After glutted markets and gutted prices for natural gas cut the cost motive, environmental anxiety still drives an accelerating Alberta quest to reduce fuel consumption by oilsands projects.
Provincial Premier Alison Redford, elevating a spring election promise into a government policy, has committed to a C$3 billion (U.S. dollar at par) industrial research effort to make northern bitumen development acceptable and respectable.
The Alberta treasury will annually put C$150 million into a planned 20-year revival of an agency that played a role in devising current bitumen production methods, the Alberta Oilsands Technology and Research Authority (AOSTRA), Redford said. Total expenditures on improvements will be double the government outlay. The agency will only cover half the costs of technology advancement projects, with industry self-selecting realistic ideas by paying the other 50%.
The first AOSTRA generated C$1.3 billion in industrial research. The star results were equipment and techniques for in-situ, underground separation of oil and sand with gas-fired injections of superheated, high-pressure steam into the four-fifths of Alberta bitumen deposits that are too deep for open-pit mining.
The second AOSTRA will concentrate on retooling the industry with clean, even green, methods of running the mines and in-situ production complexes that have become targets for international environmental protest campaigns against Canadian "dirty oil," Redford indicated.
Disclosures of the agency revival, its research agenda and a procedure for oilsands developers to bid for support for improvement projects await forthcoming government announcements.
But a prototype that focuses on replacing gas-fired heat injections and cutting the industry's notoriously high carbon-dioxide emissions stepped forward at the event where Redford made the government commitment this week, the biennial Global Petroleum Show in Calgary.
Successful early field trials of a new method -- called Enhanced Solvent Extraction Incorporating Electromagnetic Heating (ESEIEH) -- were reported by a research consortium of Laricina Energy, Nexen Inc., Suncor Energy and Harris Corp.
Via horizontal wells, the experiment used a new antenna technology to heat oil and sand into separating by blasting radio waves into a bitumen deposit. The electronic wizardry was followed by injections of a solvent that thinned the molasses-like hot fluid enough to flow up to the surface.
The next step will be a pilot project, done on a scale that enables the group's engineers to run extended tests and make refinements that whip ESEIEH into shape for a jumbo commercial development.
In the oilsands the industry emphasis is on achieving economies of scale that spread costs thin over colossal investment. Pilot plants routinely grow into operations that would be considered production complexes by other branches of the petroleum industry, with daily output of 10,000 bbl. The standard size range for single stages in commercial in-situ projects is 30,000-50,000 b/d. For mining and upgrading complexes, the minimum economic size is 100,000 b/d.
The ESEIEH team has also followed the financing pattern intended for the revived AOSTRA. The initial field trials alone cost C$33 million and C$16.5 million or 50% came from a smaller non-profit arm of the Alberta government, its Climate Change and Emissions Management Corp.
The environmental technology research agency is funded by a provincial carbon tax on industrial operations that pump out more than 100,000 tonnes per year of greenhouse gases. Annual increases are scheduled for the levy, which was initially set at $15 per tonne, and rising revenues that will also be increased by growing carbon-dioxide emissions could be converted into the foundation for the revived AOSTRA.
Under constant bombardments of bad environmental publicity, oilsands developers have an array of technical improvements under study in their own laboratories and in university programs endowed with corporate support, especially on Calgary and Edmonton engineering campuses.
ExxonMobil Corp.'s 70%-owned Canadian affiliate -- Imperial Oil, a founder of Alberta bitumen production and one of its fastest-growing mainstays -- reports that the cleanup drive is built into its 345,000 b/d new Kearl mining project north of Fort McMurray. Proprietary methods that enable the complex to skip mine-site upgrading will reduce life-cycle greenhouse gas emissions of Kearl output to about the same level as other varieties of oil refined in the United States, Imperial chairman Bruce March told the company's annual stockholder meeting this spring.
As a leader at in-situ production as well, Imperial is working on a replacement for steam heating of deep bitumen deposits -- called the Cyclic Solvent Process -- that shows promise of almost entirely eliminating gas and water use, March said.
A recent survey of the field's science by the U.S. Congressional Research Service -- titled "Canadian oilsands: Life-Cycle Assessments of Greenhouse Gas Emissions -- put the environmental problem facing the Alberta industry into sharp focus.
On average -- depending on who does the counting and what particular plants are considered -- full-cycle carbon emissions from oilsands products including their use by consumers are 14-20% higher than from other varieties of crude on the U.S. market, the service reported. But the production part of the life-cycle in Alberta puts out 55-155% more than the average for all oil types used in the U.S.
Alberta's Energy Resources Conservation Board (ERCB) has documented another side of the oilsands problem -- high fuel consumption by thermal production that becomes a severe economic headache during periods of strong natural gas prices. As of 2020 -- when projected oilsands output hits 3.5 million b/d, more than double the current 1.6 million -- the ERCB has predicted that gas consumption in the northern bitumen belt will climb by 133% to 3 Bcf/d from 1.3 Bcf/d, unless the industry weans itself off thermal production methods.
"Alberta knows the energy sector is changing around the world and we believe we're on the leading edge," said Redford. "Innovation will be the key," the Alberta premier added as she sketched the government plan for a mega-research effort.
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