As the oilsands industry begins to emerge from the recession of 2008–09, Cambridge Energy Research Associates crafts three potential routes forward

Oilsands Review — It’s not a forecast, because forecasting can lock one into assuming the future will unfold based on the assumed certainties of the present. But nothing is certain—especially in the oil industry. So when considering what may happen as the oilsands industry emerges from the so-called “Great Recession,” IHS Cambridge Energy Research Associates (CERA) has created scenarios designed to encourage stakeholders, policy-makers, and industry to “think as broadly as possible to understand the forces of change and how to adapt to them.”

The group, led by IHS CERA chair and Pulitzer Prize winning author Daniel Yergin, notes that the three scenarios in its October 2009 special report, Growth in the Canadian Oil Sands, are by no means the only possible paths for development, and in reality the future will probably include elements from each.

“The rapidly changing and unpredictable nature of this short period of history underscores the necessity for stakeholders to think about the future in a broader way and to resist the inevitable human tendency toward simple extrapolation,” CERA says, adding that the scenario process is well suited to the oilsands industry, as so much about it is uncertain. The scenarios look at the time period 2009–2035.

Scenario 1: “New social order”

The “most revolutionary” of the scenarios, supposing a “massive shift in the global economic system.” Recovery from the recession happens in 2010, but a second crisis quickly follows based on another cyclical and ”even more violent” upswing in energy prices.

But as demand recovers, supply growth cannot keep up—too many projects had been delayed or shelved. World energy supply crunch results in several years of oil above $100 per barrel, leading to increased use of alternative fuels and vehicles. Demand drops. Governments look more and more to environmental regulation, including a “climate change policy with teeth”—a law where U.S. and Canadian greenhouse gas (GHG) emissions must drop 30 per cent from 2008 levels by 2030.

Scenario 2: “Barrelling ahead”

The “strongest economic growth” scenario. The “Great Recovery” begins in 2010, driven largely by China and the impact of government stimulus investment. Global oil demand grows, while oil prices remain consistently strong. Oilsands growth is sustained at a steady pace, with new capacity additions of about 180,000 barrels per day each year to 2035. The Canadian government looks to maximize oilsands development, including diversifying markets. To reach the increased levels of production, technology and water management must advance. A major challenge could be the cumulative effects of production projects.

GHG emissions grow substantially, but still represent about 2 per cent of North American emissions and 0.5 per cent of world emissions by 2035. In this scenario, global emissions rise fourfold over the period.

Scenario 3: “Deep freeze”

The “most challenging” scenario for oilsands producers. The “Great Recession” of 2008–09 is the prelude to the “Great Stagnation.” There is a prevailing sense that “unfettered free markets have failed.” Governments play a stronger role in economics, and “protectionism and antiglobalization sentiment dominate.” This does not result in renewed economic growth, but rather stagnation. Oil prices go into a “super slump.” Marginal sources of oil such as the oilsands are hit hard.

Environmental issues “gain less traction” in a world more concerned with economic viability. It becomes less urgent to deal with climate change as GHG emission growth slows. Canada and the U.S. continue to do little on the issue. Implementation of new environmental technologies is delayed in order to cut costs.

CERA’s conclusion is hopeful, offering that technology, collaboration with government, and “an appropriate balance” between all concerned will help realize the industry’s massive potential.

Scenario Highlights 2009-2035