Oil sands from Alberta, Canada.
Photo courtesy of Suncor Energy
Celebrations marking the Province of Alberta’s 100-year history are
in full swing. Attendees of the 2005 AAPG Annual Convention in Calgary will join their host organization, the Canadian Society of Petroleum Geologists, in centennial celebrations.
news: In March, the government of Alberta announced that --
for the first time in its 100-year history -- the province
was home to more than $100 billion worth of major projects that
have been recently completed, are currently under construction or
are scheduled to begin within two years.
Energy investment leads the pack, with $69 billion allocated for
projects in oil sands, $6 billion in oil and gas, $2 billion in
pipelines and $4 billion in power projects.
question: What happens next?
a top energy executive and a well-known public figure in Alberta,
has some suggestions for Albertas future prosperity, and it
involves moving beyond a simple oil and gas economy to integrating
less attractive or marginalized carbon fuels like coal, coke, asphaltenes
and biomass into the energy pyramid.
to Dinning, the Alberta government must invest more of its windfall
profits from oil and gas royalties into research and development
that will transform the province into "the clean energy powerhouse
of the world."
is the former executive vice-president of TransAlta Corporation,
a power company and Canadas largest producer of wind energy
and, until recently, chairman of the Canadian Clean Power Coalition.
He envisions the construction of a multi-billion dollar, clean-burning
coal facility that will reduce the provinces reliance upon
natural gas, a commodity that is subject to price volatility and
increasingly constrained by supply in North America.
to "put the margin back into marginal carbons.
you put all your eggs into another basket, especially one like natural
gas, you can get hooked," Dinning said. "The last thing
that we want to do is to shut down those carbons that are marginal."
-- the provincial government treasurer from 1992-97 whos
preparing to take a run at Albertas top political job --
said the gasification of marginalized carbons to produce energy
will enable Alberta to meet its expanding energy needs and exceed
emissions reductions under the Kyoto Protocol by up to five times.
want to be on the leading edge of design technology and eliminate
emissions through the technologies that we develop, rather than
through regulation," he said. "An international protocol
(Kyoto) shouldnt dictate what should happen in Canada and,
in so doing, hobble a carbon asset. Kyoto cant match a made-in-Canada
called for Alberta to increase R&D spending to levels enjoyed
during the hey-day of AOSTRA (Alberta Oil Sands Technology and Research
Authority). Then, during a 20-year period, AOSTRA received nearly
$1 billion in government support for R&D studies that are widely
credited in the development of a commercial oil sands industry.
energy research, the Alberta government is doing more than any other
province," Dinning said. "Is it enough? The answer is
the (Natural Gas) Habit
to Dinning, "injecting natural gas into the oil sands to produce
oil is like turning gold into lead."
In a 2004
report on Canadas oil sands, the National Energy Board stated
that natural gas costs can comprise up to 50 percent or more of
total operating costs in a thermal -- or steam assisted --
in situ project.
described gasification technology that offers an elegant solution
to the natural gas crunch that Albertas heavy oil producers
will face during the next decade. According to a 2004 Canadian Energy
Research Institute (CERI) report, natural gas consumption for oil
sands extraction and refining -- currently sitting just below
a billion cubic feet per day -- could skyrocket to between 2.2
and 3.7 billion cubic feet per day by 2017, leaving many wondering
where the gas will come from to fuel future expansions.
proposed Mackenzie Valley pipeline -- scheduled to ship 1.8
billion cubic feet per day from the Canadian Arctic to Alberta --
would not feed the oil sands producers growing appetite for
CERIs study predicted a "very robust future" for
Albertas oil sands industry during the next 13 years --
given a "reasonable" outlook for oil prices. The study
was based upon conservative commodity prices -- US$25 per barrel
for West Texas Intermediate and US$4 per million British thermal
units for natural gas.
are huge. With 2.5 trillion barrels of crude bitumen in place, and
remaining established reserves of 178 billion barrels, Albertas
oil sands are second only to Saudi Arabias total reserves.
In 2004, Albertas oil sands industry produced about a million
barrels per day, or close to 50 percent of Canadas total daily
oil production. Based on CERIs most likely growth scenario,
daily production from Albertas oil sands could hit 2.2 million
barrels of synthetic crude and unprocessed crude bitumen by 2017.
of the gasification process include value-added products for Albertas
needed to upgrade heavy oil.
or "syngas," to generate electrical power and steam.
dioxide to inject into subsurface reservoirs for enhanced oil
and urea, feedstocks of the petrochemical industry.
is the sweet spot where geology meets geography," Dinning said
of the plans for a clean coal facility near Edmonton. "Virtually
no other place in the world has all of the elements where they come
together in such an integrated fashion."
often describe "clean coal" as an oxymoron, proponents
point out that the gasification process generates emissions comparable
to those produced by natural gas power plants. The ability to "fix"
carbon dioxide (the main greenhouse gas), nitrogen and sulfur into
feed stocks for the petrochemical industry means that emissions
can be further reduced.
technology has been successfully used in the refining, petrochemical
and power industries since the late 1940s. The two global leaders
are the Royal Dutch/Shell Group of Companies and the General Electric
Company. GE Energy currently operates 16 facilities in the United
States, 22 in Europe and 27 in Asia. Globally, GE Energy produces
more than five billion cubic feet per day of syngas. According to
a GE spokesperson, the company is targeting China, the United States
and Alberta for new business opportunities.
Inc.s Long Lake project, 40 kilometers southeast of Fort McMurray,
will employ Shells gasification technology to produce syngas,
power and hydrogen from asphaltenes, the bottom or heavy ends of
the oil barrel. The 21,000-hectare Long Lake oil sands lease is
estimated to contain 7.1 billion barrels of bitumen in place. Phase
One will develop a 6,700-hectare area containing an estimated 1.1
billion barrels of recoverable bitumen reserves and resources.
project represents the first commercial gasification project in
Canada. Operated as a 50/50 joint venture with Nexen Petroleum Canada,
the $3.4-billion Long Lake project is also the first SAGD (Steam
Assisted Gravity Drainage) operation in the Athabasca oil sands
region to include onsite upgrading and refining capabilities.
unique combination of extraction and upgrading technology makes
it the poster child for the new wave of energy efficient oil sands
Lake, the liquid asphaltenes are sent to the gasification unit where
they are converted into synthetic gas (or refinery off-gas), steam
and hydrogen. The synthetic gas, or "syngas," has a heating
capacity of about 300 British thermal units per standard cubic feet,
as compared to 1,000 British thermal units/standard cubic feet for
will be used to generate steam for the SAGD process. Instead of
flaring excess syngas, this "free" energy source will
be harnessed to generate power onsite in the cogeneration facility.
will be sold to Albertas deregulated power grid.
to the Hydrogen Economy
to the Canadian Clean Power Coalition (CCPC), a national association
of coal and coal-fired electricity producers, North Americas
hydrocarbon reserves are skewed by coal, which comprises 92 percent
of the reserves; oil and gas total the remaining 8 percent.
coal reserves -- often described as infinite -- are immune
to the price fluctuations seen in natural gas.
is not a carbon that should be shelved," Dinning said. "Coal
is not only cheap, its not volatile."
to Dinning, 70 percent of Albertas electricity is generated
through conventional coal fired facilities.
the CCPC released the results of a two-year study on clean coal.
"Gasification is the right technology for coal in the future,"
explained Dinning. The study contemplates the construction of a
$2 billion to $3 billion demonstration plant, most likely in Alberta,
comments were echoed by Duke du Plessis, a senior advisor with Alberta
Economic Development and the Alberta Energy Research Institute (AERI).
AERI is one of three Canadian government participants in the CCPC.
think the conditions are right for this technology to come into
commercial use," du Plessis said. "Coal is the bridge
to the hydrogen economy that everyone talks about. Hydrogen is a
clean fuel, and is increasingly being viewed as a fuel of the future."
it is unclear who will pay for the demonstration plant.
barrier is going to be getting the funding in place," du Plessis
hasnt the coal utility business done this before? Because
we havent had to," Dinning said.
and the need to reduce greenhouse gas emissions under the Kyoto
Protocol, he added, are powerful agents of change and energy integration.
New Energy Source
oil sands contain dense and viscous bitumen with a high ratio of
carbon-to-hydrogen molecules; in other words, they are hydrogen
deficient compared to conventional crudes.
to a synthetic crude can be accomplished by two methods:
which rejects carbon molecules. This process produces a solid,
coal-like waste by-product.
hydrocracking, which adds hydrogen molecules.
Inc. and Syncrude Canada Ltd. operate Albertas two largest
oil sands mines near Fort McMurray, complete with onsite upgrading
and refining capabilities. Both companies create deasphalted oil
through a coking process. OPTIs OrCrudeÔ process, in
comparison, creates upgraded synthetic crude through thermal cracking.
Suncor filed a regulatory application to construct a third oil sands
upgrader at its mine site near Fort McMurray -- preliminary
cost estimates are $5.9 billion, with an additional $600 million
to build a petroleum coke gasifier. According to Patty Lewis, a
spokesperson for Suncor, the addition of a third upgrader will boost
production to 550,000 barrels per day by 2012.
gasifier will be the first of its kind at an oil sands mining operation.
the coke gasifier a "key component" of Suncors expansion.
However, she categorized the gasification project as "early
days." Suncor expects that gasifier will consume about 20 percent
of the coke produced from the new upgrader.
got a long way to go to prove this technology," she said, "but
weve got time on our side, and the technology is evolving."
as an alternative energy source -- while seemingly attractive
-- presents some challenges for Albertas oil sands industry:
On the one hand, a coke pile represents a waste by-product from
the upgrading process that can be gasified to produce energy.
the flip side, a coke pile is a valuable carbon sink, and a commodity
that can be used in the future to offset greenhouse gas emissions
under the Kyoto Protocol.
been burning sulfur rich coke in its boilers for decades at its
mine near Fort McMurray. However, the gasification of the coke --
which will liberate carbon dioxide gases -- must be offset by
carbon dioxide capture and sequestration. And, that might require
the construction of a pipeline to transport carbon dioxide south
where it could be used in Enhanced Oil Recovery (EOR) projects or
sequestered in depleted oil and gas reservoirs.
according to Lewis, "is how do we build this gasifier and fulfill
our commitments to Kyoto?
is weighing the balance between a good business decision and long-term
environmental responsibility," she added.