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CANADIAN OIL SANDS ARE A HOT PROPERTY
Canadian Mine article by Harold Hough June/July 2009
Oil prices may have taken a dive since last summer, but that
hasn’t dampened the interest in Canadian oil sands. They
remain a hot property. The recent merger announced between Suncor
and Petro-Canada to create a major “energy/oil sands”
corporation only proves the long term interest in oil sands development.
The new Suncor will rival the Royal Bank as Canada’s most
valuable corporation. It will also join the ranks of the world’s
top 20 energy producers. And, unlike the other energy producers,
it has the capacity to expand, while the others are struggling
to grow.
There is no surprise that a major oil sands player would become
a major energy producer. 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 one million barrels per day. “It is clear
that the board and management must have real confidence in the
oil sands as a long-term play,” said Mike Percy, dean of
business at the University of Alberta. The new Suncor will have
a resource base with approximately 7.5 billion barrels of oil
equivalent (boe) of proved (developed and undeveloped) and probable
reserves.
Suncor isn’t the only big oil company with an appetite for
oil sands. Exxon said it replaced 103% of the oil it produced
in 2008, marking the 15th straight year Exxon has replaced more
than it has pumped. Half the company’s new resources came
from a single source - the Kearl Phase 1 oil sands project in
Canada which totaled 1.1 boe. And, for several months, before
the Suncor/Petro-Canada merger, there were rumors that several
foreign energy companies were interested in buying oil sands properties.
With the election of President Obama, Canada’s oil sands
look even more desirable.
Not only is Canada a stable neighbor, it is already the United
States’ largest source of imported petroleum and a potential
source for more energy. Investing in Canadian oil sands is not
only a good investment, it offers a reliable petroleum source
that lies outside any restrictive regulations the Obama Administration
may put on US energy production. Yet, it enhances national security
by providing a secure energy supply according to the Center for
North American Energy Security which advocates the development
of unconventional fuels like oil sands, oil shales, and heavy
oil in the US, Canada, and Mexico.
UNLOCKING THE OIL SANDS
Suncor’s major investment in oil sands isn’t surprising.
In fact, while other oil companies were avoiding Canada’s
oil sands as an energy source for decades, Suncor had the foresight
to invest early on; long before the current oil sands craze.
One reason other oil companies avoided the Canadian oil sands
deposits was that they were different from traditional oil deposits
and very hard to exploit. 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.
Although the deposits were discovered in 1719, it took two hundred
years for scientists to find a process that could separate the
oil from the sand. But the process was difficult and although
some companies tried to mine the sand, the region was only producing
450 barrels of oil a day during WW II. It was Suncor, which opened
up its first commercially successful oil sands mine 41 years ago,
that has managed to perfect an economical way to mine the oil
sands.
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.
One concern about using oil sands is environmental. However,
the industry is trying to alleviate that concern with “in
situ” mining which doesn’t disturb the terrain, while
still accessing the bitumen. 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.
In situ mining uses horizontal wells to reach the oil sands.
One 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 leaves the sand in place and dramatically reduces
reclamation costs.
Whether the oil sands are processed with traditional technology
or with newer methods like in situ mining, they will be critical
to any realistic American energy policy, especially if the Obama
Administration cripples the domestic energy industry. Canada’s
oil sands represent a massive energy source in our back yard that
can be used to power our petroleum dependant economy. They are
also found inside a peace loving country with a democratic tradition,
which means we will not be sending money to unstable or unfriendly
regimes. No matter what the price of petroleum in the future,
Canada’s oil sands will remain a hot property.
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