U.S. Refiners Are Betting Over $50 Billion On An Expected Increase In Tar Sands Oil (Part 2 of 3)
Submitted by EnergyTechStocks.com
Oil refiners are betting more than $50 billion that imports to the U.S. of Canadian tar sands oil will increase dramatically over the next few years, though whether that increase will occur will be subject to political crosswinds in Washington and Ottawa, as well as to potential shortages of labor and materiel.
According to a new report by the Environmental Integrity Project in Washington, two thirds of U.S. refiners’ planned capacity additions are designed to refine the thick, high-sulfur-content bitumen that can be separated from the sand when heated. According to the report, some $53 billion has been committed by a number of refiners to build, expand or convert refineries specifically for tar sands refining, which is more expensive and technologically challenging than crude oil refining. Combined, these planned additions are equal to the construction of 16 new refineries in the U.S., the report claims.
A number of recognizable names are on the report’s list of refiners gearing up to expand or convert existing refineries, including Murphy Oil, Marathon Petroleum, ConocoPhilips, BP and Husky Oil. A couple of newcomers, Hyperion Refining and Northwest Refining, want to build new refineries.
Whether enough tar sands oil will flow into the U.S. to justify refiners’ long-term expenditures remains to be seen. Eric Schaeffer, executive director of the Environmental Integrity Project, told reporters when his group’s report was released, “Let’s hope we can eventually walk away from tar sands.” A battle is already raging over whether tar sands oil from Canada qualifies under Section 526 in the U.S.’s 2007 energy bill, which bars federal agencies from buying alternative transportation fuels that generate higher greenhouse gas emissions than conventional fuel.
Meanwhile, experts have questioned whether tar sands production could be limited by natural gas availability, as well as by a shortage of skilled workers. The natural gas problem could become acute if, as some expect, it starts to take so much natural gas to separate the oil from the sand that Canada doesn’t have enough natural gas left to directly export to the U.S. With a global shortage of natural gas expected to bite in a couple of years – after the U.S. has already maxed out on the “tight” gas formations now being exploited – The U.S.’s need for more imported oil from Canada could run headlong into its need for imported natural gas from Canada.
It is far more likely that refiners’ bets will pay off if an answer can be found to the greenhouse gas emissions (GHG) problem caused by tar sands mining. Thus, as we’ll see tomorrow in Part 3, investors may reap the benefits of crash spending to develop carbon capture and sequestration (CCS) technology.
