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SUNCOR TAPS CANADIAN OIL SANDS

Domestic Mine article by Harold Hough Oct/Nov 2008

Rick George, President and CEO of Suncor Energy often tells people that in 1951, Time Magazine called the province of Alberta, the "Texas of the North.” Unlike Texas though, Alberta’s petroleum will be mined, not pumped.

Canada’s oil sands reserves are definitely larger than those of Texas. In fact, 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. Production is expected to triple by 2015. By 2030, the Canadian oil sands industry could be producing five million barrels per day. No wonder Conoco-Phillips, Exxon, Chevron, Petro-Canada and Shell are now in the oil sand business

With so much potential, it was no surprise that Suncor announced earlier this year that its board had approved a $20.6 billion investment that is expected to boost crude oil production at the company’s oil sands operation, located north of Fort McMurray, by 200,000 barrels per day (bpd). By 2012, Suncor production is estimated to be 550,000 bpd. The expansion plans include constructing four additional stages of in-situ bitumen production, a new upgrader (Suncor’s third) that will convert bitumen into higher-value crude oil, and various infrastructure and utilities. The new upgrader is expected to be completed in 2011, while bitumen feed from the new stages of in-situ production is expected to begin operation in 2009 through 2011. Crude oil production is expected to begin ramping up in late 2011

One area of focus will be in situ mining that doesn’t disturb the terrain, while still accessing the bitumen. “This will allow us to reduce our environmental footprint,” said George. 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.

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.

In order to lower the impact on the environment, Suncor has been developing in situ technology. Unfortunately, the technology has been harder to develop than had been previously imagined and led to production figures that were lower than original forecasts.

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. 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. While Canadians will never be Texans, we can sure be thankful that they won’t be like Iran’s leaders either.