Canadian Oil Sands: Development and Future...

Canadian Oil Sands: Development Canadian Oil Sands: Development and Future Outlookand Future Outlook

National Academies Workshopon Trends in Oil Supply/Demand and Peaking of

Conventional Oil Production

Oct 20-21, 2005

Eddy IsaacsManaging Director

Alberta Energy Research Institute

WWW.AERI.AB.CA

Conventional vs. Unconventional ResourcesConventional vs. Unconventional Resources

Conventional 0il & gas

Oil Shale

Bitumen

Tight Gas

CBM

Shale Gas

Gas Hydrate

Extra Heavy

Heavy Oil

Advanced TechnologyIncreased Costs

Market Price SensitivityEnvironmental Concerns

952 billionbbls

900 billionbbls

USGS5.6 Trillion bbls

discovered

Modified from Modified from HolditchHolditch (2002) & (2002) & EtheringtonEtherington (2005)(2005)

Deep Gas

How Much will NonHow Much will Non--conventional Oil conventional Oil Contribute? Contribute?

WorldWorld--Oil ProductionOil ProductionNon-conventional oil emerges

as a major new source

0

20

40

60

80

100

120

1980 1990 2000 2010 2020 2030

mb/

d

OPEC Non-OPEC Non-conventional oil

Courtesy: International Energy Agency, World Energy Outlook (2002)

Canadian Oil Sands Canadian Oil Sands –– Huge ResourcesHuge Resources

EdmontonEdmonton

CalgaryCalgary

Peace RiverPeace RiverFort Fort

McMurrayMcMurray

Athabasca Athabasca

Peace RiverPeace RiverWabascaWabasca

ColdColdLakeLake

Alberta, Canada

EdmontonEdmonton

CalgaryCalgary


McMurrayMcMurray

Athabasca Athabasca


ColdColdLakeLake

Alberta, Canada

EdmontonEdmonton

CalgaryCalgary


McMurrayMcMurray

Athabasca Athabasca


ColdColdLakeLake

Alberta, Canada

0

100

200

300

400

Conventional

Heavy Oil

Bitumen

Canada World

(billion m )3

Wightman (1997)

Canadian vs. World Oil Resources

Three locations:

• Peace River

• Athabasca

• Cold Lake

CanadaCanada’’s Oil Sandss Oil Sands

(Billion Barrels)

Oil Sands Conv.Oil-in-placeEst. ReservesRem. Ult. Pot’l

1,629175310

6225

Reserves (2003 - EUB)

Proven World Oil ReservesProven World Oil Reserves

Source: Oil & Gas J, December 2004Source: Oil & Gas J, December 2004

billi

on b

arre

ls

0

50

100

150

200

250

300

Saudi A

rabia

Canad

aIra

nIra

qKuwait

Abu Dhab

iVen

ezuela

Russia

LibyaNigeri

a

United Stat

es

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Initial Established0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Bill

ion

barr

els

InsituMineable

InsituMineable

Initial In-Place

Canadian Oil SandsCanadian Oil Sands

The Nature of the Oil Sands ResourceThe Nature of the Oil Sands Resource

Mining 19% 610,959In Situ 81% 356,164

Reserves 2003 Production, bbls/day

Production Technology

2004

386,164

Oil Sands Oil Sands --What is special?What is special?

Bitumen

Water

Bitumen

~10 nmthick

FinesCluster

Quartz orClay Mineral

Sand Grain

““Technology Oil Technology Oil ““Continuous Innovation Since the 1930Continuous Innovation Since the 1930’’ss

From Oil SandsFrom Oil Sands To BitumenTo Bitumen to Synthetic Crude Oil to Synthetic Crude Oil

Producing Bitumen Producing Bitumen –– Surface Surface Mining Mining

1

10

100

1,000

10,000

100,000

1,000,000

10,000,000

0 100 200 300 400

Temperature (C)

Vis

cosi

ty (

cP) Cold Lake

AthabascaSurfaceMining

Innovation in Mining TechnologyFrom Draglines to Shovel & Truck Operations

1970 20001970 2000

400 tonne Ore Trucks400 tonne Ore Trucks

Slurry Hydrotransport – Remote Mine(Separation during flow)

Mining Extraction to Produce BitumenMining Extraction to Produce Bitumen

Draglines, BucketwheelsDraglines, Bucketwheels& Conveyor Systems& Conveyor Systems

HydrotransportHydrotransportSystemSystem

Truck & ShovelTruck & ShovelFeed SystemFeed System

MiningMining ExtractionExtraction

TumblersTumblers

OilOil SandSand

Oil Sand SlurryOil Sand Slurry

FrothFrothTreatmentTreatment

PrimaryPrimarySeparationSeparation

VesselVessel

UpgradingUpgrading(lots of H2)

MiningMining Projects Projects –– Who is playing the game?Who is playing the game?

Not an all inclusive listNot an all inclusive list

1980 2000 2005+

Suncor Suncor SuncorSyncrude Syncrude Syncrude

Imperial

Albian/Shell

Synenco

CNRL

Fort Hills

Producing Bitumen Producing Bitumen –– In SituIn Situ

1

10

100

1,000

10,000

100,000

1,000,000

10,000,000

0 100 200 300 400

Temperature (C)

Vis

cosi

ty (

cP) Cold Lake

AthabascaSurfaceMining

In Situ

Transporting Steam Generators Transporting Steam Generators –– Radiant Radiant Section Section

Courtesy of Mark E. Doig

Steam Generator Steam Generator –– Burner FlameBurner Flame



Central Plant Under ConstructionCentral Plant Under Construction

In Situ Production TechnologyIn Situ Production TechnologyCyclic Steam Stimulation ProcessCyclic Steam Stimulation Process

Drilling Technology Minimizes Land Drilling Technology Minimizes Land DisturbanceDisturbance

Imperial Oil Cold Lake - Cyclic Steam Project 125,000 bbl/day

Steam Assisted Gravity Drainage (SAGD)Steam Assisted Gravity Drainage (SAGD)--SchematicSchematic

EAST

Steam Chamber

Steam Injector

Steam Flow

Oil Flow

Slots

Oil Producer

SAGD Facility

Oil Sand Formation

Courtesy Neil Edmunds, EnCana

-horizontal drilling

-Moderate pressure steam (500 psi)

-50% - 70% oil in place recovery

Gravity Drainage ConceptGravity Drainage Concept(SAGD Process)(SAGD Process)

Steam Chamber Development

InjectorProducer

Temperature(°C)

Courtesy: David Law, Alberta Research Council

Source: Suncor

Steam Assisted Gravity Drainage WellsSteam Assisted Gravity Drainage Wells

In SituIn Situ Projects Projects –– Who is playing the game?Who is playing the game?

Not an all inclusive listNot an all inclusive list

1980 2000 2005+

Imperial

Numerous

Experimental

Projects

ImperialAEC

CNRLShell

PanCdnNumac

NorthstarMurphy

Imperial JACOSEnCana Deer CreekCNRL OPTI/NexenShell BlackRock

Suncor ConocoPhillipsPetroCanada Husky

MEG/CNPC DevonTotal

Upgrading Technology Upgrading Technology –– 1940 1940 -- TodayToday

Visbreaking Hydrogen Addition Coking

Thermal Cracking

SuncorSyncrude

HuskyCNRL

DeasphaltingShell/AlbianOpti-Nexen

After Murray Gray, University of Alberta

Gasification

Steam H2

Conventional Conventional Light Sweet CrudeLight Sweet Crude

Synthetic Synthetic Sweet BlendSweet Blend

LPGLPG

NaphthaNaphtha

DistillatesDistillates

VGOVGO

ResidualResidual

Sulfur 150 Sulfur 150 -- 300 300 wppmwppm

Sulfur 2 Sulfur 2 wppmwppm

Sulfur 0.29 wt%Sulfur 0.29 wt%

Sulfur 1.4 Sulfur 1.4 -- 1.8 wt%1.8 wt%

Sulfur 0.4 Sulfur 0.4 -- 0.6 wt%0.6 wt%


Aromatics 20Aromatics 20--25% LV25% LV


Aromatics 34% LVAromatics 34% LV

More VGOLower SNo Residue

More DistillateLower S

Lower S

Synthetic Crude Oil – desirable features

Oil Sands Hydrogen Demand ScenariosOil Sands Hydrogen Demand Scenarios

0

1,000,000

2,000,000

3,000,000

4,000,000

2003 2013 2023

Hyd

roge

n (

ton

nes

/yea

r)

Low ScenarioMedium ScenarioHigh Scenario

Source: Canadian Hydrogen. Current Status and Future Prospects, Dalcor Consultants & Intuit Strategies, August 2004

What the Future may look likeWhat the Future may look likeIntegrated Energy Industry, Diversified Products,Broad MarketsIntegrated Energy Industry, Diversified Products,Broad Markets

Bitumen

PetrochemicalFeedstocks

Natural Gas& NGLs

SyntheticCrude Oil

Homes & Businesses

Clean Transportation

Fuels

PrimaryPetrochemicals

Planes, Trains & Automobiles

Resins andPlastics

Fibres and Materials

Film andPackaging

Adhesives and Composite Products

Value addedProducts

Fertilizers

Clean Power

Power Plants

steam H2

Hydrogen and steamFrom Coke, Coal, Bitumen Residue

Gasification

Integrating InIntegrating In--Situ Oil Sands Production and Upgrading to Reduce Situ Oil Sands Production and Upgrading to Reduce Cost and Increase Product ValueCost and Increase Product Value

OPTI – Nexen Long Lake Project

ShellGasification

Process

Gasification Capital Cost Payout Gasification Capital Cost Payout ––SAGD with an upgrader projectSAGD with an upgrader project

0

4

8

12

16

0 2 4 6 8 10Natural Gas Prices, US$/Mcf

Payo

ut, y

ears

Source: FirstEnergy Capital

Adjusted for 17% volume shrinkage

Oil Sands Production CostsOil Sands Production Costs

9 to 146 to 12BitumenSteam Assisted Gravity Drainage (SAGD)

10 to 156 to 11BitumenCyclic Steam Stimulation (CSS)

10 to 135 to 8BitumenMining/Extraction

SupplyOperatingCost per barrel (US$, 2003)Crude

TypeProduction

Method

18 to 2310 to 14SyntheticMining/Upgrading

SupplyOperating

Cost per barrel (US$, 2003)Crude Type

Production Method

18 to 2310 to 14SyntheticMining/Upgrading

SupplyOperating

Cost per barrel (US$, 2003)Crude Type

Production Method

Source: National Energy Board of CanadaSource: National Energy Board of Canada

Oil Sands Production PotentialOil Sands Production Potential

• $US2O Billion under construction or approved

• $50 Billion additional announced

• ~ 70% of Canada’s production by 2020

What About Transportation?What About Transportation?

Expanded Markets to Sustain GrowthExpanded Markets to Sustain Growth

1

Cushing

Woodriver

Fort McMurray

Montreal

Toronto

Gretna

Regina

Hardisty

Kerrobert

Cromer

Patoka

Wood River

Catlettsburg

Casper

Mandan

ClearbrookSuperior

Salt Lake CitySinclair

Cheyenne

DenverMcPherson

Ponca City Tulsa

El DoradoCoffeyville

ArdmoreMemphis

Billings

Great Falls

ToledoCanton

DetroitChicago

Robinson

Edmonton

Corpus Christi

HoustonPort Arthur

New Orleans

Lake CharlesTexas CityFreeport

Puget Sound

San Francisco

Bakersfield

Los Angeles

Borger/SunrayArtesia

El Paso Big Spring

St. Paul

Lima

Buffalo

Refineries

Canadian SuppliedNot Canadian Supplied

3(2007)

2(2005)

(2005)1

4(2007)

1-5 are NewMarkets

Enbridge: New Market Access Plan

Expanded Markets to Sustain GrowthExpanded Markets to Sustain Growth

5(2010)

Gateway ProjectCapacity 400,000 bpd

CaliforniaMarkets

5b

Far EastMarkets

5a

Sea transport from Kitimat -similar distance to Asia

as the Middle East

Potential Markets Potential Markets -- US West Coast & Far EastUS West Coast & Far East

SummarySummaryCanadian oil sands resources are immense Serious challenges remain

Technical – hard to extract and sensitive to market and input costsEnvironmental – land, water, emissions (including CO2)Social – community growth, native populationHuman resource – maintaining a skilled labor force

Innovation is key to “technology oil”Production is expected to reach 3 MM bbls/d before 2020 (currently 1 MM bbls/d)As production increases, more upgrading will be required to meet refinery specifications and increase valueFuture co-production of clean fuels and Petrochemicals -technically and economically feasible

Even this aggressive development can supply only some 10 - 15% of the required new global oil demand

Canadian Oil Sands: Development and Future...

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