Dozens of Canada's tar sands projects on hold as prices fall, analysis shows
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Version 0 of 1. Oil companies have frozen dozens of projects in Canada’s tar sands, amid falling prices and a rising tide of protest against one of the world’s most polluting fossil fuels. Some 39 projects containing 13bn barrels of oil are currently delayed or on hold, according to analysis by the campaign group Oil Change International published on Friday. The projects – a combination of open-cast mines and drilling – would pump 7.8bn tonnes of CO2 into the atmosphere if they went ahead, the equivalent emissions of 51 American coal-fired power stations over 40 years. Oil Change International said the delays showed that public protest against tar sands and a proposed network of pipelines is weighing on the industry. Exploiting the tar sands, one of the most costly and polluting ways to extract oil, has turned Canada into the world’s third-largest oil producing nation, after Saudi Arabia and Venezuela. Related: Fort McKay: The Canadian town that sold itself to tar sands Some 168bn barrels of reserves are thought to lie beneath the boreal forests of western Canada, mostly around the Athabasca river in the western province of Alberta. Marketed as a reliable source of energy, Canada’s oil exports to the US have doubled in a decade to 3.2m barrels per day (bpd). But campaigners argue that the oil sands boom is running into the sand, exemplified by growing opposition to Keystone XL, a 1,179-mile pipeline to transport landlocked Alberta’s oil to lucrative US markets - still awaiting a decision from President Barack Obama. Hannah McKinnon, senior campaigner at Oil Change International, said Canada’s tar sands had benefitted from “unfettered” market access, strong US demand, minimal regulation, high oil prices and “cheerleading” from Canada’s federal government. Now all these elements are under pressure, she said. “It is like Jenga. If you pull out a number of bricks the industry will start to crumble.” “Industry needs major new pipelines to make expansion profitable and they simply are not getting them... Unless they can overcome spectacular political, public and legal opposition – expansion is not a profitable prospect.” The Canadian Association of Petroleum Producers (Capp) has acknowledged its difficulties in finding new outlets for oil exports: in January it spoke of “challenging times” and stressed it needed “all forms of transportation in all directions – pipelines in particular”. The lobby group recently slashed its growth forecasts, although it maintains that Canada’s oil industry will increase output in 2015 and 2016. However, investment in new infrastructure is expected to fall to C$46bn (£24bn) in 2015, down from C$69bn last year, while the number of wells set to see a “significant reduction” goes beyond a 30% fall forecast in January. As the economics move against oil sands, the political tectonic plates are also shifting. Canada’s ruling Conservative party, facing federal elections in October, has been hit by a political earthquake in the oil heartland of Alberta. The New Democratic Party swept to victory in Alberta’s state elections earlier this month, overturning 44-years of Conservative-dominated rule. Rachel Notley, Alberta’s new premier, has pledged to withdraw provincial support for the Keystone pipeline and hike taxes on the oil industry. Her victory raises the stakes for Stephen Harper, Canada’s prime minister since 2006. Harper, who worked for Imperial Oil in Alberta, has been an ardent advocate for tar sands, overseeing a regime of generous subsidies. The most recent authoritative study estimated that Canada’s oil industry, including offshore oil, was aided by US$2.8bn (£1.8bn) in federal and regional subsidies. Canada, as a member of the G20, has pledged to phase out fossil fuel subsidies in the medium-term. But the most immediate problem for the tar-sands industry is the slump in world crude prices. Most of Canada’s untapped bitumen requires an oil price of $95 a barrel to be worth extracting, according to to the thinktank CarbonTracker - around $30 higher than current values. Related: Canada must deal with tar sands emissions, says Clinton campaign chief Falling prices have raised pressure on Canada’s oil sands industry, a mix of Canadian companies, big oil majors, such as Shell and ExxonMobil, and Chinese investors, who rushed into the market just before the boom began to fizzle. In the last 12 months, three of the world’s biggest oil companies - Shell, Total and Statoil - have shelved or postponed plans for tar-sands projects that would have added another 400,000 bpd to Canada’s output. Another company, Canada’s Southern Pacific Resource Corp filed for bankruptcy in January, after warning it was struggling to repay its debts. But the industry insists it has a long-term future. A Capp spokeswoman said “oil and gas is, and will continue to be, a key part of the Canadian economy for decades”. McKinnon said oil producers are assuming efforts to restrict climate change will fail. “They are essentially banking on nothing changing over the next few decades and we think that is problematic.” |