It was in a conference call with journalists a few weeks ago that Shell chief executive Jeroen van der Veer offered perhaps the most bizarre argument yet in favour of the continued development of North America’s controversial tar sands.

“If we do not produce oil sands or if we do not do enhanced oil recovery in the world,” he said, “the world still needs energy and the balancing fuel may be coal, which also has a certain CO2 impact as you may know.”

The Guardian reported the story under the headline Oil: Tar sands less damaging than coal, insists Shell, detailing how van der Veer argued that on a “wells-to-wheel” basis, oil from tar sands is only 15 per cent more carbon intensive than conventional oil and as such it has to form a part of the global energy mix for fear coal will otherwise fill the gap.

He also insisted that the risk that coal would pick up the slack in the event of tar sands projects being abandoned should make ethical investment groups such as the Co-op think very carefully about their recent calls for investment in such projects to be abandoned as too environmentally and financially risky.

On the face of it, it is a pretty compelling argument, particularly at a time when environmentalists fear that the rush to coal, as epitomised by the controversy over the proposals for a new power station at Kingsnorth, represents one of the greatest threats to the future of mankind.

But does it stack up? Well, not really, no.

The suggestion that coal may emerge as “the balancing fuel” if the tar sands are not exploited and oil production is allowed to fall is “very puzzling”, according to Dave Martin, climate and energy co-ordinator for Greenpeace Canada.

“We should not be choosing between the tar sands and coal, but between fossil fuels and renewables,” he says. “But that said, it is a very puzzling statement [from van der Veer] as the oil from tar sands is a liquid primarily used in transport fuels. It is not replacing coal.”

Martin believes the only way it can be argued that unconventional oils such as those from tar sands are necessary to head off a shift towards coal is to assume that without them we would see a huge increase in new coal-to-liquid (CTL) technologies that turn coal into transport fuels.

According to a 2006 study from the Future Energy Forum, CTL fuels are indeed far more polluting than tar sands oil, producing much more than double the carbon emissions over their lifecycle. But, as Martin observes, CTL fuel remains rare and its emissions are so high that the chance of it emerging as a mainstream transport fuel, given the global emergence of tightening carbon emissions standards, is extremely slim.

The other possibility was that van der Veer was referring to conventional coal and suggesting that a fall-off in oil production would result in increased use of coal as a means of energy generation – a plausible argument given petroleum accounts for a small, but still significant, proportion of electricity generation in the US.

But again it is not entirely clear that coal is a worse option than oil from tar sands. According to US Department of Energy figures from 2000, coal is a dirtier fuel than petroleum, resulting in 2.095 pounds of CO2 per kilowatt hour compared with 1.969 pounds of CO2 per kilowatt hour in 1999. But given Shell accepts that oil from tar sands is 15 per cent more carbon intensive on a wells-to-wheel basis than conventional oils, it is uncertain that petroleum produced from tar sands will still be cleaner than coal.

Martin is certainly not convinced. “My suspicion is that the average carbon footprint from the tar sands will exceed that of coal,” he said. “Although ultimately we need to move away from both.”

Shell’s repeated claim that oil from tar sands is just 15 per cent more carbon intensive on a wells-to-wheel basis than conventional oil is also the subject of considerable scrutiny from green groups.

A spokeswoman for Shell said the figure is based on research from 2000 undertaken by analyst TJ McCann and Associates on behalf of the Canadian Association of Petroleum Producers (CAPP). The study found that while emissions arising from the production of Canadian upgraded bitumen were, as separate studies by green groups have also found, about five times greater than for conventional forms of oil, the vast majority of emissions for all forms of oil were released when the fuel was burnt and were roughly equivalent. Consequently, total emissions for the full wells-to-wheel lifecycle are estimated to be just 15 per cent higher for tar sands oil.

Pierre Alvarez, president of CAPP, thinks the emissions gap between different types of crude could have got smaller still over the past eight years as a result of improvements in the efficiency of tar sands extraction and bitumen production and the increased energy required to tap fast-depleting reserves in regions such as the Middle East and Africa. “We are continuing to research emission levels [from different types of oil],” he says. “[But] we are running out of light sweet crude. [We need to realise] that the production profile for these fuels is not the same as it was 10 years ago.”

However, green groups believe Shell’s suggestion that oil from tar sands is only marginally more carbon intensive than conventional oil conceals huge variations between the different techniques used to extract and process the oil.

Martin explains that in most tar sands projects, the mixture of sand, clay, water and bitumen that makes up the tar fields is mined before being crushed and mixed with boiling water to separate the bitumen for upgrading and refinery. This process is hugely energy intensive, but still not as energy hungry as in situ extraction techniques that see the steam pumped directly into the ground to separate the bitumen.

The study from the Future Energy Forum, which has also been cited by Shell in support of its oil sands claims, says that while gasoline from oil sands mining has an overall carbon footprint just 12 per cent higher than that from conventional gasoline, gasoline from in situ oil sands projects has a wells-to-wheel impact that is a full 35 per cent higher.

The WWF has also expressed concern that far from being a forerunner for more efficient forms of unconventional oil, as Alvarez suggests, the Canadian tar field developments are a precursor to similar projects to extract oil from shale fields in the US. A recent study from the pressure group estimated that while producing oil from tar is between three and five times more carbon intensive than producing conventional oil, producing it from shale would be to eight times more carbon intensive.

Moreover, Greenpeace’s Martin is unconvinced that the carbon emissions associated with some of the bitumen extraction by-products are being fully accounted for.

One of the waste products that results from the process is petroleum coke, a carbon-intensive substance that, in Martin’s words, “looks like coal and burns like coal”. Some of the tar sands projects burn this petroleum coke themselves to generate some of the energy needed to drive the extraction, upgrading and refining processes, but others are believed to be selling it to be used as an energy source.

“We know one of the rail lines running from some of the tar sands to the British Colombia port of Prince Rupert has been upgraded to carry petroleum coke and there is now a multimillion-tonne stockpile at the port awaiting export,” he says.

There is no doubt Shell is right in its claims that new forms of energy must be harnessed to help plug a widening global energy gap and replace dwindling oil fields, but the scale of disagreement over the true environmental impact of tar sands projects proves that there are indeed huge risks surrounding these projects.

As the Co-op and other ethical investors have argued, the increasing likelihood of global carbon regulations make it extremely difficult to take on the risks associated with projects where there appears to be little agreement on which fuel is the most carbon intensive or even how much carbon is being released.

http://www.businessgreen.com/business-green/analysis/2224843/shell-slammed-puzzling-tar