SUNCOR AND OTHERS GO UNDERGROUND FOR OIL SANDS
Domestic Mine article by Harold Hough

SAGD is the hot word around Canada’s oil sands.  “Steam Assisted Gravity Drainage” as it is known, is an in situ mining process that promises to help mine the 85% of the oil sands that are too deep for conventional mining.  In the process, it reduces the environmental footprint of the frequently criticized oil sands industry.

"SAGD is a vast step change in technology with no mine, no tailings ponds and no water from the river," said Don Thompson, president of the Fort McMurray based Oilsands Developers Group. "It has changed the face of the oil sands."

Suncor isn’t the only company investing heavily in SAGD.  In the past few weeks several oil companies have announced in situ operations, including BP/ Husky and, Conoco–Phillips.  The BP/Husky operation is scheduled to begin in the second half of 2010 with the first oil production in 2014. The initial first phase is expected to produce 60,000 barrels per day, ramping up 200,000 bpd by 2020.  Most of the oil will wind up in a Toledo, Ohio, refinery under a refining and production joint venture created by the two companies in 2008.  Conoco-Phillips plans to quadruple oil sands production by 2015.  Construction will begin later this year to increase production at Surmont to 110,000 barrels per day by 2015 from current output of 27,000 bpd.

This new technology promises to make the Canadian oil sands sector a larger part of the nation’s energy industry.  Canada's oil sands reserves are second in size only to those found in Saudi Arabia. And, as technology continues to improve, that reserve number could go as high as 300 billion barrels or more.   Currently, Canadian oil sands production stands at over 1.2 million barrels per day.  Production is expected to reach 2 million bpd by 2015.   Oil sands projects are expected to boost Canadian oil production even as conventional output continues to wane.

Suncor, however leads the SAGD technology charge with its MacKay River and Firebag Project (named after the traditional bags Aboriginals once used to carry fire-starting flints).  Suncor’s in-situ operations disturb only about 15% of land, as compared to oil sands mining.  In addition, more than 90% of the water needed for the process is recycled.

SAGD promises to make the traditionally difficult oil sands recovery easier.  One reason oil companies have avoided the Canadian oil sands in the past were that they were different from traditional oil deposits and very hard to refine.  The oil sands are a mixture of bitumen, sand, water, and clay, and if you looked at an individual grain of sand under a microscope, you would see a grain of sand coated with a thin layer of water and a thick coat of bitumen.  Bitumen is a thick, tar-like hydrocarbon that can be processed into crude oil with a lot of effort.

In traditional oil sands recovery, the oil sands are crushed and treated with hot water, while the debris is screened off.  After the bitumen and sand mixture is separated from the rest of the mixture, it is diluted with naphtha, which strips the oil from the individual grains of sand.

After the naphtha is removed for recycling, the bitumen is heated and thermally cracked.  The result is coke, which is used to generate energy for the operation, and gases, which are liquefied to become synthetic crude oil.  Since the sulfur has been removed during the process, the resulting crude oil is cleaner, higher grade oil than most natural products.

In Situ production uses horizontal wells to reach the oil sands ore. The top well injects steam to heat the reservoir, allowing the bitumen to flow to the lower well where it is collected and piped to upgrading facilities.  This technology opens up the potential to recover large reserves that can't be reached economically by traditional mining methods. An independent evaluation of Suncor's in-situ leases estimates recoverable resources with a potential to produce about nine billion barrels of crude oil.  SAGD technology has the advantage of being well-suited to development in smaller increments, making costs and schedules more manageable.  And, given Suncor’s experience at Firebag, it also promises to lower the cost of recovery.

Of course, much depends on future oil prices.  More than $100 billion worth of new oil sands projects and expansions were delayed, cancelled or deferred after oil prices plummeted from their all-time highs of $147 US a barrel in the summer of 2008.