New IHS CERA Report Shows Oil Sands “A Key Pillar” for Energy Security

A new report released this week by IHS CERA, which draws on more than four years of research, has found that oil sands are “now the largest foreign source of US oil supply, providing more oil than Saudi Arabia or Mexico.”

As Kevin Birn, IHS CERA associate director put it:

“Over the past decade the Canadian oil sands have moved from the fringe to become a key pillar of global oil supply.  This growth has made oil sands the single largest source of U.S. oil imports and also a key source of global supply growth that could account for 16 percent of all new oil production by 2030. Today, the output of just Canadian oil sands—excluding all other Canadian oil production—is greater than the output of five out of the 12 members of OPEC.”

The report explains that although the United States is significantly ramping up production of tight oil, we will still need over 5 million barrels per day (bpd) of net imports each year over the next two decades and:

Oil sands are expected to remain an important pillar of US supply to meet this demand. Moreover, the two supply sources, tight oil and the oil sands, are complementary—not competitive. The vast majority of new supply from Canada is heavy crude, while most new US supply from tight oil is light crude. These two types of crude target different types of refineries, and both are important supply sources for North America (p. 3).

Of course, our best and most reliable supplier of oil sands is Canada and IHS CERA expects that western Canadian crude oil output will rise from 3 mbd in 2012 to 5.9 mbd by 2030, which could account for 16% of all new production globally until 2030.  As for the portion that would go to the United States, IHS CERA explains it this way:

Although markets for oil sands are expected to diversify gradually, a large part of new oil sands supply through 2030 is expected to go to the United States—as virtually all of the production does today. By 2030, the United States could import more than 4 mbd of oil sands crudes from Canada (p. 3).

What will that do for our national security?  It’s simple:

Increasing supply from Canada allows the United States to reduce its dependence on more distant supplies of oil by tanker, often from regions that are less stable and more susceptible to disruption. Pipeline and rail links between the United States and Canada constitute a “hardwired” link of Canadian oil to the US market— very different from waterborne shipments that can be diverted, even while en route (p. 3).

That’s not all: increasing supply from Canada also “offers an alternative to less certain heavy crude suppliers” (i.e. Mexico and Venezuela) and will “contribute to global spare capacity and price stability”(p. 4).

IHS CERA Shows Opponents’ Claims are Wrong

IHS CERA makes it clear that oil sands “are not the most intensive—nor are they as high carbon” of crude oils. 

[S]ources of supply from other oil-producing regions are in the same range as oil sands.  For example, the GHG emissions of Venezuelan crude, the most likely alternative to oil sands in the USGC, are in the same range as oil sands (4–20% higher than the average crude refined in the United States). (p. 20)

IHS CERA Finds that Keystone XL Will Not Cause Gas Prices To Rise

IHS CERA decimates Keystone XL opponents’ claims that the Keystone XL pipeline, and the oil it will bring, will raise the price at the pump.  On the contrary, IHS CERA finds that it may help lower prices:

If proposed pipelines are completed, the oversupply situation in the US Midwest will be resolved, and crude prices would strengthen as they reconnect with global market prices. There is a view that this would also cause prices for refined products, such as gasoline, in the Midwest to increase. However, this is not the case. The global price of oil is the most important factor shaping global and US gasoline prices. Although the price of inland North American crudes has been below the price of crudes on the USGC, this spread has not been reflected in inland North American gasoline prices, which have tracked USGC prices […] As a result, increased oil sands imports to the USGC and other US markets will not have a material impact on US gasoline prices in any market. However, as oil sands production expands, as discussed above, it can help boost global spare capacity, which can help moderate global prices, which in turn affects US gasoline prices. (p. 4)

Oil Sands crudes are safe to transport

IHS CERA states clearly that oil sands crude does not pose a greater risk for spills via pipeline than any other crudes:

Pipeline corrosion is a well understood phenomenon, and a number of scientific studies have found no evidence that oil sands crudes subject pipelines to greater risk of damage or spills than other crudes (p. 24).

The Pillar of Energy Security

But perhaps the biggest blow to Keystone XL opponents is that far from their claims that we don’t need oil sands, or fossil fuels for that matter, the reality is clear: oil sands is a “key pillar” of our energy security – and will be for decades to come.

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