Oil sands on track to be biggest source of U.S. oil imports

Posted: May 20, 2010
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Shawn McCarthy, Globe and Mail, May 19, 2010, Ottawa — Canada’s oil sands will become the largest single source of imported oil to the United States this year, and could supply more than a third of America’s foreign oil by 2030, under an aggressive growth scenario that would have to overcome labour shortages and environmental concerns, an influential U.S. think tank said Wednesday.

The growing volume of Canadian oil sands imports “emphasizes the importance they have attained as a supply source for the United States,” Daniel Yergin, Cambridge, Mass.-based chairman of energy research firm IHS CERA, said in releasing a new report on the controversial Alberta oil projects.

Canada is already the largest source of imports for the U.S. market.
But as conventional Canadian production declines and oil sands volumes grow, those non-conventional supplies are becoming increasingly critical.

In the third quarter of 2009, oil sands imports to the United States hit one million barrels a day for the first time, of total Canadian exports of 1.9 million. This year, IHS CERA expects oil sands producers to average 1.08 million barrels a day in sales to the U.S., eclipsing imports from both Mexico and Saudi Arabia, which will be declining or flat.

In the report, IHS CERA director Jackie Forrest projects production in the oil sands will grow from 1.35 million barrels a day last year, to as many as 5.7 million barrels a day by 2030 – a figure that would represent 36 per cent of anticipated American imports.

In an interview, Ms. Forrest said that “stretch” forecast will require the industry to double its current pace of expansion, and overcome both economic and environmental barriers. Her moderate growth projection targets 3.1 million barrels a day.

The IHS CERA report comes as environmental groups continue their campaign against the oil sands. Sierra Club and Natural Resources Defense Council argued in a report released Wednesday that the development of Alberta’s “tar sands” represents both a threat to the local ecosystem and a “global disaster” because it will “all but guarantee the failure of efforts to combat global warming.”

However, while the United States is committed to reducing its use of oil – and CERA projects American crude demand likely peaked in 2005 – the country will continue to be the world’s largest crude oil importers for the foreseeable future.

To feed that appetite, Americans will increasingly depend on Canada, it added.

Traditional U.S. suppliers like Mexico, Venezuela and Nigeria will have trouble maintaining current production levels – unless they improve their investment climate – while Saudi Arabia is increasingly targeting exports to China and India.

Given Canada’s role as a secure and growing supplier, U.S. President Barack Obama’s administration has been somewhat ambivalent in its view of the desirability of breakneck oil sands growth, said David Pumphrey, analyst with the Washington-based Center for Strategic and International Studies.

The U.S. State Department has approved pipeline expansion from the oil sands into the U.S. market, saying the Alberta source was critical to U.S. energy security and its efforts to reduce dependence on Middle East oil, Mr. Pumphrey noted. However, the administration also backs climate change legislation that could impose significant additional costs on refiners that process heavy-oil imports which produce more emissions when processed.

The CERA report said industry and government will have to play a role in developing new technology that will reduce the oil sands’
greenhouse gas emissions, water use and land disturbance – al of which pose limits to growth.

“Energy security needs do not have to be at odds with the environment,” the report said.