BUSINESS

Climate Activists Celebrate ‘End Of Growth In The Tar Sands,' But Growth Is Still Happening

10/28/2015 01:35 EDT | Updated 10/28/2015 01:59 EDT

  • Oilsands will run out of pipeline capacity by 2017, analysis says
  • Industry to post $2-billion loss this year
  • Production continues to grow despite global oversupply

If there’s one thing that environmentalists and Canada’s oil industry agree on, it’s that the lack of new pipelines is holding back oilsands growth.

But while the industry sees that as a warning bell for policymakers to heed, it’s music to the ears of climate activists, some of whom are increasingly predicting victory in their fight against Alberta bitumen.

A new analysis from climate advocacy group Oil Change International, titled "The End of Growth in the Tar Sands," estimates that the oil pipelines out of Alberta are 89 per cent full and argues that, with major pipeline projects delayed by public opposition, the industry will not be able to grow. It predicts Alberta’s oil producers could run out of pipeline space as soon as 2017.

“If market constraints continue, there will be no further growth in tar sands extraction and tens of billions of metric tonnes of carbon will stay in the ground,” Environmental Defence said in a statement issued Tuesday.

“Growing public opposition, the drop in oil prices and the lack of pipeline availability all show that tar sands growth is no longer inevitable,” said Adam Scott of Environmental Defence Canada.

The analysis estimates that a halt to growth in the oilsands would keep 34.6 billion metric tonnes of carbon dioxide from entering the atmosphere, equivalent to the emissions of 227 coal plants over 40 years. (However, if consumers replace that oil with oil from other sources, or other carbon-emitting fuels, not all those carbon savings will be realized.)

The report argues that oilsands producers won’t be able to make up for the lack of pipelines by using alternatives.

“The additional cost of shipping tar sands by rail can turn a typical tar sands project from a money maker to a loser,” Oil Change International said.

The report came out a day before the latest cancellation of a multi-billion-dollar oilsands project. Royal Royal Dutch Shell announced it’s scrapping its Carmon Creek project, and swallowing $2 billion in costs doing so.

Oilsands Production Still Growing

But despite the spate of shutdowns, and despite a global oversupply of oil that has sent prices down 60 per cent in the last year, Canadian oil production continues to grow and is forecast to keep doing so.

“Canadian crude oil production is expected to expand significantly over the medium term,” the Conference Board of Canada said in a forecast released Wednesday.

Developing oilsands facilities is costly and time-consuming. Many existing facilities are too expensive to shut down, as are new facilities currently under construction.

“Projects that are currently under construction will continue to be developed even in a low-price environment. Thus, past and ongoing investments will continue to drive production higher, despite the industry’s ongoing challenges,” the Conference Board said.

Its forecast sees the industry posting a total loss of $2.1 billion this year, compared to $6 billion in combined profits last year.

“Low oil prices have taken a toll on producers' revenues and cash flows, resulting in a significant contraction in investment intentions,” the forecast said.

It sees oilsands revenue dropping by 22 per cent this year, but then starting to recover as of next year.

Between 2016 and 2019, revenue will grow by an average of 14 per cent per year, thanks to “a combination of slowly recovering oil prices and increases in production,” the Conference Board said.