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Low Carbon Fuel Standards Will Adversely Affect Oil Sands Crude Producers, Refiners, and Fuel Consumers13 October 2010
Calgary, October 13, 2010
Purvin & Gertz, Inc. announces the release of its report: Low Carbon Fuel Standards (LCFS) Impacts on Oil Sands. LCFS programs are being implemented in California, Oregon and British Columbia. They are under consideration in many other states and provinces and are becoming regional in nature. LCFS programs differ by jurisdiction, but have in common mandated reductions in the carbon intensity of transportation fuels. By targeting petroleum-derived gasoline and diesel and promoting low carbon alternative energy forms such as electricity, hydrogen, natural gas and next generation biofuels, LCFS programs are intended to reduce overall Greenhouse Gas (GHG) emissions on a ‘well-to-wheels’ basis. Tom Wise, who directed the study, notes:” In effect, LCFS programs contribute to an ‘off oil’ strategy.”
The energy needed to produce oil sands crudes is higher than for most conventional crudes, so the resulting carbon intensities of refinery-produced gasoline and diesel from oil sands are also higher. However, Mr. Wise points out it is a mistake to paint all oil sands crudes with the same brush because there are different oil sands crudes, such as synthetic crude oil and bitumen blended with various diluents, and each has a different pathway and carbon intensity. Also, “contrary to widely held perceptions, our study concludes that some oil sands diluted bitumen does not have high carbon intensity under the California regulations and should not carry an LCFS penalty.”
The Purvin & Gertz’ study estimates the well-to-wheels carbon intensities of refinery-produced gasoline and diesel from various oil sands and conventional crude oils. The study estimates the impact on consumer product prices, refinery margins and oil sands crude prices, for a range of LCFS carbon costs. In market regions that implement LCFS programs, consumer product prices will increase and refinery margins will fall.
Oil sands producers would also be affected. ”Some of the oil sands crudes would require price discounts to compete with conventional crudes due to a reduced incentive to refine or upgrade heavy crudes”, adds Mr. Wise. Further, reduced crude runs in market regions with LCFS programs would result in refinery closures and displace oil sands crudes to other markets. For instance, LCFS programs in the U.S. Midwest would cause leakage of oil sands crudes to the U.S. Gulf Coast or Asia.
The study is available immediately. For more information please contact Tom Wise at 1-403-984-2200 or via this website.
About Purvin & Gertz
Purvin & Gertz is an employee owned independent energy consulting firm providing technical, commercial and strategic advice. Purvin & Gertz specializes in providing services to clients involved in the production, processing, transportation and marketing of oil, natural gas and gas liquids, and petroleum products. Headquartered in Houston, the firm consists of an international network of offices in Buenos Aires, Calgary, Dubai, Long Beach, London, Moscow and Singapore.