Canada oilsands pose investment, climate risk: WWF

LONDON (Reuters) - Canada's oil sands pose a significant investment risk as their development may be hampered by a government attempt to curtail the industry's rising carbon dioxide emissions, a report published Tuesday said.

World Wildlife Fund, authors of the report, said investors in oil sand operators like Shell, ExxonMobil and BP should consider the future competitiveness of such "unconventional" fossil fuel investments in a carbon-constrained economy, where governments affix a price on climate-warming CO2 emissions.

"The financial sustainability of unconventional oil is dependent on a scenario with limited regulation, a high oil price and a low carbon price," the report said.

"Policy makers, and energy and utility companies agree that limited regulation and a low carbon price will not last."

"Unconventional Oil", commissioned by the UK's largest consumer co-operative, the Co-operative Group, also recommends oil firms report "all risks associated with the environmental and social liabilities of oil sands operations," including CO2 emissions, deforestation and water intensity.

The western Canadian province of Alberta has an abundance of oil sands, much of which is under boreal forest holding 11 percent of global carbon sinks.

Oil sands consist of a complex mix of crude oil, clay, sand and water. In a highly carbon and water-intensive process, natural gas is used to the heat the mix, which allows for oil to be skimmed off the top.

Oil sands extraction generates three times the carbon emissions of conventional oil and uses three barrels of water for each barrel of oil produced, WWF said.

The majority is taken from nearby rivers, and less than a tenth of the wastewater is deemed clean enough to be returned. The rest is dumped into toxic so-called "tailing ponds."

The paper also recommends the Canadian government holds companies accountable for the environmental impacts and water usage, prohibits fuels with lifecycle "well-to-wheel" CO2 emissions higher than those from conventional oil, halts the issuance of new oil sand operator licenses.

Oil sand operators have proposed more than $125 billion worth of projects by 2015, with investors expected to provide much of the funding, WWF said.

RESERVES

There are an estimated 1.12 trillion barrels of recoverable, unconventional oil in North America, potentially making the region one of the world's top oil producers. This compares to global consumption of one trillion barrels of oil to date, the report said.

Canada's proven oil reserves of 174 billion barrels place the country second only to Saudi Arabia, while Canada's probable reserves are roughly double at 315 billion barrels.

Canadian greenhouse gas emissions in 2006 were 26 percent above 1990 levels, compared to a Kyoto Protocol target of an average six percent reduction by 2012.

The U.S., the world's number two emitter, withdrew from Kyoto in 2001 and therefore has no targets.

The well-to-wheel emissions generated from the North American reserves could create another 980 billion metric tons of CO2, increasing atmospheric levels by between 49 and 65 parts per million (ppm), the report said.

With current CO2 levels at around 430 ppm, global greenhouse gas emissions are getting precariously high as UN scientists say the world must peak no higher than 450 ppm by 2015, to be followed by a sharp decline of 80 percent by 2050. *To read the WWF report, go to www.reutersinteractive.com

(Reporting by Michael Szabo; Editing by James Jukwey)