Oil Sands: Tapping Alberta's Energy Gold Mine

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The following is an advisory by Industrialinfo.com (Industrial Information Resources, Inc.; Houston, Texas). Not since the days of Spindletop has there been such a buzz in the oil industry. However, the buzz heard today is not the sound of oil well gushers spewing black gold into the air, but it is the sound of giant mine shovels and haul trucks digging up the riches of Alberta's oil sands deposits. With an estimated resource of 1.7 trillion barrels of Bitumen, Alberta is sitting on an energy gold mine. Industrialinfo.com is tracking $25 Billion in planned oil sands projects, which include construction of large open pit mines, in-situ (in the ground) oil well fields, upgraders/refineries (HPI), and related infrastructure projects (distribution pipelines, terminals and power plants).

Alberta's oil sands were first commercially mined in 1967 by Great Canadian Oil Sands, the predecessor of Suncor Energy Incorporated (Calgary, Alberta). Alberta's oil sands are located in the northern part of the province and are mined at giant open pit mines operated by Suncor Energy and Syncrude Canada Limited (Fort McMurray, Alberta). These companies are mining reserves that are close to the surface and easiest to get to. Both Suncor and Syncrude initiated major capital expenditures in the area during the 1990's and now more than a dozen other companies are planning oil sands projects in the area.

After the oil sand is mined it is milled, if necessary, and then sent to an extraction plant, where bitumen is separated from the sand and water utilizing a hot water separation process. Planned mining projects total $12.4 billion representing 795,000 BBL/day of new capacity by the end of the decade.

Bitumen is a hydrogen deficient hydrocarbon and must be upgraded by coking or hydrocracking to be useful as a downstream product. Both Suncor and Syncrude operate upgraders or refineries in the area to further refine bitumen into useful byproducts such as naphtha, fuel oil, and kerosene. Approximately $2.9 billion in new upgraders and expansions of existing facilities are being planned.

It is uneconomical to mine deeper oil sands deposits due to the high cost of overburden removal. The bitumen in these deeper deposits must be extracted by in-situ methods. New in-situ technologies, such as Steam Assisted Gravity Drainage (SAGD), are leading the next wave of investment in the area. SAGD utilizes pairs of parallel wells drilled horizontally. Steam is injected in the top well, this heats up the sludge-like bitumen and gravity enables it to be collected and flow out in the extraction well. Planned SAGD projects total $5 billion, or 462,000 BBL/day of new capacity by the end of the decade.

Related infrastructure projects total about $4.78 billion and include new pipelines, terminals, and power plants.