ALBERTA OIL SANDS INDUSTRY QUARTERLY UPDATE WINTER 2013 Reporting on the period: Sep. 18, 2013 to Dec. 05, 2013 2 ALBERTA OIL SANDS INDUSTRY QUARTERLY UPDATE Canada has the third-largest oil methods. Alberta will continue to rely All about reserves in the world, after Saudi to a greater extent on in situ production Arabia and Venezuela. Of Canada’s in the future, as 80 per cent of the 173 billion barrels of oil reserves, province’s proven bitumen reserves are the oil sands 170 billion barrels are located in too deep underground to recover using Background of an Alberta, and about 168 billion barrels mining methods. are recoverable from bitumen. There are essentially two commercial important global resource This is a resource that has been methods of in situ (Latin for “in developed for decades but is now place,” essentially meaning wells are gaining increased global attention used rather than trucks and shovels). as conventional supplies—so-called In cyclic steam stimulation (CSS), “easy” oil—continue to be depleted. high-pressure steam is injected into The figure of 168 billion barrels TABLE OF CONTENTS directional wells drilled from pads of bitumen represents what is for a period of time, then the steam considered economically recoverable is left to soak in the reservoir for a All about the oil sands with today’s technology, but with period, melting the bitumen, and 02 new technologies, this reserve then the same wells are switched estimate could be significantly into production mode, bringing the increased. In fact, total oil sands Mapping the oil sands bitumen to the surface. 03 reserves in place are estimated at 1.8 trillion barrels. In steam assisted gravity drainage (SAGD), parallel horizontal well pairs There are three major bitumen are drilled from well pads at the (or oil sands) deposits in Alberta. Government update surface. One is drilled near the top of 04 The largest is the Athabasca the target reservoir, while the other deposit, which is located in the is drilled near its bottom. Steam is province’s northeast in the Regional injected into the top well, a steam Labour update Municipality of Wood Buffalo. chamber forms, and the melted 06 The main population centre of the bitumen flows into the lower well via Athabasca deposit is Fort McMurray. gravity and is pumped to the surface The second-largest oil sands deposit What’s news in the oil sands: using artificial lift. 07 business is referred to as Cold Lake, just south of Athabasca, with the main Both SAGD and CSS are used in the population centre the City of Cold Cold Lake and Peace River deposits, What’s new in the oil sands: Lake. The smallest oil sands deposit while SAGD is the in situ technology 08 technology is known as Peace River, which is of choice in the Athabasca deposit. located in northwest-central Alberta. The selection is based on a number A fourth deposit called Wabasca links of factors, including geology. The Oil sands project technology to the Athabasca and is generally technologies combined currently 09 guide lumped in with that area. produce just over one million barrels per day. The existence of bitumen in Alberta Oil sands production by has been known for a long time. Research is underway on a number 09 extraction method The first mention of it in Canadian of other production technologies history was in 1719, when a Cree designed to optimize production, named Wapasu brought a sample of including variations on solvent-assisted Project listings the “gum” to a Hudson’s Bay trading SAGD and CSS, recovery using 10 post. First Nations in what is now the electricity and in situ combustion. Wood Buffalo area had traditionally Bitumen that has not been processed, used the bitumen, which seeps from or “upgraded,” can be used directly Glossary of oil sands terms outcrops along the Athabasca River, as asphalt. It must be diluted to travel 15 to waterproof their canoes. by pipeline. Adding value, some For the first time in 2012, in situ oil producers upgrade their product Oil sands contacts sands production exceeded mined oil into synthetic crude oil, which is 16 sands production in Alberta. In 2012, a refinery feedstock. That can be 52 per cent of the province’s oil sands transformed into transportation fuels volumes were produced using in situ and other products. ■ Unless otherwise stated, all photos copyright JuneWarren-Nickle’s Energy Group © 2013 100 KILOMETRES Oil Sands Deposit 10 20 30 40 50 60 70 80 90 100 Grosmont Carbonate Triangle National Park Mapping Provincial Park Oil Sands Area the oil sands Surface Minable Area Capital of Alberta Canada’s oil sands resources are often referred to as “the oil that technology made.” Without intensive production technology development, the industry would not exist as it does today. These technologies still continue to be advanced and optimized, improving recovery and reducing environmental impacts. FORT MCMURRAY PEACE RIVER ALBERTA’S INDUSTRIAL HEARTLAND CONKLIN COUNTY OF THORHILD NO. 7 Redwater LAC LA BICHE LAMONT COUNTY COLD LAKE STURGEON COUNTY INDUSTRIAL BONNYVILLE Bon Accord Gibbons HEARTLAND Bruderheim EDMONTON Lamont LLOYDMINSTER Horse Hills Energy Park FORT SASKATCHEWAN STRATHCONA COUNTY EDMONTON RED DEER ELK ISLAND NATIONAL PARK Sherwood Park COOKING LAKE BLACKFOOT PROVINCIAL RECREATION AREA CALGARY SOURCE: Divestco Inc./Government of Alberta Inc./Government Divestco SOURCE: BEAVER COUNTY LEDUC COUNTY LETHBRIDGE MEDICINE HAT Alberta’s Industrial Heartland is over 143,815 acres in size, and is located in the north- eastern quadrant of the greater Edmonton region in central Alberta. This region is key to the value-added processing of Alberta’s oil sands resources into higher-valued refined petroleum products and petrochemicals. 4 ALBERTA OIL SANDS INDUSTRY QUARTERLY UPDATE GOVERNMENT UPDATE ALBERTA AND BRITISH COLUMBIA REACH The historic Framework Agreement on Sustainable Energy AGREEMENT ON OPENING NEW MARKETS Development, signed by Alberta Energy Minister Ken Alberta Premier Alison Redford and B.C. Premier Christy Clark Hughes and China’s national energy administration chief announced in November a framework agreement between the Wu Xinxiong, is a framework that seeks to set out concrete two provinces on moving energy resources to new markets. actions to strengthen trade ties. “A key part of our Building Alberta Plan is getting Alberta’s This non-binding intergovernmental agreement is the first resources to new markets at much fairer prices so we can keep of its kind between the Chinese central government and a funding the programs Albertans told us matter most to them,” sub-national government of Canada. It’s aligned with the said Redford. “[This] agreement with B.C. is good news for existing Natural Resources Canada and National Energy Alberta, for British Columbia and for all Canadians. I welcome Administration agreement. Premier Clark’s endorsement of the Canadian Energy Strategy Chinese President Xi Jinping and Canadian Governor General and our shared commitment to create jobs, long-term growth David Johnston also attended the signing in the Great Hall of and position Canada as a true global energy superpower. We the People in Beijing, signalling the significance of Alberta and look forward to continued constructive dialogue with B.C.” China’s future energy trade and collaboration. The framework will also see the Government of British Columbia endorse Premier Redford’s Canadian Energy Strategy. BILL CREATES ENVIRONMENTAL MONITORING AGENCY “Agreement on B.C.’s five conditions is a necessary first step before any [pipeline] proposals can be considered for An arm’s-length agency will oversee environmental approval. It is the way we do business in B.C., and it works,” monitoring in Alberta. said Clark. “By working together with Alberta through these Diana McQueen, Minister of Environment and Sustainable principles, we can grow our economies and strengthen Resource Development, introduced Bill 31 in the Alberta Canada’s economy overall.” Legislature in October. The Protecting Alberta’s Environment Act creates the new Alberta Environmental Monitoring, The governments of B.C. and Alberta agree that British Evaluation and Reporting Agency (AEMERA), responsible for Columbia’s conditions are intended to ensure both the operating a comprehensive, science-based monitoring system. responsible production of energy as well as its safe transport to new markets, giving projects the social licence to proceed. Initially, the arm’s length agency will be responsible for work currently done in the oil sands area under the Joint Oil Sands Conditions one to four are designed to achieve both Monitoring plan. Eventually, AEMERA will be responsible economic benefit and risk mitigation on increased shipments for province-wide environmental monitoring, evaluation and through British Columbia. They mirror Alberta’s legislated reporting as land use plans are implemented. commitments on responsible energy production. Alberta and British Columbia agree that only through intensive The work of this agency will provide the best possible data environmental review and protection, enhanced marine that will be used to make the best possible decisions when it safeguards and First Nations support can projects proceed. comes to responsible development of the province’s natural resources. This data will detail the condition of Alberta’s On condition five, Alberta agrees that British Columbia has environment, specifically air, land, water and biodiversity. a right to negotiate with industry on appropriate economic benefits. Both governments agree it is not for the governments Over the coming weeks, the Alberta government will appoint an of Alberta and British Columbia to negotiate these benefits. agency chair and board members through a public application Both provinces reaffirmed that Alberta’s royalties are not on process. AEMERA is expected to start operating in early 2014. the table for negotiation. NEW ACT HELPS ALBERTA REACH ENERGY POTENTIAL ALBERTA FORTIFIES ENERGY RELATIONSHIPS WITH ASIA The Alberta government is proposing legislation that will help Alberta and China signed an agreement in October to Albertans get better prices for their energy resources.