It was some three years ago that Dr. Fadhil Chalabi pointed out at his office in London that the industrialized world was looking closely at the tar sand from Canada, as one of the alternatives to sources of energy. There appears an eagerness to diversify sources of energy away from the Middle East. Dr. Chalabi is the executive director of the London-based Center for Global Energy Studies.
There is a definite rush toward exploiting the energy riches available in the sands of Alberta, Canada. The subject of energy from tar sand has generated considerable interest in the energy fraternity. The underlining point is that many are looking it as one of the sources which could reduce dependence on the countries of the Middle East.
The flow of synthetic crude out of the oil sands now exceeds that of conventional crude from Alberta’s southern oil fields. In theory some say, their capacity is second only to giant oil fields of Saudi Arabia. According to Canadian National Energy Board estimates, there are 1.6 trillion barrels of oil in the sands — of which 178 billion barrels are recoverable. However, extracting the oil is not that simple and cost effective a proposition as is the case of extracting oil from the wells.
This year, the tar sands are projected to produce just over one million barrels a day on average, nearly equal to the 1.1 million barrels produced by conventional means. However, the interesting point to note is that Alberta’s conventional production by 2015 is projected to drop by more than 40 percent, to almost 600,000 bpd, whereas, the production from sands by that time would more than double to 2.6 million bpd. The three biggest integrated operations, combining large-scale mining with on-site upgrading operations, include Syncrude — currently producing more than 230,000 bpd, Suncor producing 233,000 bpd of crude and the Athabasca Oil Sands Project, a joint venture between Shell, Chevron and Western Sands L.P. Another project that will use the oil sands’ own energy to power extraction and upgrading processes is also about to commence. This is a joint effort between OPTI Canada Inc. and the Nexen Petroleum Canada in the south of McMurray.
However, a significant problem with the tar sands is that these are not just a source of energy; they are also a voracious consumer of energy in the form of natural gas - and in that capacity are competing with gas users in both the home energy sector and the industrial sector. Oil sand plants, as they are generally referred to, make or lose money on labor costs and the cost of energy they need to drive the plants. For comparison sake only it is worth mentioning that both of these are only marginally important to conventional oil.
The most common method, which uses steam to force the heavy, black bitumen to the surface, requires copious quantities of natural gas. According to industry leaders, it takes 1,000 cubic feet of gas to convert a barrel of bitumen into light oil. Eyebrows are often raised on the use of gas to produce crude. Gas is not only a clean fuel; it’s a rich source of raw material for the petrochemical industry. Some hence argue it is crazy to burn the clean fuel in order to obtain bitumen — heavy oil.
Further, the growth of sand tar also requires massive amounts of capital. Upgrading the heavy, black oil, known in the trade, as bitumen, into usable products requires a lot investment.
One of the three major projects currently underway in Canada — the Suncor project, according to internal estimates, requires $1.5 billion a year or even more over the next seven to eight years, to take its production level to 500,000 bpd by 2016 from the current 225,000 bpd.
Fossil fuel still would remain to be the prime energy option, for many more decades — if not centuries — to come, one could safely deduce.
