--> --> Abstract: The Contribution of Alberta Extra Heavy Oil/Bitumen to World Oil Production, 2005 – 2020, by Richard Nehring; #90075 (2008)

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The Contribution of Alberta Extra Heavy Oil/Bitumen to World Oil Production, 2005 – 2020

Richard Nehring
Nehring Associates, Colorado Springs, CO

Several projections have recently been made about the future trajectory of extra heavy oil/bitumen from Alberta. This paper places these projections within the context of likely overall gross additions to world oil production capacity from 2005 to 2020.

Three aspects of Albertan extra heavy oil/bitumen are examined: (1) resources available for development relative to estimated discoverable and developable world resources; (2) projected gross additions to production capacity relative to the estimated increase worldwide; and (3) capital and operating costs relative to such costs for other major developments worldwide. The world numbers are derived from research done for and subsequent to the 2006 AAPG Hedberg Research Conference on Understanding World Oil Resources.

At first glance, Alberta heavy oil/bitumen poses a paradox to analysts of the world oil outlook. On the one hand, Alberta heavy oil/bitumen provides one of the three largest contributions (Saudi Arabia and the Orinoco heavy oil region of Venezuela being the others) to developable world oil resource potential. As of 2006, the proved undeveloped reserves of Alberta heavy oil/bitumen were approximately 155 billion barrels, nearly 10% of my low estimate of 1590 billion barrels of still to be developed world oil potential. The undeveloped technically recoverable potential was an estimated 295 billion barrels, more than 9% of my high estimate of 3240 billion barrels of still to be developed world oil potential. On the other hand, the contributions to gross additions to oil production capacity from 2005 to 2020 is only around 5% of expected additions (an average of 200,000 b/d annually compared to a worldwide average of four million b/d annually). This low rate of additions to production capacity relative to the share of resource potential occurs despite Alberta’s accessibility to major markets and its openness to international oil company investment.

The resolution to this securing paradox is found in the high cost of developing and producing Alberta extra heavy oil/bitumen. Capital costs for projects currently being developed or planned for development range from $60,000 to $100,000 per daily barrel of capacity compared to $10,000 to $25,000 per daily barrel of capacity for most major conventional oil developments worldwide. Because of the high energy use by extra heavy oil/bitumen production, its operating costs are high as well. Despite its major contributions to world oil resources, Alberta extra heavy oil/bitumen is only becoming a significant contributor to world oil production in the next 10 to 15 years because of the adverse consequences of oil resource nationalism for upstream investment elsewhere.

 

AAPG Search and Discovery Article #90075©2008 AAPG Hedberg Conference, Banff, Alberta, Canada