Oil sands: Full of energy?

The Cree Indians around Lake Athabasca used the gobs of tar they found there to waterproof their canoes. The potential of this mundane stuff to yield oil was gleaned early in the 20th century, and Athabasca in Alberta, Canada sits on the world’s richest petroleum resource: more than 2 trillion barrels, as much as all the remaining recoverable conventional oil in the world.

Of those 2 trillion barrels, however, only 170 billion are technically and economically recoverable. And of these, only 35 billion are near enough to the surface to be recovered through mining. Deposits deeper than 75 metres pose different problems and require different solutions.

One method is “cold flow”, in which oil and sand are brought to the surface together and the oil is filtered out afterwards. Another is to inject steam into a network of wells. The steam heats the bitumen, which in its more fluid state can then be extracted. This method is the most widely applicable, but alternative ways of heating bitumen are being tested.

In its raw state, bitumen is hard to transport to refineries. Since most buyers are only equipped to refine traditional crude, the bitumen must be upgraded. Upgrading plants apply intense heat to the bitumen to turn it into lighter “synthetic” crude. But the process is expensive, requiring tens of thousands of dollars of investment for every barrel per day of capacity. Reducing these costs is essential to make synthetic crude more attractive to buyers.

Oil sands production has raised concerns about the environment. Alberta’s oil sands underlie some 140,000 km2 within Alberta’s 381,000 km2 of boreal forest. So far, only about 600 km2 have been exploited. Some of those areas have been reclaimed and reforested. As of 2009, 67 km2 had been reclaimed and more than 7.5 million tree seedlings planted. Carbon dioxide is another worry. Emissions from oil sands production are 5-15% higher than those of conventional oil on a “well-to-wheels basis” (an assessment of total energy consumption, including emissions). However, Alberta is fairly active on this account, being the first jurisdiction in North America to legislate greenhouse gas reductions on large industrial facilities. Since 2007, the province has cut emissions by over 17 million tonnes, although part of this was due to the 2008-2009 economic crisis.

Canada began to exploit oil sands in the late 1960s. But it was not until reserves were quantified in the 1990s and the government provided incentives that oil sands development took off. By 2010, Alberta was exporting 1.4 million barrels per day (mb/d) of crude to the United States–15% of its crude imports–and reaping CAN$3 billion in royalties from oil sands projects.

More than 80 oil-sands projects were operating in Canada in early 2010, with a raw bitumen capacity of 1.9 mb/d. The International Energy Agency (IEA), a sister organisation of the OECD, predicts that current construction projects will increase capacity by another 0.9 mb/d by 2015. If all projects proposed were to get underway, it would add another 4.5 mb/d.

This would certainly help to quench the thirst for crude in a world slow to adopt more sustainable energy systems. The IEA projects that by 2035 “unconventional oil”, including Canada’s oil sands, will meet about 10% of global oil demand. “Regardless of what governments do,” says Christian Besson, energy analyst at the IEA, “unconventional oil is set to play an increasingly important role in world oil supply in 2035”. With accessible reserves dwindling and the costs of exploring remote ones, like deep offshore drilling, rising, Canada’s oil sands may lack refinement, but they look more dependable than their crude cousin.


References

IEA (2010), World Energy Outlook, see www.worldenergyoutlook.org

See Government of Alberta: Energy at www.energy.alberta.ca/OilSands/793.asp


©OECD Observer No 284, Q1 2011




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