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Alberta’s Oilsands
a report by
Canadian Oilsands
David McColl
1
and Marwan Masri
2
1. Senior Economist; 2. President and Chief Executive Officer, Canadian Energy Research Institute (CERI)
The phrase ‘resources beyond belief’ has often been used to describe We shall start with a quick overview of the methods for extracting
Alberta’s oilsands. With an estimated initial volume in place of bitumen – the extra-heavy oil mixed with sand – from the ground.
approximately 1.7 trillion barrels (269 billion m
3
) of crude bitumen,
1
the With this knowledge base provided, we shall discuss one of the
oilsands are one of the largest hydrocarbon deposits in the world. common methods for estimating whether or not a project (or
Remaining established reserves of bitumen were estimated by the projects) will be economically viable over a period of time. This is our
Alberta Energy Resource Conservation Board (ERCB) to be 172.7 billion supply cost approach. By understanding the costs associated with
barrels
2
as of 31 December 2007. Approximately 22 billion barrels are producing bitumen, we can explore some of the production profiles
under active development in the oilsands; conventional oil pales in that CERI routinely projects. Lastly, we shall discuss some of the
comparison, with a mere 1.5 billion barrels recoverable. The magnitude environmental challenges that the industry is facing.
of the established reserves has catapulted Canada into second position
for total oil reserves, behind only Saudi Arabia, as depicted in Figure 1.
3
Crude Bitumen Reserves
To process the bitumen, it must first be extracted from the ground.
Five years have passed since the Oil and Gas Journal officially recognised Bitumen from the shallower oilsands deposits (less than 75m deep) is
the reserves,
4
thrusting Alberta onto the global stage with a resource, extracted through open-pit mining operations. These mines expose the
economic and political climate that embraced international investment in oilsands by removing the overburden. The oilsand is then removed by
the province. While the oilsands are a resource beyond belief, some using truck and shovel mining methods. Bitumen is separated from the
organisations and government officials in North America view the sand through a process of adding warm water and agitation. Removing
oilsands as a ‘dirty’ fuel source that is contributing to global warming. roughly two tons of sand produces one barrel of bitumen.
Unfortunately, some of the statements made are based on incomplete
information. To be sure, there are environmental aspects of oilsands In situ means ‘in place’, and indicates that the bitumen is extracted
production that could be improved. However, as we move ahead with from the sand in the reservoir. These techniques are employed for
improving knowledge about the oilsands, it is imperative that industry, deeper oilsands deposits (more than 75m deep in the oilsands
government and the public better understand the resource and its formation). The two main in situ processes currently being used are
potential. The Canadian Energy Research Institute (CERI) acts as an cyclic steam stimulation (CSS) and steam-assisted gravity drainage
independent voice in communicating information and analyses (SAGD). These methods inject steam into the formation to heat the
associated with oilsands development to other industries within the bitumen, allowing it to flow and be pumped to the surface. More
energy sector. The purpose of this article is to provide an overview of the than 80% of remaining established reserves are estimated to be
oilsands while touching on some economic and environmental aspects. recoverable using in situ techniques.
Once extracted, the bitumen can be upgraded to produce a product
David McColl is a Senior Economist for the Canadian Energy Research Institute (CERI),
that can be accepted as a feedstock by many North American
where he has worked since November 2004. Between November 2005 and February
2007, he provided CERI and start-up energy company Energy Alberta Corp. (EAC) with
refineries. In the upgrading process, bitumen is converted from a
consulting services. Since re-joining CERI, he has become a team leader for various
viscous oil that is deficient in hydrogen and high in sulphur, nitrogen,
oilsands studies focusing on supply cost and projection outlooks and the economics and
emissions associated with natural gas alternatives for use by oilsands operators. In
oxygen and heavy metals to a high-quality ‘synthetic’ crude oil (SCO)
addition to project leadership experience, Mr McColl has co-authored a wide variety of that has similar density and viscosity characteristics to conventional
studies examining issues such as natural gas, liquefied natural gas, nuclear energy,
light sweet crude oil, with a lower sulphur content (0.1–0.2%).
oilsands and oilsands co-generation. Through his involvement with CERI, he has also
been a guest lecturer in the field of energy economics at the University of Calgary. Mr
McColl is knowledgeable in the fields of oilsands, natural gas, electricity in Canada and
Oilsands Supply Costs
nuclear energy.
Most estimates for the cost of extracting bitumen from the oilsands
E: dmccoll@ceri.ca
are based on a ‘supply cost’ approach. CERI’s supply cost estimates
take into account a 10% real rate of return, taxes, royalties,
Marwan Masri is President and Chief Executive Officer of the Canadian Energy Research
Institute (CERI), positions he has held since August 2007. Prior to this appointment, he
operating costs and other variables.
5
Converting raw bitumen to
was Vice President of Research, having joined the Institute in November 2005. Mr Masri’s SCO costs about CA$30–40 a barrel. While CERI estimates supply
experience includes a distinguished career with the California Energy Commission, which
costs for upgraders sourcing bitumen from a mine or in situ projects,
included over 29 years of experience in the energy field. His most recent positions were
Commission Deputy Director, Division Director, Technology Systems Division (Research
a quick and easy way to estimate the cost of a barrel of SCO coming
and Development) and Director of the Renewable Energy Program. Mr Masri also has
from Alberta’s oilsands (if the bitumen is sold to an independent
25 years of experience at Californian universities lecturing on the economics of energy
and the environment.
upgrader) is to add CA$30–40 to the cost of a barrel of bitumen.
Our supply costs estimates for upgraders can be found in CERI’s
E: mmasri@ceri.ca
supply cost studies.
30
© TOUCH BRIEFINGS 2008
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