No water, no oil: How the parched western provinces may hamper the oilpatch

Persistent and extreme drought circumstances throughout Western Canada may have a devastating impact on the oil and pure gasoline sector, which has drilling operations in a few of the driest areas, in response to a brand new report by Deloitte.

Restricted water provide may have vital results on the manufacturing of oil and gasoline, the report warns, and the timing could not be worse for the business as many corporations are wanting to extend manufacturing and drilling with new export pipelines and amenities nearing completion.

The previous a number of years have been parched in elements of Western Canada, however there may be additional concern this yr due to the beneath common snowpack within the mountains.

“It is not going to be as easy to only pipe recent water in. It’s possible you’ll want to maneuver it and truck it to totally different areas,” mentioned Andrew Botterill, an vitality analyst with Deloitte Canada, in an interview with CBC Information.

In B.C., the provincial vitality regulator has warned snowpack ranges have been solely 72 per cent of the historic common. 

Trucking in water and recycling water will each lead to extra “costly and complex” operations for corporations, he mentioned.

The Bow River flows via downtown Calgary. Alberta is poised to start out negotiations with main water licence holders to strike sharing agreements in three key provincial river basins, together with the Bow. (Jeff McIntosh/The Canadian Press)

Many communities are already on excessive alert a couple of devastating drought and potential impacts on ingesting water and availability for industries, equivalent to agriculture.

It is the fourth yr of drought circumstances and regulators have warned business about potential water restrictions this summer season. The quantity of water used to provide oil and gasoline can range, with drilling exercise in some areas utilizing as much as 10 occasions extra water in comparison with different areas, relying on geological elements, in response to the Alberta Power Regulator.

The regulator is already limiting how a lot water oilsands and different vitality tasks can withdraw from a part of the Athabasca River and different rivers within the province. Some communities have additionally banned the oilpatch from utilizing municipal water. 

“The allocation of water goes to be an more and more vital challenge,” mentioned federal Pure Assets Minister Jonathan Wilkinson. “The long-term impacts of local weather change imply that that is going to be a seamless problem that we’re going to have to interact.”

Water is used for drilling and for fracking — a standard method the place a high-pressure combination of water, sand and chemical compounds are injected into an underground rock formation to create cracks and entry oil and pure gasoline. Utilizing recycled water can influence the effectiveness of drilling, which might enhance prices.

At present, oil costs stay above common in comparison with the final decade, however pure gasoline costs are depressed. That is why drought circumstances may have an even bigger influence on manufacturing of pure gasoline.

“Once you mix the truth that there could also be areas the place water is scarce along with the truth that gasoline costs are low, the suitable factor to do is to not power the problem and attempt to ship extra manufacturing with a better price,” mentioned Mike Belenkie, CEO of Benefit Power, a mid-sized firm producing primarily pure gasoline.

Belenkie has saved an in depth watch on precipitation ranges all through the winter, not solely due to the water scarcity however the elevated danger of wildfires, too.

“The larger concern actually is about fires,” he mentioned. “It was an terrible yr for forest fires final yr and it would not appear like it may be any higher this yr.”

Dry winter circumstances inflicting concern for farmers

Although colder temperatures have arrived in Alberta, an unseasonably heat and dry winter has farmers apprehensive about what it may imply for his or her crops this summer season. Travis McEwan has extra.

Greater than 100 fires are nonetheless burning in B.C. and Alberta after unusually dry circumstances in each provinces. Final yr, roughly 15 million hectares burned throughout the nation, over seven occasions the historic nationwide annual common.

For the primary time in 20 years, the Alberta authorities has opened water-sharing negotiations amongst licence-holders, together with the vitality and agricultural sectors, with the purpose of lowering water use.

“Oil and pure gasoline corporations are actively growing use of other water sources equivalent to low-quality groundwater, municipal wastewater, and recycled produced water to cut back recent water wants,” mentioned Richard Wong, vice chairman of regulatory and operations with the Canadian Affiliation of Petroleum Producers, in an emailed assertion.

The business group is working with the Alberta authorities to think about “low-risk inter-basin water transfers to alleviate strain on water-stressed areas,” mentioned Wong.

On the COP28 UN local weather summit final yr, international locations world wide agreed to transition away from fossil fuels so as to restrict international warming. 

Local weather change will profoundly have an effect on the nation’s water provide as summers develop hotter and winters shorter, consultants say. Whereas precipitation is predicted to extend total, so will the length and severity of droughts. 

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