During the time I spent working for Berlin-based Zeit Online this past summer, my colleagues asked for a piece explaining Canada’s oilsands for Zeit’s German audience.
Admittedly, I didn’t quite know where to start. But, after realizing that many of my colleagues were unaware of various major events in the industry, I knew which points were important to discuss. And as Germany is currently quite concerned about relying on Russia for energy imports, this seemed an obvious way into the subject.
The piece below first appeared on Zeit Online on September 26, 2014, translated into German.
Since then, it appears that the European Union will likely be dropping a proposal to label Canadian oilsands oil as environmentally unfriendly, which would open the door to further imports.
Canada: Europe’s next oil well?
Trouble with Putin? Concerned about Russia as a viable source of energy? Don’t worry, there’s always Canada. At least that’s what Joe Oliver says. He’s the minister of finance in Ottawa, and he has something to sell.
“Canada is a reliable, responsible energy supplier,” Oliver said during a speech in London in June 2014.
“We could become an energy source to our European friends — the kind of friend and partner you can rely on.”
The European friends seem to have heard that message. Germany’s ambassador to Canada, Werner Wnendt, told ZEIT ONLINE, “I think it would be very wise if, with a long-term perspective, Canada and Europe would look at a partnership.”
A spokesperson for Canada’s natural resources ministry said in an email that Canada is not negotiating an energy deal with the European Union.
With trouble in Eastern Europe and the Middle East, Canada is certainly eager to promote itself as an alternative source of oil to the continent, judging by how often high-ranking politicians show up in Europe to talk about it. And as Canada is a stable democratic oil-producing country, Europe could certainly consider a trade expansion.
Of course, first the oil would have to get across the Atlantic.
Pipeline problems
Canada’s oil industry has a problem right now: There’s a lot of potential supply, but it’s sitting in the centre of the country and needs to get out. Right now most major pipelines lead south into the United States. About 3.3 million barrels per day flow through these lines – about 4.4 per cent of world production.
It hasn’t happened yet, but if oil companies want to expand production in order to supply Europe, soon enough, they will reach the capacity of the existing lines. The Canadian Association of Pipeline Producers estimates that Canada faces between three and five years of constrained pipeline capacity, given the current status of various proposed pipeline projects.
The alternative is shipping it by rail. However, the ever-growing amount of oil travelling byrail makes many Canadians nervous, particularly after a train carrying American oil derailed in the village of Lac-Mégantic, Quebec in the summer of 2013. The resulting explosion and fire destroyed much of the village’s downtown and killed 47 people.
Pipelines are the preferred alternative for oil companies. There are problems here, too, though. A recent investigation by the Canadian news outlet Global News found that there were on average two pipeline spills per day over the last 37 years in the province of Alberta alone, although most were quite small.
Public worry about spills is partly to blame for many stalled pipeline projects. There are a lot of proposals – from Keystone XL, which will travel south through the U.S., to Northern Gateway, which would cross the Rocky Mountains west towards the Pacific, and Energy East, which would bring Alberta crude to the Atlantic coast.
So far, though, none of these projects has been fully approved or started construction, partly because of vocal public opposition (though many Canadians also support pipeline projects).
Then, of course, there is the oil itself.
The oilsands
Almost all of the growth in Canadian oil production over the past decade has come from the oilsands – a huge but mostly remote region in the province of Alberta. The oil there is extremely thick and viscous and is mixed with sand. It’s so thick it won’t flow through a pipe without the addition of a diluent.
Getting the bitumen out of the ground is not only expensive compared to conventional oil; it can be extremely damaging to the environment. Much of the oil sands are not drilled, but mined – scooping the bituminous sand from the surface of the earth in huge open-pit mines, which means forests or other vegetation have to be cleared to make room.
The oil is then separated from the sand by heating the material and mixing it with water. Residual dirty water, contaminated with oil and other chemicals, is pumped into large tailings ponds and left to settle.
The Alberta government estimates that 763.37 square kilometers of land are disturbed or cleared due to oilsands development.
That’s a little bit bigger than the surface area of Hamburg.
But not all of the oilsands are mined in this way. Much of it is drilled from deep in the ground. Steam and chemicals are pumped underground to heat and liquefy the oil, which is then pumped out of the ground.
This means less surface disturbance than digging a huge open-pit mine, but there are still some problems. In some cases, too much pressure underground or cracks in the rock has caused oil or other chemicals to leak out uncontrolled – like a series of spills in operations owned by the company Canada Natural Resources Limited, which have been leaking for over a year. Nearly 1.2 million litres of bitumen have spilled so far, and there is no end in sight.
So why are Canadian politicians and industry so eager to promote the oil sands?
In short, it’s big business.
Jobs in the oilpatch
According to numbers from Canada’s national statistical agency, oil extraction accounted for about 6 per cent of national GDP in May 2014. That’s significantly more than Canada’s agriculture, forestry and fishery sectors, but less than the construction industry.
There were nearly 67,000 jobs in the oil and gas industry in 2013, according to Statistics Canada.
But it’s in the oil-producing province of Alberta where the revenue has a big impact.
There, the government receives payments, called “royalties,” from companies for the right to exploit the province’s oil and bitumen resources. This amounts to a lot of money – 5.48 billion Canadian dollars (3.76 billion Euro) or 14 per cent of the province’s total revenues in 2013. That’s without accounting for corporate taxes or revenue from land sales.
And 59,000 jobs in Alberta depend on oil and gas, according to Statistics Canada.
So Canada’s oil sector is likely to keep growing and the country is going to keep searching for new markets. Canadian oil has already begun to arrive on European shores – 8.5 million barrels in 2013, says Canada’s natural resources ministry.
If a pipeline to the Atlantic is built, you can expect that number to increase.
Tune in to Corus radio Tuesday evening, Oct. 7 for a two-hour special on how to approach Canada’s bitumen riches: “Canadians Talk…The Oil Sands. At what cost?”
Vancouver: 4 p.m. – 6 p.m. on CKNW AM 980
Edmonton: 5 p.m. – 7 p.m. 630 CHED
Calgary: 5 p.m. – 7 p.m. Newstalk 770
Winnipeg: 6 p.m. – 8 p.m. 680 CJOB
Toronto: 7 p.m. – 9 p.m. on AM 640
Hamilton: 7 p.m. – 9 p.m. on AM900 CHML
London: 7 p.m. – 9 p.m. on AM 980
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