Oil Sands 101

ERG VictoriaJan 09

Roger Bailey

Alberta Tar Sands• Big, Tough Expensive Job• Not Economic• Depends on government handouts• Dirty Oil• Pollutes the Environment

– Air: SOx, Nox, CO2, Climate – Water: consumption, toxic sludge– Land: Devastates Boreal forest

• Destroys society

Alberta Oil Sands

• World’s largest oil deposit 2,000,000,000,000• Established Reserves: 173,000,000 barrels• Canada’s economic engine• $70 billion invested, $70 billion planned• Now 1.2 million BPD, 5 million BPD in 2030• Creates Jobs and Wealth • Mining yesterday’s technology• In-Situ SAGD is the future

What Changed?

1. Price of oil over $50 / bbl2. “The end of cheap oil” 3. Government Policy.4. Technology5. Resources to Reserves

What Recently Changed?

1. Price of oil under $40 / bbl2. Not “the end of cheap oil” 3. Government Policy

1. Royalties up (Syncrude + $2 billion)2. Taxation: No accelerated CCA 3. CO2 Penalties

4. Technology: CO2 focus5. Resources to Reserves? Economics

AOSTRA• Alberta Oil Sands

Technology and Research Authority• Alberta invested $750 million in R&D• Industry matched funding and did the work• Enabling Technologies

– Steam Assisted Gravity Drainage (SAGD)– Cold Water Extraction (OCWE)– Consolidated Tailings (CT)

Alberta’s Oil Sands Areas

Alberta Geology

Alberta Oil Sands Production

Alberta Oil Production

Source: CERI Study CAPP Backgrounder 2008

Alberta Oil Update Dec 2008

Source: CAPP Update Dec 2008

Oil Sands Projects

Athabasca Mining1,115,000 –2,977,000

Athabasca In-Situ324,000 – 1,543,000

Cold Lake In-Situ219,000 – 280,000

Peace River In-Situ 12,000 – 100,000

Mining Technology Change• Truck and Shovel

Hydrotransport

Cold Water Extraction

Consolidated Tailings

Athabasca – Mining

Operator Project Initial Potential

Albian/Shell Muskeg/Jackpine 150,000 560,000

Suncor Base Plant 280,000 550,000

Syncrude Base Plant 300,000 600,000

CNRL Horizon (2008) 135,000 577,000

Imperial Kearl (2010) 100,000 300,000

Petro-Canada Fort Hills (2011) 100,000 190,000

Total Joslyn Creek Mine(2013) 50,000 200,000

Athabasca – In Situ - SAGD

Operator Project Initial Potential

•JACOS Hangingstone 1 0,000 30,000

•Suncor Firebag 68,000 375,000

•ConocoPhillips Surmont 25,000 110,000

•EnCana Christina/Foster 42,000 400,000

•Devon Jackfish 35,000 70,000

•Husky Sunrise (2012) 50,000 200,000

•OPTI/Nexen Long Lake 72,000 288,000

•Petro-Canada MacKay River 22,000 70,000

Cold Lake – In Situ –SAGDOperator Project Initial

Potential

•Shell Hilda Lake (pilot) 600 20,000

•CNRL Primrose 50,000 110,000

•Imperial Cold Lake (CSS) 150,000 110,000

•Husky Tucker 18,000 40,000

•Peace River – In Situ

•Shell Peace River 12,000 100,000

Underground Test Facility (UTF)

Shaft & Tunnel Access

SAGD Well PairsHorizontal Injector And Producer

Steam Assisted Gravity Drainage

• Steam injected in upper horizontal well melts the bitumen

• Bitumen flows by gravity down to the lower producing well

• Steam chamber grows as bitumen is produced

• Recovery over 60%

SAGD Applicability

• Resources to Reserves• 352 Billion @ 6%• 239 Billion @ 10%• EUB Reserves in 2000• 173 Billion based on

SAGD • Steam Assisted Gravity

Drainage

Oil Sands Reserves

Steam Assisted Gravity Drainage

Steam Assisted Gravity Drainage

• SADG needs steam. Steam Oil Ratio ~3

• Steam is water and energy– Both are limited and expensive

• Little fresh water: saline and recycle• Expensive water treatment required• Energy? Gas, Co-generation?• Gasification? Pitch? Nuclear?

SAGD CO2 Emissions• Natural gas for steam ~1 GJ/barrel• CO2 Emissions ~60 kg/bbl• Cogeneration:

– Gas turbine produces electricity – Exhaust + re-firing produces steam

• Cogen steam for SAGD with no CO2• CO2 in Cogen charged to electricity• CO2 from Cogen less than coal

Nuclear Energy for Oil Sands?

Nuclear for steam, electricity and hydrogen is possible but….

Oil Sands Projects

Source: CERI Study CAPP Backgrounder 2008

Bitumen Upgrading• Upgrading takes the black

out of black oil, the tar (asphalt)

• Synthetic crude approximates crude oil for refineries

• SCO flows and distils to refinery fuel products

• Bitumen needs carbon out or hydrogen in

• Capital, energy and CO2 intensive

• Refinery integration in US?

Wall of Cash Flow“Wall of Cash Flow”

20 Year Horizon

Source: CERI Study CAPP Backgrounder 2008

Source: CERI Study CAPP Backgrounder 2008

20 Year Horizon

Oil Sands Challenges• Environmental sustainability

– CO2 costs– Natural gas limitations and costs

• Fiscal changes, lower returns• Infrastructure limitations• Workforce • New Markets and Pipelines• Upgrading? Moving to US refineries

Inflation: Capital Cost

Source: CAPP Backgrounder 2008

Dirty Oil?

• Not the “End of Oil” nirvana• Other oil options will be produced• Oil Sands, Oil Shale, Carbonates• Life Cycle Analysis:

– 85% of Emissions in use as fuel

Life Cycle Analysis