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Modelling the costs of non-conventional oil: A case study of Canadian bitumen

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  • Méjean, Aurélie
  • Hope, Chris

Abstract

High crude oil prices, uncertainties about the consequences of climate change and the eventual decline of conventional oil production raise the issue of alternative fuels, such as non-conventional oil and biofuels. This paper describes a simple probabilistic model of the costs of non-conventional oil, including the role of learning-by-doing in driving down costs. This forward-looking analysis quantifies the effects of both learning and production constraints on the costs of supplying bitumen, which can then be upgraded into synthetic crude oil, a substitute to conventional oil. The results show large uncertainties in the future costs of supplying bitumen from Canadian oil sands deposits, with a 90% confidence interval of $7-12 in 2030, and $6-15 in 2060 (2005 US$). The influence of each parameter on the supply costs is examined, with the minimum supply cost, the learning rate (LR), and the depletion curve exponent having the largest influence. Over time, the influence of the LR on the supply costs decreases, while the influence of the depletion curve exponent increases.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 36 (2008)
Issue (Month): 11 (November)
Pages: 4205-4216

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Handle: RePEc:eee:enepol:v:36:y:2008:i:11:p:4205-4216

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Keywords: Non-conventional oil Uncertainty Experience curve;

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  1. Chakravorty, Ujjayant & Roumasset, James, 1990. "Competitive oil prices and scarcity rents when the extraction cost function is convex," Resources and Energy, Elsevier, Elsevier, vol. 12(4), pages 311-320, December.
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Cited by:
  1. Méjean, Aurélie & Hope, Chris, 2013. "Supplying synthetic crude oil from Canadian oil sands: A comparative study of the costs and CO2 emissions of mining and in-situ recovery," Energy Policy, Elsevier, Elsevier, vol. 60(C), pages 27-40.
  2. Sena, Marcelo Fonseca Monteiro de & Rosa, Luiz Pinguelli & Szklo, Alexandre, 2013. "Will Venezuelan extra-heavy oil be a significant source of petroleum in the next decades?," Energy Policy, Elsevier, Elsevier, vol. 61(C), pages 51-59.
  3. Méjean, A. & Hope, C., 2010. "The Effect of CO2 Pricing on Conventional and Non-Conventional Oil Supply and Demand," Cambridge Working Papers in Economics 1054, Faculty of Economics, University of Cambridge.

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