Texas Oil Impacting the Oil Sands
by aseth on November 25, 2016 - 3:37pm
The recent discovery of another source of oil in Texas has sparked the conversation about the increased need for pipelines in Canada. The new Texas formation, known as the Wolfcamp formation, contains an estimated 20 billion barrels of oil, 16 trillion cubic feet of natural gas, and 1.6 billion barrels of natural gas liquids. While this is not expected to have a huge effect on oil prices, it is still noteworthy for the Albertan and Canadian government. “…it's critical for us, for Alberta and Canada indeed to diversify our markets and get Canadian pipelines to Canadian ports and Canadian tidewater." Says Alberta Energy Minister Margret McCuaig-Boyd. The Canada ships most of its oil to the US. The discovery of the Wolfcamp formation has caused America to go from one of our biggest customers, to one of our biggest competitors. This change in relationship has emphasized the need for Canada to diversify its markets in Asia.
Canada is a staples economy, meaning that it relies on raw, unfinished materials, such as oil, to fuel its economic growth. For instance, oil production as percent GDP for Newfoundland, Alberta, and Saskatchewan are 35%, 28%, and 25% respectively. That means that the Canadian economy is more reliant on oil production than most countries.
The discovery of the Wolfcamp formation has also led to the Keystone XL pipeline to become less of a priority to the Canadian government. There is less of a need to send oil to the US and it makes more sense to build pipelines to Canadian ports in order to ship Canadian oil overseas.
It should be noted that the discovery of oil in Texas isn’t exactly new oil, but rather a new assessment that reveals more oil and gas available through the use of hydraulic fracturing, or fracking. Fracking is a method used to extract oil from the ground whereby a well is drilled hundreds of metres into the formation. Large amounts of fracking fluid, made up of water, sand, and other chemicals, is then pumped at a very high pressure into the pipe, causing the rock layers in the formation to fracture, creating pathways for oil or natural gas to be extracted. Fracking is a highly controversial method of extracting oil because of concerns of the natural gas, or oil getting into local water supplies and affecting the health of nearby residents. Fracking conflict generally falls into two categories of conflict, value conflict and interest conflict. Value conflict is the result of actors having different ideas regarding how the resource should be managed. Interest conflict is the result of two actors having different ideas about who should benefit from a resource and who should pay for the resource. These conflicts are often between the government or private companies, and citizens or environmental groups.