Greening Canadian Oil Sands Would Cost $105 a Barrel

The Canadian Energy Research Institute spent 18 months examining the potential and expected impact to the oil sands industry once stricter climate change policies aimed at reducing greenhouse gases are implemented in the U.S. and Canada.

And guess what CERI found out? It’s going to be expensive. Really, really expensive. The question is, whether the latest doom-and-gloom surrounding the oil sands industry is enough to kill any off any future investment from oil explorers and producers?

CERI’s report says crude would have to reach $105 a barrelto offset the costly endeavor of reducing greenhouse gas emissions from oil sands below convention oil. And then there is the two decades it is expected to take to make the appropriate improvements, which may include carbon capture and storage for plants using natural gas, replacing natural gas with gasification or using nuclear technologies.

Two months ago, BNET noted, the continued interest and investment among major oil companies in Canadian oils sands in spite of the $100 drop in oil prices and threats of stricter environmental regulations. Back then, French energy giant Total was engaged in a hostile takeover attempt of UTS Energy, a partner with Petro-Canada in the delayed Fort Hills oil sands project.

Total failed to takeover UTS, the Fort Hills project remains stalled and the industry is facing new criticism over a 97 percent drop in royalties paid by some energy producers. Petro-Canada, which is merging with Suncor Energy, recently reported a loss of $47 million in the quarter ended March 31, compared with a profit of $1.08 billion in the same period a year ago because of lower oil prices and higher costs related to the Fort Hills project.

Major oil companies with cash in-hand including Exxon could take advantage of bargain basement prices in the oil sands. But the risks are most likely too high for a traditionally conservative company like Exxon.

At least one company, Norway’s Statoil is moving forward with its oils sands project, although it scrapped plans to build an $12 billion refinery upgrader that converts bitumen extracted from oil sands into crude. Statoil, facing its own environmental pressure, will sell bitumen to others to refine.

These days oil producers are more apt to acquire stakes in projects in Brazil and even, politically sensitive Iraq before investing in any costly Canadian oil sands projects.