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Oil Sands Fever

24 November 2005

Miningpicture
An oil sands mine from the air.

The Pembina Institute, an environmental group based in Alberta, Canada, has issued a cautionary environmental report on the effects of the boom in Canadian oil sands production.

The report, Oil Sands Fever: The Environmental Implications of Canada’s Oil Sands Rush, warns of escalating water usage, rising greenhouse gas emissions and the disruption of Alberta’s boreal forest.

The report calls for a sustainable approach to oil sands development, including establishing parameters for development and reclamation; creating a new fiscal plan that eliminates federal tax subsidies and increases royalty revenue; and investing a portion of the wealth in a sustainable energy fund.

Alberta is home to nearly all of Canada’s oil sands—and area of 149,000 square kilometers that constitute about 23% of the entire province. Today, about one-third of Canada’s total oil production is derived from these oil sands. That’s changing rapidly.

With the production constraints and declining fields of conventional oil and the resulting surge in prices, investment in the unconventional production of crude from oil sands in Canada has soared. The Canadian Association of Petroleum Producers (CAPP) earlier thus year projected a 50% total increase in Canadian crude oil production by 2015 from 2.6 million barrels per day in 2004 to 3.9 million barrels per day, with an investment of some C$87 billion over the next 10 years. (Earlier post.)

Government and industry see the potential of increasing that to 5 million barrels per day by 2030, making Canada one of the top oil producing and exporting countries of the world.

Oil sands are a mixture of sand, clay, water and deposits of bitumen—a very viscous form of oil that must be rigorously treated in order to convert it into an upgraded crude oil before it can be used in refineries to produce gasoline and other fuels. (Oil sands used to be called tar sands, to give you a sense of it.) The ratio of bitumen to everything else is relatively small: 10%–12%.

The bitumen contained in the oil sands is characterized by high densities, very high viscosities, high metal concentrations, high amounts of sulfur and a high ratio of carbon to hydrogen molecules. With a density range of 970 to 1,015 kilograms per cubic meter (8-14° API), and a viscosity at room temperature typically greater than 50,000 centipose, bitumen is a thick, black, tar-like substance that pours extremely slowly.

Oil sands production can be divided into in-situ production (heating and other processing of the tar-like sands while still underground to release the oil, with subsequent extraction) and mined production (where the sands are mined, and then hauled to a retort for processing).

Once extracted, the resulting heavy crude must then be upgraded into useful product.

Investment announcements in the oil sands have flowed hot and heavy the past few weeks. A few prime examples:

  • Canadian Natural Resources used the presentation of its Q3 results to announce an aggressive oil sands and heavy oil expansion plan that could cost some C$25 billion (US$ 21.2 billion) and propel the company into the ranks of the top independent oil producers globally.

    The proposed capital expenditure amounts to nearly the C$29-billion market capitalization of the company, which is Canada’s No. 2 oil and natural gas producer.

  • EnCana, Canada’s largest natural-gas producer, announced it is exploring investing some C$5 billion to increase its oil-sands production 12-fold (from 42,000 barrels per day to 500,000 barrels per day) over the next decade. Another C$7.5 billion would be needed to maintain production over the life of the project. Investors reportedly are knocking at EnCana’s door to get in on the work.

  • Shell Canada Ltd., Canada’s fourth-largest oil company, said it plans to boost capital spending 60% next year partly to increase output from an oil-sands project in Alberta. The company forecasts spending C$2.7 billion ($2.28 billion) in 2006, with C$965 million allocated to the Athabasca Oil Sands Project.

Areas of primary environmental concern relative to oil sands production include:

  • Surface disturbance from mining operations.

  • Water. Both types of processing consumer large amounts of water, ranging from 2.5 units to 4.0 units of water for each unit of bitumen produced.

  • Greenhouse gases. Oil sand operations emit large amounts of carbon dioxide (CO2) and some methane (CH4) gas and nitrous oxide (N2O). Increases of GHG emissions from oil sands production will have to factor in to Canada’s Kyoto compliance.

  • Criteria pollutants such as oxides of nitrogen (NOx), sulphur dioxide (S02), volatile organic compounds (VOCs) and particulate matter (PM).

  • Energy needs. The recovery and upgrading of bitumen from the oil sands are energy intensive activities, consuming large amounts of natural gas, electricity, transportation fuels and hydrogen.

Pembina_nox Pembina_sox
Nitrogen oxide intensity of producing synthetic crude oil from oil sands versus conventional oil in Alberta Sulphur dioxide intensity of producing synthetic crude oil from oil sands versus conventional oil in Alberta.

As a result, the Pembina report argues:

The magnitude of the risks and opportunities arising from Canada’s oil sands rush is unprecedented in the history of Canadian energy production. All Canadians, including future generations of Canadians, have a stake in the outcome.

Given the scale and pace of the development, it is clear that Canada has a global responsibility for demonstrating stewardship and leadership in preventing the current and rapidly increasing environmental impacts of oil sands exploitation. Furthermore, any development of the oil sands must be done in the context of a national strategy for the transition from environmentally intensive conventional energy to an economy based on sustainable energy.

The report makes four primary recommendations for Canada to demonstrate leadership in this area:

  1. Responsible use.

    • Develop a national energy framework by the end of 2006 with targets and supporting policies for energy efficiency, energy conservation, renewable energy and conventional energy in collaboration with the provinces, First Nations, industry and non-governmental organizations (NGOs).
    • Provide incentives for responsible consumption.
    • Regulate Canadian fleet fuel efficiency based on best available technology.

  2. Protecting the climate.

    • Define Best Available Technology Economically Achievable (BATEA)-based targets for the oil sands industry at a level that ensures new and expanded projects make a meaningful contribution towards meeting Canada’s emission reductions obligations under the Kyoto protocol.
    • Invest in research and provide incentives to promote the commercialization of more efficient transportation-based technologies and the development of low-impact alternative fuels.
    • Require all existing and new oil sands operations to be carbon-neutral (net zero GHG emissions) by 2020 through a combination of actual reductions and emission offsets.

  3. Protecting the Regional Environment.

    • The government of Alberta should establish a conservation offset within the oil sands region by protecting an area of intact boreal forest of high conservation value that is representative of the region.
    • Alberta should establish interim environmental limits that protect human health and the environmental integrity of the region before approving additional oil sands development.
    • Alberta should establish clear reclamation expectations that ensure the long-term ecological sustainability of the region before approving additional oil sands development.
    • The governments of Canada and Alberta should create the conditions for CEMA to successfully refine environmental limits and develop regional environmental management systems to guide decisions about future oil sands development. This will require the development of specific memoranda of understanding between government and CEMA that include clear deliverables and a firm schedule, the provision of additional human and financial resources, and clear statements of political expectation and support for meaningful outcomes.
    • Canada and Alberta should assume responsibility for those issues that will not or cannot be addressed through the CEMA process in a timely fashion. Commit to a process to consult with stakeholders and a schedule to implement new standards and systems to manage these issues.
    • Canada and Alberta should ensure that industry maximizes their use of best available technologies to minimize the rate of increase of cumulative environmental impacts.

  4. Establishing an Equitable Fiscal Regime

    • Establish a timeline for eliminating federal subsidies, especially tax advantages, to the oil and gas sector.
    • Redirect subsidies and favorable fiscal policies towards conservation of energy, energy efficiency and expansion of low-impact renewable energy.
    • Maximize the collection of royalties and taxes to compensate current and future generations of Albertans and Canadians for the utilization of this publicly owned, nonrenewable resource.
    • Invest a portion of the wealth derived from royalties and taxes into a permanent fund for sustainable energy to foster further innovation in energy conservation, energy efficiency and the production of low-impact renewable energy.

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November 24, 2005 in Canada, Oil, Oil sands | Permalink | Comments (22) | TrackBack (5)

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» New Energy Currents: 2005-12-02 from Winds of Change.NET
After a two-month hiatus to adjust to some new academic obligations, New Energy Currents is back, and better, with a more robust selection of links and significant expansions in two different directions. First and foremost,... [Read More]

» New Energy Currents: 2005-12-02 from Winds of Change.NET
After a two-month hiatus to adjust to some new academic obligations, New Energy Currents is back, and better, with a more robust selection of links and significant expansions in two different directions. First and foremost,... [Read More]

» Oil sands from Econbrowser
Are oil sands the answer to peak oil? They'll help some, to be sure. But they're not a reason to ignore the issue. [Read More]

» Oil sands from Econbrowser
Are oil sands the answer to peak oil? They'll help some, to be sure. But they're not a reason to ignore the issue. [Read More]

» Oil sands from Econbrowser
Are oil sands the answer to peak oil? They'll help some, to be sure. But they're not a reason to ignore the issue. [Read More]

Comments

Oil sands promise to be an ecological disaster of immense proportions. I see nothing here that will change that. Preserving boreal forests? Please. These forests are already presumably taking up carbon so you would just be making things better than they would have been.

Stop the production of oil sands now. Resume only after the development of proven technology that will make their production carbon neutral.

Naa they are going full tilt on oil sands and there is nothing that will stop it.

The size of the digs is just mind boggling. Just one small testing dig was like a large city and the explansion plans call for something far larger then chicago and new york city combined. Its HUGE.

Wow. That makes nuclear energy seem freindly. It even makes non strip mined coal seem not so bad. Not that I am for strip mining or coal use, they all increase co2 output and use a resource that cannot be replaced. This is a real problem with the price of rising oil, people will do almost anything to get it. Wait till oil is $100 a barrell. What will people do to get it then?

At some point, even with a total disregard for gouging up huge chunks of earth, these guys have to run into an issue with water supply and pollution.

I think nukes would be preferrable. At least we'll get some H2 out of it (along with 20,000 year waste storage problems).

Re: Lance

Yeh. Nuke 'em. Or did I not understand what you meant?

Talk about your clusterfuck.

"Wait till oil is $100 a barrel. What will people do to get it then?"

There will be human being fireworks show everyday in every single place that produce oil.

Btw, at $100 per barrel, there will be more better option then waging war for oil.

It gets even better. I have heard that they are looking at building nuke plants to generate electricity with the waste heat being used to extract the oil from the sands. The nuke heat would be used in place of the expensive natural gas they use now.

Holy crap batman I just got back from Fort McMurry and it's like mad max. I've stayed out of there so far in my contacting career but my curiosity got the best of me. My suspicions were confirmed it looks like a environmental disaster zone. Tailing ponds as big a lakes that they havn't figured out how to get rid of. Big boulders getting sucked into 2500 hp pumps with the familiar bang clang with Tina Turner singing in the back ground.

And it may get much worse when production is stepped up from 1 MB to 5MB a year, mainly for export south of the border. Thanks to Oil Sands extraction and associated upgrading and power facilities, Canada is now number one per capita polluter in the industrial world. Signing the Kyoto agreement seems to have an opposite effect of CO2 emissions in Canada. Guess who is going to pay to clean it up.

Fossil fuel conservation would be a much better idea. Using CLEAN energy from Hydro, Wind, Waves, Sun (and even Nuclear?)for our domestic, industrial and transportation needs is a better sustainable solution.

Correction: Should read ... from 1 MB to 5 MB a day..

One the nuclear question, the Alberta Premier Ralph Klein is dismissing the possibility of building a nuclear power plant in the oilsands region to support the production and upgrading of the resource.

Klein also says that he is firmly set against using natural gas for the processing, preferring to see the oil sands companies use coal, hydroelectricity, coal bed methane or the bitumen itself as “much better alternative than using natural gas.”. Using natural gas would be a “tremendous waste of a resource.” (Earlier post)

That's one ugly picture...

Bitumen, a very soft coal. If you are going to do something stupid at least be smart in how you do it. Send the gunk through thermal depolymersation.

"they are looking at building nuke plants to generate electricity with the waste heat being used to extract the oil from the sands. The nuke heat would be used in place of the expensive natural gas they use now."

Sound thinking.

I would like to know how to get a job making some real money working for a company or companies in the oil sands? I seen 60min, they said workers make $100,ooo thousand or moore a year? I want a job like that any info? Thanks Steve

i would like to know how to secure a job at the oil sand site iam a british citizen & a student of law in my part two, could you please furnish me with more information as regard the above

i've posted a comment requiring information as per how to secure a job at the oil sand site on (18/2/06) iam a british citizen, a part two law student seeking any great opportunity to make money.

Hello

I live in sweden , and I want to begin to work with oil sand, is there anyone who can give some information how I shall do..

Thanks

Hello


I live in SAudi Arabia, and I want to begin to work with oil sand, is there anyone who can give some information how I shall do..

thanks

Mature Experienced US ATP Pilot and A@P (Engineer) is Interested in a Pilot Job flying in and out of Fort Mcmurry Canada DHC-6, CV-580, YS-11, DC-9/MD-90/B-717,
BAC-111, C-130, C-46, ND-262 G-111, G-73T, BE-200

looking for info on jobs in oil sands

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