More oil sands in the pipeline than the future will want: IEA
Alberta has already approved far more oil sands production than the world will want according to the International Energy Agency (IEA).
If the IEA is right, it means an end to new oil sands project approvals and probably an abandonment of some that have already been approved. It also means Canadians might want to re-evaluate the need for bitterly controversial new tar sands pipelines—like Keystone XL, Northern Gateway and the Trans Mountain twin.
Let's take a look at some of the details.
The IEA has arguably the world's most detailed and comprehensive database on global energy. Their flagship annual report—World Energy Outlook—is an essential resource relied upon by many of the world's major economies, as well as global energy industries. The IEA's 2010 World Energy Outlook report specifically analyzed future oil sands demand under several possible energy scenarios. In every scenario, global demand for oil sands in 2035 was well below what has now been approved.
What makes this analysis so remarkable is that the IEA is a friendly proponent of the oil sands. They open their report saying "production from Canadian oil sands is set to continue to grow over the projection period, making an important contribution to the world’s energy security." No greenie tree-huggers there.
But the IEA are also hard-nosed economists who include in their analysis the reality that high production costs coupled with high carbon emissions will hurt the competitiveness of the oil sands in the future. They conclude that there are already more oil sands projects in the pipeline than will be needed to supply future demand.
My chart below details this oil supply and demand mismatch:
The red column shows that already approved projects will be able to deliver 5.2 million barrels of oil a day (mmbpd). Additional projects to deliver another 3.8 mmbpd are working towards approval. Both the industry and the Alberta government say they are planning for 5.0 mmbpd to be flowing out the taps by 2030, with more supply coming soon after.
For comparison, my chart shows the high-end and low-end of the IEA demand scenarios for the year 2035.
Lowest demand scenario
In the most hopeful IEA scenario, humanity limits climate change to two degrees Celsius—which is more than double warming so far. Two degrees is the threshold above which most climate scientists say an overheating climate becomes dire and dangerous for us.
As US President Obama warned in his acceptance speech last week, the "destructive power of a warming planet" is a growing threat that must be addressed.
In this scenario, the IEA says global demand for oil sands will be 3.3 mmbpd. Over a third of the 5.2 mmbpd the industry already has approval for, and is planning to produce, won't be economically viable.
In fact future demand can be met almost entirely with currently producing projects plus those in construction. About 90 per cent of projects already approved but not being built yet won't be needed.
Highest demand scenario
The IEA's most pessimistic scenario has humanity choosing a dirty energy path leading to a climate "catastrophe" of six degrees Celsius of global warming. As the IEA said when releasing their report: "Everybody, even the schoolchildren, knows this is a catastrophe for all of us." (See: Climate “catastrophe” of 6C dead ahead: IEA.)
But, even in this dystopian future of climate misery, the IEA says that only 4.6 mmbpd of tar sands oil will be economically viable. This is still well below the industry game plan of 5.0 mmbpd by 2030, rising to 6.0 mmbpd by 2035.
However you slice it, it is looking increasingly likely that demand for Alberta's oil sands will fall well short of even today's commitments. The endless growth scenario is looking more like a long walk on a short pier. Albertan's would be wise to protect themselves from this risk while they still can.
MIT agrees
A study by Massachusetts Institute of Technology (MIT) titled "Canada’s Bitumen Industry Under CO2 Constraints" backs up the notion that Alberta's oil sands will struggle to compete in a low-carbon future. Its conclusions are blunt:
"The niche for the oil sands industry seems fairly narrow and mostly involves hoping that climate policy will fail..."
"When there is substantial participation of developing countries in a climate policy there appears to be little role for Canadian oil sands..."
"… with CO2 emissions caps implemented worldwide, the Canadian bitumen production becomes essentially non-viable even with CCS technology."
The threat of over-capitalizing the industry leading to many billions in stranded assets and punishing debt burdens is real. For a glimpse of such a future the Albertans can just look across the border at what is happening to the US coal industry.
Fall of the king
As I wrote recently, King Coal is struggling to avoid sliding off just such a carbon cliff. Their plans for rapid growth have quickly morphed into collapse. (See: Rapid collapse of USA coal holds warning for tar sands.)
Major US coal companies have seen their stock prices get slashed in half this year. Billions in assets are being stranded or sold at pennies on the dollar. Credit ratings are plunging as debt load from boom time dreaming is weighing down balance sheets. Energy economists at the US government's Energy Information Administration (EIA) determined that US coal demand would virtually disappear under moderate climate policies. A modest and rising carbon price would see a 92 per cent decline in coal burning by 2035.
It is global warming, stupid
America's coal industry ignored the basic facts that climate change is real, it is dangerous and therefore carbon emissions will become ever more restricted and expensive in the future. 
Despite clear warnings from top energy economists, the American coal industry gambled big money on expansion plans even as they were plunging headlong into the low-carbon future. That hubris and swagger is now looking like a losing bet for both its shareholders and the coal communities.
Instead of taking the risk seriously and using the value in their resource to fund a graceful transition to a more sustainable future economy, the players on the stage shook their fists in defiance against the coming storm until it literally crashed over them.
The reality is that high-carbon fuels, no matter how abundant, face a very challenging economic future as climate change tightens its grip on our lives. Of all the forms of coping, in the end denial is the least successful.
For decades climate scientists have warned that climate change was coming and it would be nasty if we didn't act.
We didn't. In recent years more and more of the world's top energy economists are starting to warn in very stark language that the dirtiest of our fossil fuels are incompatible with a safe climate system.
We are facing a choice: either we leave the dirtiest fuels in the ground or we inject our climate system with so many "steroids" that increasingly chaotic and extreme weather will threaten our food supply, water supply and trillions of dollars in infrastructure.
The extreme weather we have experienced in recent years comes after just 0.8 C of warming. The IEA says our high carbon path will lead to nearly eight times that much—6.0 C of warming—during the lifetime of today's kids.
Yet even on that miserable path we don't need all the tar sands we have already approved.
Sell by expiry date
Perhaps, the game afoot in Alberta and Ottawa is to off-load on foreigners as much of our tar sands deposits and infrastructure as we can before the expiry date.
Or perhaps, like King Coal, dot-com investors and the recent Romney campaign, the people in charge are just too invested in the dream to accept any unpleasant reality that spoils their narrative. Perhaps Alberta and Ottawa really will fail to act on the clear and present danger. If so, we will all be forced to wait and watch as unpleasant reality crashes the party and we are left to pick up the pieces.
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(2) Comments
No-one is ever going to convince me, pipeline bursts and tanker spills, do not kill everything that dirty crud touches. That chemical laced Bitumen, is absolutely lethal.
BC is a province of avalanches, mudslides, rock slides, earthquakes, with three recent quakes. There are numerous forest fires. There are swift flooding rivers, that carry away homes and highways.
The seas going into Kitimat Port, are one of the most treacherous in the world. Kitimat as a Northern Port, has hurricane force wind warnings. There are waves 30 t0 50 feet high. There are rogue waves as high as a four story building. The channel narrow, the tankers massive, that have to do hairpin turns to get around them. It takes over three miles to stop, one of those behemoth tankers.
This foolish venture is totally brain dead.
There were three freighters, caught in one of BC's coast massive storms. One freighter put out a distress call. Their top load of logs was torn off by the storm. If the bottom load shifted, the ship would have capsized. It took hours for Search and Rescue, to reach that stricken ship in that storm. The other two freighters also lost their cargo, also torn off by the storm. They had to turn back and pray, to make safe harbor on BC's coast.
Therre is still a Ferry that sunk, that is still leaking fuel. No-one has bothered to clean that up either.There is still oil gathering on the rocks, from the Valdez spill 25 years ago. The Valdez spill is a teacup spill, compared for those huge dirty oil tankers.
We are brain dead, to permit Harper to stay on as P.M. The Federal election was fouled and dirtied, by the robo-call cheat. And, we all know who-dunnit.
The end is nigh--well not quite;I've just began to believe that a 747 jet liner will not land in my bedroom tonight(but what about tomorrow night??)--
NOW what to do about the Northern Gateway pipeline?
There is ongoing speculation about the real potential of the Bakken and shale oil resource discoveries ,worldwide. The U.S. are fairly certain that in a few years they will be net exporters of oil and gas.See the following two references and be bewildered.How might these resources affect us—maybe the Tar Sands will eventually be challenged by this new huge production potential(some say with less expensive and more desirable product )Note; Alberta also claim huge reserves of these shale oil deposits??—Where will it ALL TAKE US--remains to be seen.Of course Enbridge and Trans Canada will be building MANY pipelines to carry these new oil and gas products—to everywhere.!! Reference 1. a world outlook http://www.worldenergyoutlook.org/and 2. a Canadian outlook http://www.theglobeandmail.com/commentary/peak-oil-more-like-peak-canada/article5370334/-look at these and then ask yourself “what we in BC should do about the Northern Gateway pipeline project”?— Some suggestions for Enbridge; Yes the Enbridge Gang have an image problem; largely due to the mess created in the Michigan-Kalamazoo fiasco.—Most pipelines ,eventually, will have a leak incident....and with GOOD OPERATING PRACTICES the incident will be handled with little impact.The history making Kalamazoo incident was unfortunate for all parties—and this incident is causing Enbridge much hard work to gain public confidence. Yes ,BC residents are not yet ready to have Enbridge build a pipeline through very difficult mountainous route , then to ‘handoff’ the responsibility for marine transport in very large oil tankers as they wiggle their way through a 50 kilometer inlet waterway. Enbridge have ‘stuck’ steadfastly to this ‘bad plan’. Couple this with Enbridge’s inability to create an ‘operations safety’ image and they make it very difficult for ‘peasants’ like me to accept their ‘bad plan’! Yes ,there is a strong Provincial and Federal government desire for the pipeline operations REVENUE—and couple this a bit of BULLYING by Enbridge-- we might yet see the pipeline built. However the problems are mounting;1. the public negative stance remains—Enbridge likely don’t care much---BUT the politicians are getting nervous and ‘nervouser’!2.time is every ones enemy—the longer we wait—the sooner all this Bakken and shale oil bonanza factors into the outcome—how? As I see it ,after reading some of the articles referred to above---Enbridge ,though reluctantly, may say—enough already-‘we’re out of here’!---Enbridge are likely to benefit ‘hugely’ from these new oil and gas finds—they’ll be building pipelines to meet the continental demand... and the Northern Gateway loss may become but a blip on their balance sheets!3. Is there hope?—yes—but time may be an issue—so what to do – First, Enbridge needs to get busy and earn the public trust—I see a sign of hope –Al Monaco,new President and CEO,is making some good noises—he’s been quoted recently discussing the ‘possibility’ of moving ship loading out of Douglas Channel and to Prince Rupert—repeat—a ‘possibility’.And now MORE hopeful signs for Enbridge –see http://m.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/pq-makes-oily-mess-with-its-pipeline-rhetoric/article5398351/?service=mobile where the columnist tells us that ...”Al Monaco ,may be changing the ways of his company...tying executive bonuses to safety and security...” this is the signal that many have been waiting for—this guy has been listening and more importantly –he’s acting ! ! However the columnist also suggests that the Northern Gateway pipeline project ...looks doomed!—Many folks are saying the same thing—Yet hope remains, IF Mr. Monaco can quickly SHOW B.C. public the NEW ENBRIDGE--4.Convince the willing members of the Board to ‘have an OPERATIONS SAFETY EPIPHANY’(what to do with the unwilling??)—First ,get rid of those fluffy full page color ads and spend the money elsewhere--get the senior technical and management (including Board members) on the road (local gatherings,major and local media,etc..)to show us that your ‘operators’ know their stuff—we, the public,will judge the QUALITY of your team—Romney and Obama went in front of a world audience to show themselves—now you SHOW US THE BEEF!!5.show us your NEW ORGANIZATION– I suggest that you include CORPORATE TECHNICAL OFFICER,(CTO ) who will be responsible to keep you and the Board apprised of system conditions –and show how will the Board be held ACCOUNTABLE for directing and funding system needs and sound practices, in a timely manner...don’t just follow operating and technical standards—SET THE STANDARDS!6. In spite of all the naysayers—there are millions of miles of pipelines and millions more will be built—let BC enjoy the benefits(yes there are risks)—let Enbridge show us how they intend to MINIMIZE the risks!—Let’s get on with the project ‘SMARTLY’--and together,eventually, we should enjoy the benefits of this controversial project..Simple as that.