized tank car in common use
in North America. Tanks built to this
specification must be circular in cross section,
with elliptical, formed heads set convex
outward.[2] They have a minimum plate
thickness of 7⁄16 inch (11.1 mm)[3] and a
maximum capacity of 34,500 US gallons
(131,000 L; 28,700 imp gal).[4] Tanks may be
constructed from carbon steel, aluminum alloy,
high alloy steel or nickel plate steel[5] by fusion
welding.[6]
A aerial image shows a train entering a depot along the Burlington Northern Santa
Fe (BNSF) rail line outside of Williston, North Dakota March 12, 2013.
As a result of an accident in Cherry Valley, Illinois, in 2009,
Canadian Exports of oil by rail
18,000,000
16,000,000
29,400
14,000,000
bbls oil
12,000,000
10,000,000
12,600
8,000,000
6,000,000
4,000,000
4200
2,000,000
0
IQ
IIQ
IIIQ IVQ
IQ
IIQ
IIIQ IVQ
IQ
IIQ
IIIQ
2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014
Team Line Up
For
•
•
•
•
•
•
•
Canada
Province of Alberta
Montana
South Dakota
China (Nexen)
European countries
Oil Companies (In Field;
Husky, Shell, SunCor, SynCrude,
Nexen)
• Oil Companies (Fracking
Bakken Shale)
• Republican Party
• Nebraska Governor
Against
•
•
•
•
Saudi Arabia
Venezuela (Citgo)
Burlington RR (Warren Buffet)
Canadian National RR (Bill
Gates)
•
•
•
•
Heavy oil Refineries
First Nations (Alberta)
OPEC
Bold Nebraska (Property
Owners)
• Democratic Party
• President Obama
Pipeline Alternatives
West & East
Rail 5 Mil
bbl/yr North
525,000
bbl/d West
1,100,000
bbl/d East
1,290,000
bbl/d South
Northern Gateway pipeline
2013 filed application --$14,393,000,000 cost with 1,100,000 bbl/d capacity
Team Line Up
For
•
•
•
•
•
•
•
Canada
Province of Alberta
Montana
South Dakota
China (Nexen)
European countries
Oil Companies (In Field;
Husky, Shell, SunCor, SynCrude,
Nexen)
• Oil Companies (Fracking
Bakken Shale)
• Republican Party
• Nebraska Governor
Against
•
•
•
•
Saudi Arabia
Venezuela (Citgo)
Burlington RR (Warren Buffet)
Canadian National RR (Bill
Gates)
•
•
•
•
Heavy oil Refineries
First Nations (Alberta & BC)
OPEC
Bold Nebraska (Property
Owners)
• Democratic Party
• President Obama
World Political Influences
Proven Reserves of Oil
350
300
200
150
100
Potential Years of Production
at 2012 rates
50
120
0
100
80
Years
Billion of bbl
250
Top Holders of Proven Oil
Reserves
60
40
20
0
U.S. Petroleum Flow, 2013
(Million Barrels per Day)
Table 1. Volume of crude oil and petroleum products
transported through world chokepoints, 2009-13
Location
2009
2010
2011
2012
2013
Strait of
Hormuz
15.7
15.9
17.0
16.9
17.0
Strait of
Malacca
13.5
14.5
14.6
15.1
15.2
Suez Canal and
SUMED
3.0
Pipeline
3.1
3.8
4.5
4.6
Bab el-Mandab 2.9
2.7
3.4
3.7
3.8
Danish Straits
3.0
3.2
3.3
3.1
3.3
Turkish Straits
2.8
2.8
3.0
2.9
2.9
Panama Canal
0.8
0.7
0.8
0.8
0.8
World
maritime oil
trade
53.9
55.5
55.6
56.7
56.5
World total oil
84.9
supply
87.5
87.8
89.7
90.1
In Situ Bitumen Extraction
CHOPS - cold heavy oil
production with sand
CSS - Cyclic steam (huff & puff)
VAPEX - Solvent injection partial
upgrade in situ
THAI - Toe to heal air injection
COGD – Combustion overhead
gravity drainage
SAGD - Steam assisted gravity
drainage
Factors increasing CO₂ emissions from
oil sands petroleum (7% to18%)
• Natural gas burned to extract bitumen
• Natural gas used to up-grade bitumen for
pipeline transportation
• Additional natural gas used to bring diluent to
Alberta
• Additional natural gas used to pump Syncrude
via pipeline since 25% to 30% is diluent
• Additional energy used to refine heavy oil
Rail 5 Mil
bbl/yr North
525,000
bbl/d West
1,100,000
bbl/d East
1,290,000
bbl/d South
Team Line Up
For
•
•
•
•
•
•
•
Canada
Province of Alberta
Montana
South Dakota
China (Nexen)
European countries
Oil Companies (In Field;
Husky, Shell, SunCor, SynCrude,
Nexen)
• Oil Companies (Fracking
Bakken Shale)
• Republican Party
• Nebraska Governor
Against
•
•
•
•
Saudi Arabia
Venezuela (Citgo)
Burlington RR (Warren Buffet)
Canadian National RR (Bill
Gates)
•
•
•
•
Heavy oil Refineries
First Nations (Alberta & BC)
OPEC
Bold Nebraska (Property
Owners)
• Democratic Party
• President Obama
Natural Resource of Canada
OIL SANDS
• Second largest in world, most developed
• Technology under development
– Considered in-situ burning
– Considered nuclear heating
– Focus SAGD (steam assisted gravity drainage)
– High capital investment
Oil Industry in time of Flux
• Saudi Arabia calling the game
• New investment in exploration and
development at a standstill
• Accelerating change in technology of energy
production
– Fracking & Horizontal Drilling (Oil and Gas
Productivity Increasing)
– Renewable resource options
Changing Balance of Power in World
• US moving more toward self sufficiency; less
imported oil
• China’s economic growth and domestic
production faltering
• More instability in world energy market
• Food productivity/technology spreading in
world
Where do we go from here?
• Individual efforts?
– Conservation
– Sustainable resources
• Corporate effort ?
– Technology/productivity development
– Resource acquisition
• National effort ?
– Build Pipeline, bring Oil to US for refining
– Oil allies
What does Canada do?
•
•
•
•
Subsidize?
Abandon or delay Oil Sands development?
Kill pipeline?
Bet on changing oil prices for future?