Canadian Heavy Oil Industry

Question

Discuss the economic, environmental effects and social impact of Canada’s heavy oil industry on Western Canada. 
Note: Evenly distribute the content between
a)Economic effects & impact
b)Environmental effects & Impact
c)Social effects & Impact

Answer

Canadian Heavy Oil Industry

Contents

Introduction. 2

Environmental Effects and Impacts. 4

Economic effects and Impacts. 9

References. 12

Introduction

Canada’s petroleum industry is a major driver of the North American country’s economy. The country is the fifth-largest oil producer in the world and has the third-largest oil reserves. Of its total production, about 60% is made up of upgraded and non-upgraded bitumen with the remaining percentage comprising light crude, heavy crude, and natural gas condensate (Frehner, 2011). Canada is one of the largest oil exporters in the world, supplying about 40% of America’s oil (Frehner, 2012). Notably, a huge portion of its exports supplied to the eastern side of Canada comes from the western part of the country. Most of the oil deposits are located in Western Canada especially in Alberta. There are other major reservoirs in Lloydminster and Saskatchewan (Levant, 2011).

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Oil exploration is a highly scientific undertaking that entails the application of physics and chemistry concepts. This analysis will focus on heavy crude oil which is on the opposite spectrum of light crude. The difference between the two is based on weight, viscosity and chemical composition. The weight of oil is measured using the standard (American Petroleum Institute) API scale. With a standard water API of ten degrees, light oils will have an API that is higher than ten while heavier oils will have an API between eight and ten (Kasoff, 2007).

Heavy oils are characterized by high densities, high viscosity and specific gravity. Its molecular composition is also higher which makes it harder to flow in normal conditions. Oil sands are loose deposits containing a mixture of sand, clay and concentrated petroleum in the form of bitumen. Canada has one of the highest deposits of oil sands. Bitumen is characterized as unconventional oil due to its hydrocarbon composition (Kasoff, 2007). Of great importance is that heavy oils are different from bitumen and oil sands due to the degree of decomposition and chemical action by bacteria.

With an understanding of types of oils, this paper will particularly focus on the economic, environmental and social impact that the heavy oil industry has had on Western Canada (Sakurada and Tamakichi, 2003). Due to the concentration of these deposits in the western region, the effects have been extremely notable and differentiable. Undoubtedly, the oil industry will have varying effects at different stages of extraction, processing and distribution. National and global politics have been major factors in the oil industry with economics further fueling the operation. Over centuries, a combination of political and economic factors on national and international levels has driven the industry to both growth and destruction. Hence, whilethe industryhas grown tremendously, certain countries have remained at warfollowing oilpolitics.

Even with an extremely sophisticated energy and oil policy, Canada has not escaped the growing and evolving effects of heavy oils. Furthermore, with a concentration on light oils that has spanned for centuries all over the world, the shift to heavy oils is met with a different and new form of challenges and strengths. Basically, the high processing and production cost and infrastructure required for heavy oils has kept its price lower than light oils for years. However, with recent advancements and research coupled with a growing personnel specialization in heavy oils, the industry continues to shift to heavy oils. This analysis will study these effects and impacts on social,environmentaland economic factors with a concentration on the present andprojected periods. Even so, references will be made to the historicaldevelopment of the industry in Canada.

Environmental Effects and Impacts

            Environmental degradation is mostly experienced at extraction, processing or transportation. Oil sands are rich in hydrocarbons, carbon gases and sulfur even at the most basic forms. Environmental degradation has recorded the highest global rate in the present time. This is because of the constant need for energy efficiency and exploration. Canada’s reservoir has an estimated 170bilionbarrels of bitumen in the Alberta province (Frehner, 2011). The method of extraction poses the first environmental hazard. Unconventional and heavy oils are extracted using surfacemining where the deposit is closer to the surfaceor drilling when the deposits are more than seventy five meters deep. As the deposits occupy close to 140,000 square meters, the extent of exploration will include an extremely large portion of land. As the deposits already take 20% of Alberta’s land space, the already leased land is a huge portion of the entire province (Frehner, 2011). As more land is acquired and prepared for mining, this expands the environmental effects and the economic stability especially of the inhabitants.

            Surface exploration has destroyed the aesthetic appearance of the land as well as the top layer ecosystem. Crucial-microorganisms and small reptiles face endangerment while flora is completely wiped out. Even so,whilesurface methods may be quite harmless, it is the in situ drilling that poses more challenges (Wetterstein, 1997). Heavy oil drilling has led to the modification of equipmenttocreate huge andpowerfulmachines that can penetrate the earth in search of these deposits. As a heavy producer, Canada has some of the most recent and exquisite mining and drilling technologies. These are acquired through local construction or in combination with other international providers such as China, Japan and the US. At its worst, heavy oil drilling has been known to offset manmade seismic disruptions and earthquakes. The mines of Alberta have experienced a few seismic disruption but none have been intense or severe. However, researchers warn that continuous alterations in seismic balance could have huge negative effects. In the US alone, several high risk areas such as Texas, Oklahoma and Colorado have been hit by mild man made earthquakes that grew extremely frequent in a very short time (Xiao, 2015). In addition, this creates weak lines or recreates fault lines that promote further movement of tectonic plates and magma. Since Canada is also a big miner of natural gases, open holes has always been a problem in this region since exploration began. In the early years, holes that emitted gases were left open before they were finally covered in years after. Over time, geophysicists warn that they willbe completely unable toaccurately predict or study the land in regards to seismic activity and more so to oil mining. Already, the land is assuming completely new characteristics and response mechanisms that need new studying and understanding. Seismic activity continues to be more destructive to life on the surface as well as resources and equipment (Shojai, 1995). Wildlife patterns of migration, nutrition or mating have been disrupted as well.

            Another huge environmental impact has been the clearing of boreal forests as more land is leased for drilling and mining. With morethan 80,000 square meters leased in the last three decades, the boreal wet land has been greatly compromised with much of the et ecosystembeing completely destroyed (Kasoff, 2007). The main reason for this impact has beenthe pooradministration orregulations togovern companies that drill in these areas. Dominantly,these companies have continued to operate with complete ignorance of the forest ecosystemorthe aboriginal culture and preservationthat has sustained the ecosystemfor centuries. In the past,many countries have acquired eases without properenvironmental protection strategies (Garvey, 1972). Consequently,and reclamation has been highly unsuccessfuldue to the expansive damage and continuing leasing ofmore fields. Currently, companies are required todeposit insurance tocover for future and unpredicted environmentaland human damages. However,this regulation has come in too late at a point here it bears no potential of improving this damage in the long term. Oil mining activities have come into constant conflict with aboriginal people and culture that are otherwise known as protectors of the land. Only until recently has the importance and place of aboriginal culture been appreciated in conserving the environment. Through a harmonious relationship, aboriginal people in Canada and other countries are truly the only people who have mastered the nature and ecosystems of their regions. They are able to use these resources without depleting or tipping the balance scale. These conflicts have derailed oil drilling as well as aboriginal activities (Garvey, 1972). The Peat land vegetation has also been majorly wiped out along with the wildlife that occupied this region.

            The third environmental effect has been the high carbon emission during the intensive production process of heavy oils. The government of Canada outlines the Carbon emission from oils ands and heavy oils is about 4.5 times that produced for light oils. Once a member of the Kyoto Protocol, Canada has since backed down from this agreement and remained very dominant in regards to international climate change and environmental conservation. As an industrialized country, the carbon and gas emission rate of this country is extremely high and continues to grow following the concentration and emphasis on industrial development.  The Canadian carbon gas emission has a long-term negative effect in the entire North American region. Since the US and Mexico are both quite industrialized, these countries have fairly damaged their ozone and atmospheric layer exposing the people to further health dangers. Consequently, the hydrological cycle has been moderately contaminated and affected. This has influenced drastic climatic changes that progressively have a chain reaction on the world’s water cycle. Currently, the biggest portion of greenhouse gases in Canada comes from the Alberta fields. This is largely due to the government and industrial rush into heavy oil mining without proper research and management strategies. As a result, current production outperforms the strategies and systems of environmental protection and preservation (Ross, 2012). Furthermore, this also poses great pressure on the financial capacity of these companies to effectively fulfill all the standards. As a result, while oil sands have expanded and heavy oil production strengthened, core government and energy policies have failed to level up to this development. Eventually, the entire industry is bound to incapacitate itself through its own unsustainable operations. The Alberta Energy Regulator is currently working to develop better management systems that will clean up the mining landscape and cap the waste products produced.

            Water is used in extremely high amounts in heavy oilextraction and processing. With an estimated 600,000,000 cubic meters of water every year, such high amounts of water are bound tocause shockand a gapin the water system (Frehner, 2011). Often pumped from the Athabasca River,this constant water usehas had a negative effect on the aquatic life supported by these water bodies. Aquatic populations have drastically dropped with certain species going extinct in these regions. Water is used toreduce the viscosity of these oils and make it more separable. Waste water is highly toxiceven when it is deposited in aquifers. Over time,this waste water has seeped intothe ground where itcontaminates the soilor otherwise re-enters the hydrologicalcycle. Te tailings ponds are also by products of this waste water. This waste contains highly toxic products such as naphthenic acids and hydrocarbons in solid,liquid and gaseous forms. Currently,Alberta has over 700 billion liters oftoxic tailing materials in the area (Frehner, 2012).These tailings are expected togroweven more rapidly duetothe rapid expansion ofheavy oildrilling. Sadly, not even one tailing has been reclaimed since mining began. The toxicity of the Alberta region is extremely high even through the tailings are stationary. Even so, leaks and evaporations are inevitable whichraises moreconcern on the safety of its occupants. Furthermore,most people in Western Canada do not know the extent ofthese tailings and their effects over time. The method being developed suggests depositing these tailings in pits and covering them with fresh water. This method has not been tried and is highly unproven. Without a doubt,it is worryingto see that the heavy oil industry continues to growamidst environmental hazards with the supportofthe government and energy regulators at the expense of the environment and welfare of the population (Genova and Toyin, 2005). The impact ofthiskind of negligence is one that spansacross health and sociallevels. In extension,it represents the moral deterioration and preservation of life in preference tofinancialand status gratification. In addition, it represents the lackof responsibility and sense of ownership by the government as wellas the populations.

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            Heavy oil projects continue to get approved and funded in Canada. Hopefully,as the government continues to support this industry,it may also tighten the regulations that support environmentalprotection (Conrad, 1999). Companies shouldbe evaluated on a common standard that allows all stakeholders to include social and environmental responsibilities in their operation. Firstly, research is extremely important in determining the geological processes of the region and its response toheavy oil and oilsands exploration. Technologicaladvancements which continue tohave seismic effects on the land must be properly integrated to minimize the risk of earthquakes and damage. Funding should alsobe directed towards environmental preservation during the approval ofeach project (Levant, 2011). Finally,the aboriginalculture and populations have to be given their due place and adequately consulted through every step of the process.

Economic effects and Impacts

            The economic dimension that drives the oil industry comprises a combination of finance, politics and energy policies. The oilindustry is a vital part of Canada’s economy and by extension, that of North America at large. With close tohalf a million people depending directly and indirectly on this industry, this sector provides continuous financial security to a great number of people. As heavy oil and oil sand exploration continues to expand, even more professionals and skilled personnel are being trained and assimilated intothis sector. It is an economically and professionally growing sector that is equally rewarding. With an estimated 10 billion barrels produced, thisrepresents the immense potentialof the complete oil resource in Western Canada (Levant, 2011). Even though Canada is one of the leading developers of renewable energy sources, oil energy is still going to be used for many years. Growing demand will continue to sustain oil drilling in the country with a specific concentration on heavy oils. With a concentration on making heavy oils cost effective, technology improvement has been at the core focus for this industry. Extreme privatization of the industry has allowed it to grow rapidly and obtain funds from multinational partners. These private companies operate in an open and free market forum where they are allowed to make their own decisions and adjustments under the main regulation by legal framework controlling this industry.

            One of the effects of this industry is the ability to integrate governments of Canada, Alberta and Saskatchewan to raise close to $2 billion to support research and environmental protection in the western region (Xiao, 2015). With this kind of leverage and credibility, projects such as Alberta Carbon Trunk have remained independent and sustainable. These governments have developed the ability to combine aspects of their economic compositions in this industry and other supporting industries.

Further development of heavy oil has alsosupported the technologicalsector which is the basis of this growing sector. Research has allowed formore efficient equipment that reduces steam standards especially for deep-seated deposits. Separation of this crude oilhas also been modified toobtain higher grades in different varieties that willfetch good prices and equally compete with the light crude sector (Xiao, 2015). Common technologies include gasification systems which arecompletely independent from the light crude and natural gas separation systems. Canada’s economy has been strengthened by this industry to be able to support even more industries. The manufacturing,processing and financialsectors are direct benefactors ofheavy oil development. Construction and transport infrastructure has alsobeen made morecost effective and is now sourced within the country.

More than half of the oil drilled from western Canada is exported tothe international markets, with most of it going to the US. This market is accessible both by proximity, logistics and regional economicalcooperation that reduces the taxes andcosts oftrade between countries (Ross, 2012). Canada is therefore abletomake consistent revenue fromthis exportation. The manufacturing industry has allowed the country to develop a sort of competitive advantage in Northern America since it is cheaper than the US and slightly more expensive than Mexico. Quality production has become a characteristic of Canada’s manufacturing industry all because of the accessibility to energy. The integration of local governments has ensured that while the Western region is the main contribute, the Eastern region also benefits from this industry. Notably, Canada has one of the most well distributed resources in Northern America which caters comfortably to its average size population. Economic empowerment is highly plausible for most of the population owing to the independence and automation of most industries as a result of efficient energy systems and transparent financial structures. Partnering with European and Asian leaders in the heavy oil industry has further directed funds to Canada and further distribution in international oil economics.

References

Conrad, N. (1999).Reading the Entrails: An Alberta Eco-history. Calgary: University of Calgary Press.

Wetterstein, P.(1997). Harm to the Environment: The Right to Compensation and the Assessment of Damages. Oxford: Clarendon Press.

Frehner, B. (2011). Finding Oil: The Nature of Petroleum Geology 1859-1920. Lincoln: University of Nebraska Press.

Garvey, G. (1972). Energy, Ecology, Economy. New York: W.W. Norton.

Genova, A.andToyin F. (2005). The Politics of the Global Oil Industry: An Introduction. Westport: Praeger.

Herald, D. (2000). The Politics of Oil-Producer Cooperation. Boulder: Westview Press.

Kasoff, M. (2007). East meets West in the Canadian Oil Sands. American Review of Canadian Studies, 37(2), 18-37.

Levant, E. (2011). Ethical Oil: The Case for Canada’s Oil Sands. Toronto: McClelland and Stewart.

Ross, M. (2012). The Oil Cause: How Petroleum Wealth Shapes the Development of Nations. Princeton: Princeton University Press.

Sakurada, D. and Takamichi, M. (2003). State Power and Mutinational Oil Corporations: The Political Economy of Market Intervention in Canada and Japan.International Journal, 58(2), 1-14.

Shojai, S. (1995). The New Global Oil Market: Understanding Energy Issues in the Word Economy. Westport: Praeger Publishers.

Xiao, A. (2015). The Geopolitics of Oil Prices: Analyzing the Effects of Production and Investment on Global Oil Prices. Harvard International Review, 36(4), 102-158.

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