Heavy Oil and Tar Sands

Unconventional oil—which includes tar sands, heavy oil, bitumen, or shale oil—refers to any type of crude-like resource that does not flow easily and is hence difficult to produce. Remarkable quantities of heavy oil and tar sands are concentrated in Canada and Venezuela. The Oil and Gas Journal reclassified 174 billion barrels of Canadian oil sands to “established reserves” in 2002, catapulting the country to second behind Saudi Arabia in terms of total petroleum reserves. Venezuela’s “extra heavy oil” could follow a similar reclassification soon, potentially adding another 235 billion barrels to its reserves, and making it the world’s largest reserve holder. These two countries will likely play an important role in supplementing the eventual decline in conventional oil output. There are profound technical, economic, and environmental challenges to overcome, however, before these oil resources can play a more significant role in the global energy supply.

Canadian tar sands are currently produced by surface mining and in situ extraction, in roughly equal amounts. The former method, relying on massive earth-moving equipment and processing facilities, has limited future capacity since 80 percent of the oil sand resources lie deep underground and are not accessible to open pit mining. The latter method currently relies on energy-intensive steam injection and large volumes of natural gas. However, conventional natural gas production may have peaked in Canada, leaving policymakers scrambling to figure out how future needs will be met. Nuclear power plants could substitute for natural gas to produce the steam needed, but the oil sands still require natural gas during the refining process to upgrade the petroleum product to a marketable commodity. New technologies are under development to make the deeper-lying resources economically and physically accessible. The International Energy Agency expects that Canadian oil sands output will rise from 1 million barrels per day (mb/d) now to 5 mb/d in 2030.

Venezuela has equally massive reserves of heavy oil in the Orinoco Belt. Approximately one-quarter of Venezuelan’s current crude output of 4 million barrels a day comes from heavy sources. This percentage is expected to rise as conventional resources decline and heavy oil recovery technologies improve. Currently, only a small percentage (5-10%) of original oil in place can be recovered economically. The World Energy Council believes Venezuelan heavy oil output will grow to 5.5 mb/d by 2030.

Greenhouse gas emissions associated with heavy oil production vary depending on location, oil quality (need for upgrading), and extraction method. Lifecycle emissions vary from roughly 15 percent above conventional oil use levels to over 50 percent or more. Carbon dioxide capture and sequestration could be applied to offset a portion of the extra greenhouse gas emissions from some heavy oil production, but it would add to costs. The local and regional environmental impacts of heavy oil and tar sands production can include: significant water consumption, massive earth moving and ecosystem disturbance, increased criteria and other air pollution, and release of heavy metals and toxic materials. New technologies have the potential to lower these environmental impacts, although they will likely remain substantially higher than conventional crude production.