At the moment it seems that part of the industry is engaged in a head to head. Tight oil is in a battle with the oilsands when it comes to filling demand, particularly in the US. An abundance of light sweet feedstock has appeared as if from nowhere and the heavy sour bitumen and syncrude of the Canadian oilsands is no longer being hailed as the answer to supply shortages. However, I can’t help but feel that there is a place in the market for both.
Register for a free trial »
Get started absolutely FREE in 2 minutes, no credit card required.
In 2012, US$ 23 billion was invested in the oilsands and the same is forecast for 2013. Some could argue that the fact that the investment figure isn’t expected to increase in 2013 isn’t a positive sign, however, I would beg to differ. Continuous stable investment surely indicates that oilsands products do indeed have a constant and sustainable place in the global market, at least for the short term. The oilsands are also of vital economic importance to much of Canada and it is considered as a positive place to do business due to the level of stability within the country, so will stay an attractive location for investors to spend their cash.
Global demand for fossil fuels and energy in general is growing; this is an undeniable fact and one that leaves plenty of room in the market, both domestically and globally for tight oil and the oilsands. Yes, demand from the US for Canadian products is falling at the moment due to the presence of shale reserves, but there are still places in the US market for Canada. Firstly, exports from Latin American countries such as Mexico are falling as the country’s reserves begin to suffer from natural depletion, so, there will be supply gaps to fill. And secondly, as the age of sweet crude was thought to be over during the 2000s, the US converted many refineries to process heavy crudes, and this capacity will go to waste and become idle if not used to process the heavy feedstocks from Canada that are available. Another point to raise when it comes to demand is that Asia is thirsty, very thirsty, as the population continues to expand and countries such as China change from net exporters to net importers. China is already investing in the oilsands to ensure that it reaps the benefits of supply and these Asian investments can only grow as the door has now been opened to them.
The above reasons do, I believe, show that there is room for a shared marketplace when it comes to North American crudes; however, there are two areas that do paint the oilsands in a less favourable light and in this debate they can’t really be ignored. There are many environmental issues surrounding them from the amount of energy required during production, to the quantities of ground water that are needed to the destruction of land that occurs during mining. These cannot be denied, yet, millions of dollars are being invested in research in Alberta in particular to overcome these issues and make the oilsands cleaner. The other problem is that of infrastructure. There is very little that extends down through Canada and the USA that can be utilised by the oilsands and with the rejection of plans for the Keystone XL pipeline, despite vast support and economic benefits, there is not much hope at the moment that this situation will change. If the marketplace is to remain balanced and prosperous and increasing energy demand is to be met, then these two issues will, I’m afraid, have to be tackled head on.