The Carbon Bubble by Jeff Rubin

Author:Jeff Rubin [Rubin, Jeff]
Language: eng
Format: epub
ISBN: 978-0-345-81471-5
Publisher: Random House of Canada
Published: 2015-05-11T16:00:00+00:00

THE CHEAPEST OIL IN THE WORLD, WITH THE HIGHEST COSTS

Before his death in September 2012, Peter Lougheed made an interesting and unexpected return to the public eye. In his day, Lougheed was a force to be reckoned with—as premier of Alberta from 1971 to 1985; as the founder of Canada’s longest-running political dynasty (Conservatives have ruled the province for more than forty years and counting); and as the “voice of the new West,” willing and eager to butt heads with Pierre Trudeau over the controversial National Energy Program in the 1980s.

But by 2008, Lougheed was a distant memory for most Albertans—at least until he started talking publicly about the province’s resources. The eighty-year-old former premier was questioning the torrid pace of oil sands development, foreign ownership of the resource and the outsourcing of refinery jobs. His overarching message was blunt: “I … feel strongly that the public policy of Alberta is wrong, and that they’re trying to do too much, too quickly … We should have a more orderly development.”12

Lougheed’s public plea was a poignant reminder that those who have lived through the province’s resource cycles worry most about its oil sands–dependent future. And with very good reason. Few if any of the world’s oil resources are as dependent on sky-high oil prices as Alberta’s oil sands. Given the size of the resource—an estimated 170 billion barrels of bitumen—the growth potential is enormous. Unlike the tight oil fracked from shale formations in the Bakken or Eagle Ford, the oil sands are so vast that producers don’t have to worry about rapid depletion rates. Add Alberta’s modest royalty rates and industry-friendly regulatory environment to the region’s geological endowments and you have an ideal location for the global oil industry to invest its money.13

Alberta was expecting to attract the lion’s share of global industry spending to its reserves. Of the $1.1 trillion in planned capital spending on high-cost oil projects over the next decade, nearly 40 percent was slated for the oil sands. The nearly $400 billion to be spent in Alberta was twice what the runner-up, the US Gulf Coast, would be getting, and roughly four times what’s earmarked for offshore Brazil.14

But there’s a catch. Every single cent of that planned capital spending is dependent on high oil prices. As noted in chapter 3, oil sands success needs oil prices higher than $80 a barrel—anything less and the investment just doesn’t make economic sense. The same holds true for other unconventional oil sources around the world, but thanks to Alberta’s overreliance on oil for its long-term growth, the province will feel any pullback more than most. Capital spending won’t go ahead, the huge planned production increases won’t materialize—and the royalty revenues that the Alberta government is counting on, if not already spending, will never accrue.

This scenario was, in fact, playing out even well before that fateful OPEC meeting in November 2014. Total E&P Canada, the Canadian arm of French oil giant Total SA, along with its partners Suncor Energy and Occidental

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