IEA: Canada's oil sands set for rebound

MONTREAL, Nov. 13 (UPI) -- Canada's oil-sands industry, hampered by the global economic crisis, could bounce back if it can overcome key economic and environmental challenges, according to the International Energy Agency.

In its 2009 World Energy Outlook released Tuesday, the IEA predicted long-term growth in the sector despite the recent cancellation of a number of projects and weaker oil prices.

While Canadian oil-sands production had doubled to 1.2 million barrels a day from 2000 to 2008, the IEA noted that $150 billion in new projects that would have added 1.7 million barrels of daily production have been suspended or canceled due to the financial crisis.

The new economic challenges come on top of "fresh worries" about the environmental impact of the oil-sands industry.

"In today's uncertain regulatory framework, this is creating worries for investors," it says.

The report notes that Canada's oil-sands sector faces technical, economic and environmental challenges amid the global financial crisis and efforts to limit greenhouse gas emissions.

The report notes that "many' countries," particularly the United States and China, will be looking for a bigger share of oil-sands output in order to reduce dependence on Persian Gulf oil.

Marvin Odum, president of Shell's U.S. division, told the Houston Chronicle Thursday the company is planning a 100,000-barrel-per-day expansion in Canada's oil sands.

"Providing that current challenges can be overcome, Canadian oil sands have the potential to make a significantly greater contribution to global energy security for decades ahead by increasing the diversity of supply," the report says.

But as an industry whose profitability currently relies on oil prices of $75 to $80 a barrel, the IEA said the outlook for oil sands in the medium term is "less certain."

The group predicts oil-sands production rising to 2.1 million barrels per day in 2015 and 3.9 million barrels per day by 2030.

But a joint report by the London-based Center for Global Energy Studies, headed by former Saudi Oil Minister Sheik Ahmed Zaki Yamani, along with Calgary-based Geopolitics Central, predicts oil-sands growth at 2.4 million barrels per day to 3.1 million barrels per day in 2020, depending on economic and geopolitical factors.

"We still feel there's a lot of potential for negative developments in the political realm," Geopolitics President Vincent Lauerman told the Calgary Herald, admitting that the joint report's outlook for Canada's oil sands is not quite as optimistic as the IEA study.

"A lot of studies tend to focus on economic and environmental considerations and ignore geopolitical factors. It all depends on what type of world we're living in," Lauerman said, noting that it's not possible to predict what impact potential power struggles among nations could have on oil-sands development.