Oilsands players e ‘carbon-constrained

The growing clout of electric vehicles has raised questions in the oilpatch over what a shrinking market would mean, particularly for the Canadian oilsands, above le half of the 97 million barrels of oil the world consumes every day are used for land-based transportation fuels. The rest is used as feedstock in petrochemical plants, jet fuel, bunker fuel, lubricants, heating oil and other products.

Some oil executives in Calgary’s corporate headquarters dismiss peak demand theory, or at least see it as too far away to garner any deep consideration. But some major oilsands players, including Suncor Energy Inc. and Cenovus Energy Inc., are envisioning — though not especially fearfully — their business models in a “carbon-constrained” world.

“We do believe that oil demand will likely start to peak within 20-30 years at a level that is higher than today, and although demand will decline thereafter, we expect oil will still be needed for decades,” Suncor’s chief executive Steve Williams said.

Oilsands players have collectively made notable improvements in reducing carbon emissions and other pollutants in recent years.

Canadian Natural Resources Ltd., Canada’s largest oil and gas producer by production volume, cut back its overall emissions intensity by 5.6 per cent in 2015 compared to 2014.

Suncor cut its emissions by nine per cent during the same period. The company hopes to cut its overall emissions intensity 30 per cent by 2030, according to its most recent sustainability report to stakeholders.

Even so, the oilsands are still among the most energy-intensive supplies on the planet, and some analysts wonder if Canada’s heavy oil producers will be the first victims of more rigorous climate change policies.

“We know that Canadian oilsands are quite carbon intensive, so they could come under pressure there,” said Paul McConnell, an analyst at Wood Mackenzie based in London.

Since mid-2014, persistently lower commodity prices have helped ready oil and gas producers for a peak demand scenario. Big oilsands companies, as well as smaller conventional producers, have pared costs by drastically reducing their labour forces and moving toward leaner production models.

Unlike the early 2000s, a peak demand scenario would mean that fewer new sources of supply would be needed and less often.

“When you have a plateauing of demand, you’re going to have an environment where price spikes and things like that diminish,” Tertzakian said.

Big multinational producers, analysts say, would forgo megaprojects in favour of incremental developments to keep competitive in a shrinking market.

This is already taking place to some degree: companies including Imperial Oil Ltd., Husky Energy Inc. and Suncor are building smaller, lower-cost “replicated” oilsands facilities that can be built in modest 10,000 barrel-per-day stages and repeated. Large-scale developments, by comparison, were often in the 100,000 bpd range.

Those companies, and others, are also testing new technologies to cut costs and reduce their carbon footprints.

For example, they are injecting products known as solvents into bitumen reservoirs in order to produce oil using less steam, cutting back the amount of natural gas consumed in the process.

They are also installing sensor systems that better predict and monitor choke points and inefficiencies at their facilities, thereby boosting productivity and reducing The 1890 Morrison electric. needless emissions.

Conventional producers across Western Canada are lowering their per-barrel costs by tweaking old technologies, such as improving their ability to inject high-pressure water into reservoirs to reinvigorate old wells — a process known as “waterflooding.”

They are also piloting new ones, like using more automation in drilling and completing wells, and installing higher-sensitivity sensors that allow geologists to drill the “sweet spots” in oil formations.

“Every day, there’s a new technology being studied in our offices,” said Grant Fagerheim, chief executive of Whitecap Resources Inc., a light oil producer mostly focused on assets in Alberta and Saskatchewan.

But the debate over EV adoption — and the resulting decline in the need for oil — is more a question w w b b v b