The FUTURE of OIL (A straight story of Canadian Oil Sands)

Additional Praise for The FUTURE of OIL

"If you real y want to understand the oil sands business—warts and all—look no further.

Sanjay Patel has compiled the definitive myth-buster on the industry. Al the facts are in

here. But, more importantly, Sanjay has tackled the big-ticket issues—like the impact of

the oil sands on global warming—head on and without apology. Sanjay rises above all the

noise and the hypocrisy to put oil sands into perspective. It’s not a perfect business; far from

it. But, Sanjay makes the case that the oil sands industry can lift its game significantly. We

can help to meet the world’s growing energy needs—and we can do it cleanly. That’s the

bottom-line message in this first class book."

—NEIL CAMARTA

"The Alberta oil sands today stands at the nexus of several prominent and controversial

debates. Every day there appear headlines about dirty oil or bitumen pipelines. Terms like

dilbit have moved from the lexicon of industry experts and technology wonks to environ-

mental blogs and the daily paper. In the midst of a storm of outrage and complaint a voice of

calm is needed to inject facts and to connect the dots between the issues and the processes,

history and technologies involved. Sanjay Patel has done a remarkable job of maintaining a

reasoned and balanced approach while bringing the depth of insight that only comes from

immersion in the industry. In particular in the areas relating to GHG emissions he does an

excellent job of acknowledging the voices and positions of opposing sides without defensive-

ness. From his opening sentence: "We have known for a long time that our use of oil is

irresponsible and unsustainable." the reader knows this is not a one-sided industry position

statement. A welcome contribution to the discus ion that anyone who wants to understand

what goes on behind the headlines and polemics must read. This book should be required

reading for anyone who cares about the energy/environment chal enge we face and who

values informed dialogue."

—RICHARD ADAMSON, MANAGING DIRECTOR,

CARBON MANAGEMENT CANADA,

NETWORK OF CENTRES OF EXCELLENCE

"Energy, environment and the oil sands are not issues for policy makers, business people,

engineers or environmentalist alone, ordinary people need to understand the pros and cons

and to think of the chal enges as their own and take ownership of the solutions. Sanjay

Patel provides a logical and lucid articulation of the issues that helps the specialist and the

amateur alike gain the key knowledge in a superior manner."

—EDDY ISAACS, CEO, ALBERTA INNOVATES,

ENERGY AND ENVIRONMENT SOLUTIONS

"Sanjay provides a data- and information-rich look at the crucial, growing Canadian Oil

Sands industry and its place in the world's energy future. This is a must-read for anyone

interested in fact-based decisions on the oil sands, including policy makers, investors,

environmentalists, the media and oil industry professionals interested in the oil sands."

—MIKE BUSHMAN, AUTHOR AND RETIRED GLOBAL POLICY

AND COMMUNICATIONS VICE PRESIDENT FOR

SUSTAINABILITY SERVICE COMPANY NALCO

"In any debate, polarization of opinion and viewpoint is a trait that is all too often fol owed and espoused. Your balanced and informed opinion must be commended and

appreciated. You have taken a complex topic and distilled it down to laymen terms

making it understandable and enlightening. I would hope that people on both sides of the

Ethical Oil vs Dirty Oil; the energy vs the environment debate, environmentalist or

industrialist, wil take the time to understand the overall complexity they each have a stake

in solving. More importantly, I would urge anyone, who is seeking an informed approach

to these issues to take the time to read this book. It is in OUR best interests for OUR long

term survival and way of life."

—ELTON ASH, REGIONAL EXECUTIVE VICE PRESIDENT,

RE/MAX OF WESTERN CANADA (1998), LLC

"Sanjay provides a fact-rich, in-depth look at the Canadian Oil Sands. The Future of Oil

touches on all the sensitive concerns about the Canadian Oil Sands through actuality and

truth and can be understood by both, individuals in the industry and those not directly in

it, wanting to learn more. A look at our Canadian energy future avant-garde."

— MUNAF SAMJI, CEO & PUBLISHER,

THE OIL & GAS MAGAZINE

The Future of Oil is a wel researched, thoughtful study of the oil sands industry in Alberta. The detail and insight in the writing and research makes this a must read book.

—GARTH ROBERTS,

FRONTLINE LEADERSHIP EXPERT AND AUTHOR

The

FUTURE

of OIL

The

FUTURE

of OIL

A Straight Story

of the Canadian Oil Sands

SANJAY PATEL

Copyright © 2012 by SANJAY PATEL

Published by CreatiVentures Publishing

All rights reserved. The use of any part of this book reproduced, transmitted in any form or

by any means, electronic, mechanical, photocopying, recording, or otherwise, or stored in a

retrieval system, without the prior written permission of the copyright owner is an

infringement of the copyright law.

Patel, Sanjay

The Future of Oil: A Straight Story of the Canadian Oil Sands/Sanjay Patel

ISBN: 9788188360192 (Hardcover)

www.futureofoil.ca

Printed and bound in Canada by Friesens, Altona, MB, Canada

Cover Design by Amortech Design Labs, Calgary, AB, Canada

Book Design and Typesetting by www.wordzworth.com

Limit of Liability/Disclaimer of Warranty: This book contains information obtained from

highly regarded sources. Reasonable efforts have been made to publish reliable data and

information, but the author and publisher cannot assume responsibility for the validity of all

materials or the consequence of their use. The advice and strategies contained herein may

not be suitable for your situation. You should consult with a professional where

appropriate. The author has attempted to trace the copyright holders of all material

reproduced in this publication. If any copyright material has not been acknowledged please

write and let us know so we may rectify in any future reprint.

For information on corporate discount for book purchase or any other sales inquiry, please

visit www.futureofoil.ca

Published Simultaneously in India by CreatiVentures Publishing

CreatiVentures Publishing

C-22, Karan Gharonda, Sainikwadi,

Pune – 411014, Maharashtra, INDIA

www.creativentures.in

I wrote this book for Shri. K.K. Bagadia

My late father, who inspired me to do things

that I thought were beyond my reach

Contents

List of Figures

iii

List of Tables

v

Acronyms

vi

Acknowledgements

ix

Introduction

xi

Chapter 1

Our Energy Needs and the Growing Importance of

Unconventional Oil

1

Chapter 2

The Future of the Canadian Oil Sands

39

Chapter 3

History of the Canadian Oil Sands

59

Chapter 4

A Brief Portrait of the Canadian Oil Sands

75

Chapter 5

GHG Emissions and the Dirty Oil Disgrace

81

Chapter 6

Bitumen or Biodiversity: A False Dichotomy

103

Chapter 7

The Truth about the Athabasca River and Its Fragile

Ecosystem

115

Chapter 8

Tailings Ponds: Image and Reality

133

Chapter 9

The Real and Perceived Impacts of Oil Sands

Development on Human Health

143

Chapter 10 The Pipeline Protest

163

Chapter 11 Oil Sands Technologies: Past, Present, and Future

191

Chapter 12 The Casualties of a Propaganda War

213

Conclusion

223

Bibliography

227

Notes

232

i

List of Figures

Figure 1.1. WTI Crude Oil Price

5

Figure 1.2.

Many Possible Energy Options to Power Vehicles

10

Figure 1.3a.

Consumption of Energy (2010)

15

Figure 1.3b. Consumption Oil (2011)*

15

Figure 1.4.

Relationship Between GDP & Oil Consumption (U.S.)

16

Figure 1.5.

Bel Curve

19

Figure 1.6.

World Oil Discovery

20

Figure 1.7.

World’s Proven Oil Reserves (2011)

35

Figure 1.8.

Production Cost for Various Sources of Oil

35

Figure 1.9.

GHG Intensity for Fuel Derived From Various Oils*

37

Figure 1.10. Current and Future Oil Production (Unconventional

Sources)

37

Figure 2.1.

Oil Consumption Statistics*

43

Figure 2.2.

World Liquid Fuel Supply Sources

45

Figure 2.3.

Canada’s Oil Production

52

Figure 2.4.

Oil Sands Production by 2035

53

Figure 4.1.

Oil Sands Location

77

Figure 4.2.

Bitumen Production by Methods*

80

Figure 5.1.

World’s Five Largest GHG Emitters (2009)*

86

Figure 5.2.

Per Capita GHG Emissions (2009)*

87

Figure 5.3.

Wel To Tank (WTT) CO2 Emissions

90

Figure 5.4.

Wel To Wheel (WTW) CO2 Emissions

91

Figure 7.1.

Alberta Water Allocation (2009)

120

Figure 7.2.

Athabasca River

121

Figure 7.3.

Licensed Water Use From the Athabasca River

124

Figure 7.4.

Water Withdrawal Comparison (2009)*

124

iii

iv | THE FUTURE OF OIL

Figure 7.5.

Oil Sands Mining Net Water Use and Allocation from

Athabasca River

125

Figure 7.6.

Mining Bitumen Production Vs. Net Water Use

129

Figure 7.7.

Bitumen Production and Saline Water Use in In-Situ (1980

– 2009)

130

Figure 7.8.

Life Cycle Water Use of Various Sources of Energy

Production

132

Figure 8.1.

Tailings Pond

136

Figure 9.1.

Geographical Location of Fort Chipewyan and Other

Communities in Alberta

146

Figure 9.2.

Annual Average Fine Particulate Concentration (2001 –

2010)

157

Figure 9.3.

Key Groups Involved in Monitoring & Research in the Oil

Sands

159

Figure 10.1. Oil Sands Supply Chain

165

Figure 10.2. Light-Heavy Oil Price Differential*

171

Figure 10.3. Capital Intensity for Integrated Oil Sands Projects

172

Figure 10.4. Pipeline Routes

176

Figure 10.5. U.S. PADD*

178

Figure 10.6. Canadian Heavy Oil (Including Oil Sands Products)

Disposition – 2011

179

Figure 10.7. Proposed Keystone XL Pipeline Route

180

Figure 10.8. Oil Price difference between WTI & Brent

184

Figure 10.9. 2011 U.S Crude Oil Imports (Top 10 Countries)

186

Figure 10.10. Proposed Northern Gateway Pipeline Route

189

Figure 11.1. CO2 Intensity for Mining & Upgrading Integrated

Operations

197

Figure 11.2. CO2 Intensity for First Generation In-Situ Projects

201

List of Tables

Table 5.1

Carbon Costs to Produce a Barrel of Oil*

97

Table 5.2

Total Carbon Cost (Oil Production + Refining)*

98

Table 5.3

CCS Projects

102

Table 6.1

Area Disturbed by Oil Sands Exploration (End of Dec

2010) in Alberta

106

Table 8.1

Bird Mortality Rate (U.S.)

138

Table 9.1

RMWB Population (2010)

149

Table 10.1

Crude Oil Properties

168

Table 10.2

Existing Pipelines Exiting Western Canada

177

Table 10.3

Proposed Pipeline Projects

182

Table 11.1

Tailings Technologies

199

Table 11.2

Difficult Reservoirs

205

Table 11.3

Emerging In-situ Technologies

206

Table 11.4

Main Groups & Organizations Engaged in Technology

R&D

211

v

Acronyms

ABC

American Bird Conservancy

ABMI

Alberta Biodiversity Monitoring Institute

ACB

Alberta Cancer Board

AERI

Alberta Energy Research Institute

AIEES

Alberta Innovates - Energy and Environmental Solutions

AOSP

Athabasca Oil Sands Project

AOSTRA

Alberta Oil Sands Technology and Research Authority

API

American Petroleum Institute

AQHI

Air Quality Health Index

ARWMF

Athabasca River Water Management Framework

BP

British Petroleum

BTU

British Thermal Unit

CAPP

Canadian Association of Petroleum Producers

CBC

Canadian Broadcasting Corporation

CCEMC

Climate Change and Emissions Management Corporation

CCS

Carbon Capture & Storage

CEI

Cantox Environmental Inc.

CERI

Canadian Energy Research Institute

CNOOC

China National Offshore Oil Co.

CNRL

Canadian Natural Resources Ltd

CO2

Carbon Dioxide

CONRAD Canadian Oil Sands Network for Research & Develop-

ment

COSIA

Canada’s Oil Sands Innovation Alliance

CSOR

Cumulative Steam to Oil Ratio

CSS

Cyclic Steam Simulation

CT

Composite Tailings

CTL

Coal-to-Liquid

Dilbit

Diluted Bitumen

EBF

Ecosystem Base Flow

EOR

Enhance Oil Recovery

vi

ACRONYMS | vii

EPA

Environment Protection Agency

EPEA

Environmental Protection and Enhancement Act

ERCB

Energy Resources Conservation Board

EU

European Union

F-T

Fischer-Tropsch

GDP

Gross Domestic Product

GHG

Greenhouse Gas

GSC

Geological Survey of Canada

GTL

Gas-to-Liquid

H2S

Hydrogen Sulphide

HEMP

Human Exposure Monitoring Program

IBC

International Bitumen Company

IEA

International Energy Agency

IETP

Innovative Energy Technologies Program

IFN

Instream Flow Need

IHS CERA IHS Cambridge Energy Research Associates

IPCC

Intergovernmental Panel on Climate Change

LARP

Lower Athabasca Regional Plan

LASER

Liquid Addition to Steam to Enhance Recovery

LCFS

Low Carbon Fuel Standard

LSWG

Land Stewardship Working Group

MFT

Mature Fine Tailings

NCUT

National Centre for Upgrading Technology

NRDC

Natural Resources Defense Council

NST

Non-Segregating Tailings

GCOS

Great Canadian Oil Sands

OECD

Organization for Economic Co-Operation and Development

OGCB

Oil and Gas Conservation Board

OIP

Oil-in-Place

OPEC

Organization of the Petroleum Exporting Countries

OSLI

Oil Sands Leadership Initiative

OSTC

Oil Sands Tailings Consortium

OSUM

Oil Sands Underground Mining Inc.

PADD

Petroleum Administration for Defense Districts

viii | THE FUTURE OF OIL

PAC

Polycyclic Aromatic Compound

PAH

Polyaromatic Hydrocarbons

PFT

Paraffinic Froth Treatment

PM2.5

Particulate Matters

PPM

Parts Per Million

PSV

Primary Separation Vessel

PTAC

Petroleum Technology Alliance of Canada

R&D

Research & Development

RAMP

Regional Aquatics Monitoring Program

RD&D

Research, Development & Demonstration

RFS

Renewable Fuel Standard

RSC

Royal Society of Canada

SAGD

Steam Assisted Gravity Drainage

SCO

Synthetic Crude Oil

SO2

Sulphur Dioxide

SOR

Steam to Oil Ratio

THAI

Toe to Heel Air Injection

TOR

Tailings Reduction Operation

TRS

Total Reduced Sulphur

TTW

Tank-to-Wheels

USGS

United States Geological Survey

U.S. EIA

U.S. Energy Information Administration

VAPEX

Vapour Extraction

VOC

Volatile Organic Compound

WBEA

Wood Buffalo Environmental Association

WCSB

Western Canadian Sedimentary Basin

WTI

West Texas Intermediate

WTT

Well-to-Tank

WTW

Well-to-Wheels

Acknowledgements

This book would not have been possible without the assistance of many

individuals and organizations. I sincerely thank each of you for your

generous support.

I am highly indebted to the following groups and organizations for

providing the information necessary to complete my book. Without your

valuable support, this book would not have been possible.

● U.S. Energy Information Administration (U.S. EIA)

● International Energy Agency (IEA)

● IHS Cambridge Energy Research Associates (IHS CERA)

● Canadian Energy Research Institute (CERI)

● Energy Resources Conservation Board (ERCB)

● Alberta Environment

● Canadian Association of Petroleum Producers (CAPP)

● Alberta Cancer Board (ACB)

● The Royal Society of Canada

I would like to gratefully acknowledge Joji Valli, author and publisher at

CreatiVentures Publishing, for his enthusiastic supervision throughout the

process of readying this book for publication. I wish to extend my sincere

gratitude for a job well done. I would also like to acknowledge and thank

the entire team who worked on my book.

This book ends with a chapter on ethics by Vasco Castela, who partic-

ipated in the project as an independent contributor. Vasco has also edited

key chapters in the book, helping me to deliver a message that matches my

vision for what the book should achieve. I would like to thank him for his

valuable contribution. Vasco Castela teaches Applied Ethics at the British

Columbia Institute of Technology, and writes about ethics for various

Canadian publications.

Kind endorsements from Neil Camarta, Richard Adamson, Eddy

Isaacs, Elton Ash, Mike Bushman, Munaf Samji, and Garth Roberts were

humbling. A special thanks to Richard Adamson, Sean Wells, and Dwayne

Edwards for reviewing key chapters and providing their valuable inputs.

ix

x | THE FUTURE OF OIL

Finally, without the support of my family, this journey would not

have started—and certainly would not have ended! I thank my wife Rita

for allowing me to pursue this project on top of a full time job at Suncor.

A special thanks to my wonderful children, Devki and Ayush, for always

making me smile and for their understanding on those weekends when I

was writing this book instead of spending time with them.

Introduction

We have known for a long time that our use of oil is irresponsible and

unsustainable. Today, for the first time, we seem to be reaching the point

where a critical mass of people seem to be willing to do something about it.

More of us are voting for leaders who promote renewable energy produc-

tion, and who vow to reshape environmental laws and regulations. The

pressure is on, and it is working. Support for environmental policies is

crucial for access to public office. In 2012, the construction of the Keystone

XL pipeline, meant to carry oil from the province of Alberta, Canada, to the

Gulf Coast of the U.S., became an issue that many analysts said could make

or break President Barack Obama’s chances for re-election.

While there is reason to be excited about the prospects for environ-

mental protection and with climate change finally getting the attention it

deserves, not only in the public sphere but also in the political world, we

still need a plan to reduce and eventually eliminate our use of oil. Unfor-

tunately, this cannot be done today, and we are going to have to use oil

for a while longer—perhaps a few decades more. This may well sound like

the words of St. Augustine: "Lord, grant me chastity and continence, but

not yet." But the reason why we cannot move beyond oil today is not

because we don’t want to. It is not due to a lack of political will or success-

ful lobbying by oil companies, as some would argue. Unfortunately, it is

more complicated than that. We simply lack the technology to do it.

During most of the 20th century, oil reserves were plentiful. As a re-

sult, it was easy to extract and it was cheap. It was also of very good

quality, known in the industry as sweet crude oil—pure, fluid, and

smooth, it gushed from young wells under natural pressure and could be

pumped from the ground with basic machinery. But those days are almost

gone, and most of the oil available today is thicker, lies deeper, and is

more expensive to extract. Its extraction poses greater risks to the envi-

ronment than ever before. We now look to the open ocean or into the

fragile ecosystems of the Arctic to find new deposits, but still we do not

find enough. The reserves of sweet crude oil have been in decline for years,

and although supply is managing to keep up with demand, it won’t do so

for much longer.

xi

xii | THE FUTURE OF OIL

In the meantime, global oil consumption is on the rise, driven by rap-

id growth in large developing economies such as China and India. This

means that unless we are able to increase oil supply, we face a bleak future

of ever rising oil prices suffocating consumers and companies, and making

economic recovery and job creation impossible. We need more oil. Now.

We must then look for alternatives to complement the declining reserves

of sweet crude oil, and the only viable alternative available today is uncon-

ventional oil: biofuels, synthetic fuels, oil shale, and oil from oil sands.

None of these is perfect, but we have no other choice.

There is a general feeling among environmentalists and the environ-

mentally-minded that there is no point in discussing which sources of oil

are better or worse, for they believe we should stop using oil altogether

rather than struggle to find more. It is often said that our society is "addict-

ed to oil," and some conclude from the drug metaphor that it would be

wise to go cold turkey, but it is a mistake to take the metaphor literally.

Drugs provide a pleasurable experience more or less detached from reality,

and addiction leads to a sustained conflict between one’s ability to experi-

ence reality and enjoy it. Ultimately, the addict needs to choose between the

drug and reality. Oil, however, is an integral part of our reality, and we will

not live better without it, simply because we do not know how to do so.

There are many alternatives to oil for energy production, from hy-

droelectric plants to solar power, but the transportation sector still relies

almost exclusively on combustion engines powered by fuels produced

from oil. Contradictory as it may sound, our clean future needs to be built

from oil—there is no other way to build it. Recycling bins are made from

plastic, as are much of the Toyota Prius and even Greenpeace’s flags. This

is not hypocrisy. It is reality. Whether we like or not, oil continues to be

one of the foundations of our economy, and if we are rebuilding the

foundations of our house while we continue to live in it, we must be

careful. Whatever we do, we need to make sure that the economy contin-

ues to function while we make any necessary improvements. We cannot

dismantle the oil economy with a wrecking ball.

We need a green revolution, but cutting down on new oil produc-

tion is not the place to start. If you feel you are giving into consumerism,

you buy less. You do not begin by quitting your job. It is problematic to

use oil, but if enough is available at reasonable prices we can maintain

INTRODUCTION | xiii

economic growth, without which we sacrifice the quality of our schools

and healthcare, and even the ability of governments to afford subsidies

to support renewable sources of energy. Oil must have a future, or we do

not have one, and the Canadian oil sands are the very best unconven-

tional oil available today.

The Future of Oil is a clear, concise, and complete guide to the Cana-

dian oil sands industry. It was written to respond to a very clear problem:

it is difficult to obtain reliable information about the industry anywhere.

Many or even most newspaper articles on the topic are ripe with exagger-

ated portrayals of the industry’s dangers and benefits, and are written by

people who know very little about the subject. Even those who work in

the industry and who are specialists in their field find it hard to grasp the

big picture—whether energy security is a real issue; the impact of oil sands

on the global economy; how much water is really used; the effects of water

use on the environment; the latest technological developments in recover-

ing land used for tailings ponds; or how the most realistic well-to-wheels

calculations of carbon emissions show that oil sands are far less harmful to

the environment than is commonly thought.

This book starts with a discussion about why we need more oil, why

there is no better alternative than the Canadian oil sands to complement

conventional oil, and how the industry is prepared to respond to the need

for additional supply. Later on, the book focuses on issues raised by

environmentalists, how they have been covered by the press, and tells the

facts straight, both the good and the bad, about greenhouse gas (GHG)

emissions, the impact of land disturbance on biodiversity, water use,

tailings ponds, human health concerns, and pipelines. There is also a short

history of the industry, which helps readers to understand its present state,

and a chapter on technology, discussing the research underway to improve

environmental protection. The book ends with a chapter on the polariza-

tion of the oil sands debate and its impact on people’s ability to under-

stand the issues involved.

After reading this book, it should be clear that we can speak of a

meaningful compromise between ensuring our future oil supply and

environmental protection. A transition to an age of cleaner energy is

necessary and inevitable, but until then oil has a future, with the Canadian

oil sands having a major and irreplaceable role to play.

CHAPTER 1

Our Energy Needs and the Growing

Importance of Unconventional Oil

espite much wishful thinking to the contrary, the world’s

economies rely heavily on oil and will continue to do so into

D the foreseeable future. Although there has been some limited

progress in obtaining energy from new and renewable sources, we

continue to consume oil at a rate that has never been higher, and every

year the consumption rate grows. We find it hard to produce enough

conventional oil, the liquid oil that is pumped from oil fields and off-

shore platforms. The pure black oil that gushed under pressure from

young wells is all but gone, and we now need to pump it from deeper

wells, go further into untapped regions, like the Arctic, and spend more

money to find new sources.

But world economies cannot be sustained by conventional sources of

oil. With tougher sanctions aimed at Iran soon, there is the potential for

shortfalls in the world oil market. In view of this and other geopolitical

unrest or natural calamities that we might face, getting a grip on rising oil

prices is a particularly pressing need, and to do this we need to increase

the world’s oil supply. We must turn to unconventional oil—biofuels,

synthetic fuels, and oil sands—to complement our energy needs. Among

all available sources of unconventional oil, Canada’s oil sands stand out as

the most attractive solution, taking into account environmental, ethical,

and energy security concerns.

One consequence of the current tight supply situation is that any minor

conflict in oil-producing countries causes prices to spike, and the conse-

quences of the next spike could be very serious. Recovery from the 2008

financial crisis and the European debt crisis was slow and fragile. The world’s

1

2 | THE FUTURE OF OIL

developed economies increasingly rely on the fast growing economies of

China, India, and Brazil to emerge from economic crises. These awakening

giants are the engines of the world economy, and they run on oil.

But according to environmental activists, what we need is less oil, not

more. We cannot rely on oil, they say, because it harms the environment

and is non-renewable. Unfortunately, the world’s reliance on oil is not just

an environmental or political problem. It is rooted in deep technological

difficulties. For example, there is simply no alternative source of power for

the transportation sector. Batteries, solar, and wind power cannot power

trucks, ships, and planes, at least based on today’s technology. There is no

realistic alternative for oil at the present time, and there is no guarantee

that we will find such an alternative in the next few decades.

Although the world’s fossil fuel reserves are finite and will eventually

be exhausted, this will not happen suddenly or soon. The most pessimistic

forecasts for depleting world oil reserves have ignored the contribution of

unconventional sources of oil. According to the latest estimates, there are

about 1,000 billion barrels of conventional crude oil left, but an addition-

al over 10,000 billion barrels of unconventional oil.1 Unconventional oil

reserves are more than ample enough to supplement the global supply of

conventional oil, thus meeting the world’s energy needs in the next few

decades. This will allow a smooth transition to other fuels that are hope-

fully cleaner and renewable.

At first glance it may seem strange that oil consumption is increasing.

After all, as of March 2012, Toyota sold 1.1 million of its most popular

hybrid car, the Prius, in the U.S., and 2.5 million worldwide.2 Many of us

are starting to use low-consumption light bulbs, TVs, and computers.

Other household appliances are becoming more efficient, investment in

insulating homes and offices is increasing, and industries are becoming

more energy efficient, too. In fact, energy consumption per capita is

beginning to decline in many mature western economies. However, the

boom in energy consumption in high-growth developing economies

outweighs these advances. In these economies, economic growth typically

goes hand in hand with high energy consumption.

Unconventional crude oil is already beginning to supplement conven-

tional oil supply. In Brazil, growing numbers of vehicles run on ethanol

and other biofuels, with consumption now rivalling that of gasoline, and

THE GROWING IMPORTANCE OF UNCONVENTIONAL OIL | 3