Oil Sands, Keystone XL and Energy Security
Posted July 10, 2015
Here’s one takeaway from IHS’ new research report on Canadian oil sands: Thank goodness for Canada and its oil sands.
Along with our own domestic energy renaissance, oil sands imports from our northern neighbor and ally are growing America’s energy security. Oil sands crude is critically important now and will be into the future, IHS says – which is why we here in the United States should be ever so grateful for our energy partnership with Canada and attentive to ways that relationship can be strengthened.
Yes, that’s a reference to the long-languishing Keystone XL pipeline. If we’re serious about oil sands development – and IHS’ report strongly suggests Americans should be – then we should quit politicking to death the single biggest infrastructure project at hand that would facilitate oil sands transportation to the U.S.
IHS calls oil sands the “cornerstone” of global oil supply growth:
From 2005 to 2014, oil sands production increased by 1.2 million barrels per day (MMB/d), or over 128%, making Canada the third largest source of global supply growth. This occurred despite several challenges, including cost escalation, environmental scrutiny, and the timing of new pipeline capacity.
This is illustrated in a chart from the IHS report:
The report details reasons oil sands have grown despite a variety of challenges:
- Technological innovation
- The vastness of the oil sands resource
- The openness of oil sands development to private and foreign investment
- Canada’s stable political and economic climate
Oil sands and the trade associated with it have helped the U.S. and Canada. And, as we’ve noted before, importing oil from a stable neighbor and ally is better for U.S. energy security than other options. IHS projects oil sands growth will mean another 800,000 barrels of oil per day of new supply by 2020. The report:
Oil sands growth has strengthened energy security by geographically diversifying supply while providing economic benefit to Canada and the United States. This growth made Canada the United States’ largest source of oil imports (exceeding volumes from all of OPEC combined toward end-2014), thereby displacing more distant sources of supply, bolstering continental energy security, and supporting economic growth.
Again, our energy relationship with Canada is one of the keys to America’s future. The report:
With US heavy crude oil import demand largely unscathed by US tight oil, increasing volumes from the Canadian oil sands are expected to come largely from heavy crude oil or from bitumen blends. In contrast, production volumes from some other large sources of US heavy oil imports, including Venezuela and Mexico, have been declining. IHS projects that Canada’s oil production will continue to rise through the end of the decade, while the trajectories of output from Venezuela and Mexico are expected to be downward in this period. In this way, growing oil sands supply and tight oil can be complementary, and oil sands exports to the United States are expected to increase. Both sources represent incremental supply that fits specific refinery demand, displacing more distant alternative sources of supply and contributing to greater North American energy security.
Which brings us back to Keystone XL and the galactic misfortune of the White House allowing an energy infrastructure project of strategic impact to morph into a political football in a nonsensical fight over oil sands development. Nonsensical, because – in addition to the importance of oil sands cited in IHS’ latest report – the U.S. State Department says Keystone XL wouldn’t affect oil sands development – we’re already importing oil sands via the five-year-old Keystone pipeline.
The Keystone XL debate should never have come to this. It should never have lasted going on seven years, delaying jobs, economic growth and energy to the United States – as well as the kind of investment in infrastructure President Obama has said is crucial for the country. API President and CEO Jack Gerard from earlier this year:
“We need pipelines like Keystone XL to fully realize our energy potential. Pipelines are one of the safest modes for transporting product and we need more of them. Keystone is but one example of a pipeline that, if approved, could benefit consumers by increasing the amount of fuel to the market place while stimulating job and economic growth, and all without costing taxpayers a dime.”
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.
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