Alberta Oil Sands Industry Quarterly Update

Home , National Energy Board, Suncor Energy

ALBERTA OIL SANDS INDUSTRY QUARTERLY UPDATE

SPRING 2018 2 Oil sands map What’s new 10 Oil sands data Reporting period: 3 Market update 7 Projects 13 Glossary DEC. 8, 2017 6 Resource + technology 8 Business 15 Contacts spotlight TO MAR. 15, 2018 9 Environment + technology ALBERTA’S Initial volume in place OIL SANDS trillion 1.84 barrels Canada’s oil sands resources exist in three major deposits in FORT MCMURRAY Initial established reserves PEACE RIVER Alberta: Athabasca, Cold Lake billion and Peace River. Athabasca, the 176.8 barrels 1840.0 largest in size and resource, is 176.8 home to the surface mineable CONKLIN Remaining established reserves (2016) 11.4 region. All other bitumen must billion 165.4 be produced in situ or by drilling. 165.4 barrels LAC LA BICHE Currently, the vast majority of oil COLD LAKE sands production is exported to Cumulative production (2016) U.S. markets. BONNYVILLE billion 11.4 barrels

SOURCE: ALBERTA EDMONTON LLOYDMINSTER ENERGY REGULATOR

Peace RED DEER Kitimat River  1 Fort McMurray Grande Prairie Edmonton  2 CALGARY Burnaby Hardisty Anacortes Calgary 9 Cromer MEDICINE HAT LETHBRIDGE 10 Quebec City Saint John Clearbrook 5 Superior Montreal 4 3 12 Guernsey Sarnia 11 Canadian and U.S. crude oil Flanagan Chicago pipelines and proposals  1 Enbridge Gateway Patoka 2 Kinder Morgan Trans Mountain Wood Oil sands deposit Oil sands area 6 3 TransCanada Keystone River Peace River Capital of Alberta 4 Spectra Express - Platte System Athabasca Pipeline Cushing 5 TransCanada Keystone XL Cold Lake Proposed Pipeline 6 ENB Spearhead South Surface ENB Flanagan South mineable area 7 7 ENB/Enterprise Seaway 8 8 TransCanada Gulf Coast Extension Houston Port Arthur 9 Enbridge Mainline 10 TransCanada Energy East Freeport 11 Enbridge Line 9 12 Enbridge Southern Access

SOURCE: SUNCOR ENERGY OIL SANDS ECONOMICS NO LONGER WHAT IS HOLDING BACK GROWTH: WOOD MAC

Oil sands projects aren’t as high cost as Bakken well level economics, but it's a very would question. Why would you add until you they used to be, but investors still aren’t ready different decision than an incremental well in get some certainty on some of these pipe- to inject cash into another wave of growth. the Bakken,” he says. lines?” Oberstoetter asks. That’s because the improvements that “You still have that dynamic of short-cycle The next wave of oil sands project devel- have been made on the cost front are being returns, which are in vogue now, versus these opment is likely to occur in the mid-2020s, he obscured by other factors, according to Wood long-life projects where you’d need a little bit says, around the time that the U.S. Lower 48 Mackenzie. more confidence on a $60 or higher oil price. supply juggernaut is expected to plateau. Even Non-energy in situ operating costs have But in terms of the economics, we think they though this is the same timeframe for an an- dropped 45 per cent since the first quarter of compete… you’re not going to compete with ticipated plateau in demand, new projects will 2014, with leading projects below C$5/bbl, the best of the best of the Permian, but those still be required – including in the oil sands. notes Mark Oberstoetter, Wood Mackenzie’s get drilled up eventually.” “Even if we are in a declining oil demand director of Canada upstream research. Construction on some new oil sands environment, you still have to replace a lot He adds that at the same time, integrated projects was restarted over the last year, but of the lost production per year. That gives us mining opex has fallen 33 per cent, with Oberstoetter says this is not surprising given confidence that U.S. tight oil is not enough; Canadian Natural Resources’ Horizon project the large amount of sunk capital in half-built you need deep water, you need oil sands, and achieving less than $20/bbl in the fourth facilities. In recent months however, new work you need a price higher in the $60s, $70s to quarter of 2017. has gotten the green light, including Osum’s support those [final investment decisions],” Capital cost reductions have not yet replicated Phase 2B at Orion and MEG Energy’s brown- he says. the success that has been realized in operating field expansion at Christina Lake. That includes proposed projects like costs on the whole, with a technological step “If we’re expanding that out to the bigger Imperial Aspen, Cenovus Narrows Lake and change required to bring the breakeven for a projects, the Pengrowths and Cenovuses and Foster Creek Phase H, as well as Suncor new SAGD project under US$50/bbl, Wood CNRLs, they’re worried about what that investor Energy Meadow Creek and Lewis. Mackenzie says, but there are recent examples backlash would be on a [final investment deci- “They’re in a time frame that probably coming closer to US$54/bbl. sion]. Their investors need to be sold that the makes more sense for more aggressive oil “We’re seeing phase-level break evens in oil sands cost structure has come down.” sands expansion; the companies that are the high $50s for a [Pengrowth] Lindbergh Pipeline export capacity in particular is a pushing those forward, pretty soon they’re Phase 2 or some of those kind of good, low key issue that is masking progress being made going to run out of opportunities to acquire hanging fruit projects, and that’s going to on costs, Wood Mackenzie said in a research things, and if they do want growth in that time compete with your Tier 2s in the Eagle Ford. note earlier this month. frame, it will mean going back to a modular It’s already competing with some of the “Market access is a logical one that they SAGD growth.”

3 Invest Alberta Your one-stop connection to doing business in Alberta Where Investment Thrives How can we help you? • Business Support: Customized advice, access to capital and incentive programs • Coordination and Connection: Linkages to government and business partners • Insight and Information: Market intelligence and opportunity analysis

Invest Alberta Your one-stop connection to doing business in Alberta Where Investment Thrives RESOURCE + TECHNOLOGY SPOTLIGHT

NON-CONDENSABLE GAS CO-INJECTION Gas helps to insulate the chamber top to reduce heat loss Steam Injector Steam is generated BACKGROUND in situ by scavenging heat from the the hot ll oducer we Producer Well SAGD technology, which was commer- reservoir rocks s the pr toward Steam continues to heat bitumen drain es to STEAM ntinu cialized in 2001, has been a spectacularly il co INJECTOR ed o Infill Well eat successful oil sands recovery process, with H Warmed bitumen is pushed towards output roaring to approximately 1.2 million infill well by pressure Steam difference and gravity Non-Condensable barrels per day today. Gas (NCG) However, it remains an energy intensive PRODUCER INFILL process, which is why producers remain WELL WELL committed to lowering the steam/oil ratio. One way of doing this is to add small SOURCE: MEG ENERGY amounts of non-condensable gas (NCG) such as methane to steam injected into the overburden -- where heat is wasted -- to 100,000 barrels per day by the end of reservoir after wells have been producing steam is diverted laterally where it contin- the year. over a period on SAGD mode. ues to mobilize bitumen. In early 2017 Suncor Energy received Once there is sufficient heat in the res- SAGP was first piloted at the Dover regulatory approval to convert all steam ervoir, the NCG helps maintain pressure test site where SAGD was developed. That injectors on one pad at its Firebag proj- and frees up steam to be redeployed into government-funded testing, and several ect to NCG co-injection. new SAGD well pairs. more recent pilots by oil sands producers, In summer 2017, Canadian Natural MEG Energy has realized great success indicated SAGP could improve steam/oil Resources Limited applied to implement with NCG co-injection and is currently in ratios without reducing oil production. NCG co-injection on one well pad at its the process of deploying it across its oil MEG’s take on the system is called Kirby South SAGD project. The applica- sands project site. Other companies are in enhanced modified steam and gas push tion was approved in November 2017. the process of following suit. (eMSAGP), which also includes drilling of Also in November, ConocoPhillips single collector wells between well pairs to Canada filed an application for broad HOW IT WORKS collect bitumen that would otherwise be use of NCG co-injection at its Surmont Dr. Roger Butler, the inventor of the unrecoverable. SAGD project, following successful pilot SAGD process, also developed a system he The technology has enabled MEG to testing. It received regulatory approval in called steam and gas push (SAGP). This in- increase production without increasing January 2018. volves co-injecting relatively small amounts steam generation capacity. In those specific ConocoPhillips began injecting of a NCG with steam. well patterns where eMSAGP has already non-condensable gas with steam at three The gas has several benefits. It replaces been deployed, the company is currently Surmont well pairs in December 2016 some of the steam, resulting in a lower seeing a steam-oil ratio of approximately and has extended co-injection to all the steam/oil ratio. It helps maintain pressure. 1.3:1 (the industry average is 3:1), with the well pairs on one pad. ConocoPhillips’s (As steam condenses, pressure drops in the freed-up steam being diverted into new regulatory application sought approval for reservoir. But methane doesn’t condense, wells to further increase production. NCG co-injection at four drainage areas so the pressure needed to push the heated at Surmont Phase 1 and 11 drainage areas bitumen to producer wells is maintained.) WHERE IT WORKS/ at Surmont Phase 2. The gas also forms an insulating blan- CURRENT STATUS In September 2017, junior BlackPearl ket that reduces heat loss into the cap MEG will complete the implemen- Resources Inc. also applied for an NCG rock, thereby improving energy efficien- tation of the eMSAGP growth initiative co-injection trial at its Blackrod SAGD cy. The methane layer at the top of the across its Christina Lake project in 2018, pilot. This was approved in October. steam chamber also forces the steam to which is expected to enable production flow laterally. So instead of reaching the to continue to ramp up to reach 95,000 WITH INFORMATION FROM MEG ENERGY

6 WHAT’S NEW PROJECTS

Suncor Energy continues to advance its oil sands growth strategy post 2020, filing in March 2018 the regulatory application for the 160,000 bbl/d Lewis SAGD project. Lewis, which would be built in four “replica- tion” phases, is slated to come online after the company’s initial phases at Meadow Creek East and Meadow Creek West, with first oil planned for 2027. Suncor has identified 10 in situ oil sands project locations to add approximately 360,000 bbls/d going forward, CEO Steve Williams said last year. The first is expected to be 40,000 bbls/d at Meadow Creek East in 2023. Suncor received regulatory approval for Meadow Creek East in March 2017 and filed its application for Meadow Creek West last October. bbls/d this year and then 240,000 bbls/d which will add a further 6,000 bbls/d of Suncor Energy announced official in 2020 after investing in supplemental capacity by the end of 2018. start-up of its brand-new Fort Hills oil crushing capacity and flow distribution “We are on a clear path to double sands mine in late January. So far the interconnects to enhance reliability, in- production by the end of 2019, moving us project has produced 1.4 million barrels crease redundancy and reduce downtime, closer to our goal of producing 20,000 of bitumen froth, the company said. the company said. Its share of the project bbls/d at Orion,” Osum CEO Steve Production from the first of three trains will be $400 million, indicating that the Spence said in a statement. from secondary extraction was expected full cost will be approximately $563 mil- He told JWN that the company is bene- to ramp up through the first quarter, fol- lion including ExxonMobil’s 29 per cent fiting from a “continuum of execution” with lowed by start up of the second and third ownership investment. workers and equipment already in the field. trains in the first half of 2018. “We announced our Phase 2B ex- Suncor sai d Fort Hills is on track to Privately held junior Osum Oil Sands pansion back in October, which started reach 90 percent of its 194,000 bbl/d Corpsays it will proceed with work at the the ball rolling for us. We’ve got a rig in capacity by the end of 2018. Orion SAGD project to increase production the field, construction work ongoing; we capacity, planning to double its volumes by knew we wanted to proceed with Phase Imperial Oil says that production at the the end of 2019. 2C in a timely manner following up on Kearl oil sands mine in 2020 will be about Orion, which Osum purchased from that. As we looked at the opportunities to 60,000 bbls/d higher than it was in 2017. Shell in 2014 for $325 million, currently jointly execute the projects it just made This will be the result of “improvement produces about 9,000 bbls/d and is the an awful lot of sense to do them together. activities” conducted last year as well as company’s sole operating asset. It is lo- We will be working with essentially the a new project that will run through 2018 cated near Cold Lake, Alta. same contractors and just continuing the and 2019. In fall 2017, one month after complet- program along rather than taking a break Kearl averaged 178,000 bbls/d for ing its 1,500-bbl/d Phase 2A expansion, in between, so the synergies of doing that the full year 2017 against capacity of Osum commenced construction of Phase were pretty strong,” Spence said. 220,000 bbls/d. This compares to 2B, which will add 3,000 bbls/d of capacity While the capital cost of the latest expan- 169,000 bbls/d in 2016. with first steam expected in mid-2018. sion was not disclosed, Osum said it would Imperial plans to reach 200,000 Today the company sanctioned Phase 2C, be funded by cash on hand and cash flow.

7 WHAT’S NEW BUSINESS

Suncor Energy has increased its share in Fort Hills to 53.06 per cent from 50.8 per cent, while Teck has increased its ownership stake to 20.89 per cent from 20.0 per cent. Total has in turn decreased its ownership share to 26.05 per cent from 29.2 per cent. Under the new agreement, Suncor and Teck have funded an increased share of the project capital, in the amounts of approximately $300 million and $120 million respectively, which Suncor said may be further adjusted in accordance with the terms of the deal.

SOURCE: CONOCOPHILLIPS CANADA Horizon North Logistics has entered into new partnerships with the Chipewyan of paramount importance for securing Partnership (9.03 per cent) and Nexen Oil Prairie Dene First Nation south of Fort accommodations contracts in the north Sands Partnership (7.23 per cent). McMurray and the Athabasca Chipewyan of Fort McMurray oil sands area.” First Nation north of Fort McMurray, as MEG Energy Corp. has announced an well as the $14-million acquisition of the A report from IHS Markit’s Oil Sands agreement with Wolf Midstream Inc. for Moose Haven Lodge from the Chipewyan Dialogue is forecasting that oil sands cap- the sale of the company's 50 per cent inter- Prairie band. ital spending will drop below $10 billion est in the Access Pipeline and 100 per cent Moose Haven Lodge is located near this year – the first time that has hap- interest in the Stonefell Terminal for cash Janvier, in the heart of what has been pened since 2004. and other consideration of $1.61 billion. called “SAGD central,” with multiple There is also no return to previous annu- Wolf Midstream nearly two years ago large-scale projects operated by com- al spending highs of over $30 billion in any bought out Devon Energy Corporation’s panies including Cenovus Energy, MEG of IHS Markit’s three outlook scenarios. 50 per cent interest in Access. MEG had Energy, Devon and ConocoPhillips. “Each year since 2014, investment in been looking to unload its 50 per cent While the lodge may be the primary the oil sands has fallen as projects have interest as well for some time. asset in the deal announcement, the part- been completed and brought online and nerships are of greater importance, said few new projects have been sanctioned,” Athabasca Oil Corporation is “explor- analysts with GMP FirstEnergy. IHS Markit said. ing monetization options” for its thermal “We believe the value of this acquisition oil infrastructure. This includes a will be realized through additional catering Suncor Energy Inc. has reached an 300,000-barrel tank farm at Cheecham, contract wins for oil sands projects in agreement to acquire Mocal Energy’s south of Fort McMurray, and dilbit and the South Fort McMurray region. It is five per cent interest in the Syncrude diluent pipelines between the Leismer our understanding that the Chipewyan joint venture for US$730 million, or ap- project and Cheecham Terminal. Prairie is uniquely positioned to win these proximately C$920 million. Athabasca acquired the assets as part contracts and Horizon North is their sole Through this transaction Suncor's share of its purchase of the Leismer oil sands partner,” wrote analyst Ian Gillies in a in the Syncrude joint venture will increase project from Norway’s Statoil in January research note, adding that the benefit of from 53.74 per cent to 58.74 per cent. 2017. The company says the tank farm First Nations partnering also exists in the Subsequent to the successful close of this and pipelines will “remain a strategic mining region north of the city. transaction, the joint venture partners will asset for future growth initiatives” at “Our understanding is that strong be Suncor (58.74 per cent), Imperial Oil Leismer and at the proposed Corner proj- relationships with First Nations are now Resources (25 per cent), Sinopec Oil Sands ect, which has regulatory approval.

8 WHAT’S NEW ENVIRONMENT + TECHNOLOGY

The Alberta government says it will support up to $1 billion to help com- mercialize bitumen partial upgrading technologies. The funding will occur over eight years beginning in 2019-20, and will include a variety of fiscal tools including loan guar- antees and grants.

This will leverage construction of two to SOURCE: CENOVUS ENERGY five partial upgrading facilities represent- ing up to $5 billion in private investment, running pilots, [and] depending on the generation” of technology for oil sands 4,000 jobs during construction and 200 success of those pilots and the iterations water treatment. full-time jobs during operation, according we take we see a pathway where we could The Membrane Technology to the province. actually be below the global average oil Assessment Program will be built at The province says that partial upgrad- greenhouse gas emissions intensity.” NAIT’s Centre for Oil Sands Sustainability ing would enhance oil sands industry to help develop 12 industrial water tech- competitiveness by reducing industry Suncor Energy says it will start replacing nologies used in oil sands, and train and costs, increasing pipeline capacity and what appears to be its full heavy hauling develop 12 highly qualified people, NAIT enabling more refineries to process mining fleet with driverless trucks. said in a statement. Alberta bitumen products. It would not Suncor, which has been running a field This will also enable at least six western limit future opportunities for full refining pilot of autonomous haulage systems since Canadian oil companies the opportunity to within Alberta. 2015 , says it as validated that the technology test their technologies and more quickly can be used safely, effectively and implement innovations that create environ- Canadian Natural Resources says it is efficiently in its operating environment. mental and economic benefits, NAIT said. on a pathway to produce oil sands with The company announced that it will GHG emissions intensity that rivals that proceed with phased implementation over Syncrude is one of nine operations in of light crude oil in North America and the next six years, starting with its North Canada that was recently recognized with around the world. Steepbank Mine. The company said it one of the Mining Association of Canada A 2014 study by IHS Markit found expects to deploy more than 150 auton- (MAC)’s Towards Sustainable Mining that oil sands crudes consumed in the omous haul trucks in the full program, leadership awards. U.S. had GHG emissions that ranged from which it estimates to be one of the largest It’s a program that has been underway 1 per cent higher to 19 per cent higher investments in electric autonomous vehi- for 13 years that focuses on environmen- than the average. cles in the world. tal performance and social impacts. Canadian Natural, which produces Suncor said it will “continue to work with To win a leadership award, a facility un- from the Primrose, Kirby, Horizon and the union on strategies to minimize work- dergoes an external verification in addition AOSP oil sands projects, doesn’t just want force impacts,” and that “current plans show to its own annual self-assessments. to be equivalent to the average crude on that the earliest the company would see a Syncrude reports that it was assessed GHGs, says executive vice-chairman Steve decrease in heavy equipment operator posi- on six indicators: aboriginal and commu- Laut – it plans to do better. tions at Base Plant operations is 2019.” nity outreach, biodiversity conservation “If you look at where we are today at management, energy use and GHG emis- Horizon itself, taking our carbon capture The Northern Alberta Institute of sions management, safety and health, and storage activities, we’re about five per Technology (NAIT) will receive almost tailings management, and crisis manage- cent off the global average GHG emissions $600,000 from Western Economic ment and communications planning. intensity for all crude oil,” Laut told JWN. Diversification Canada and $200,000 The awards are an “important and rare “We see many improvements in the from Canada’s Oil Sands Innovation distinction,” according to MAC president use of technology to leverage that. We’re Alliance (COSIA) to develop “a new and CEO Pierre Gratton.

9 OIL SANDS DATA

ALBERTA CRUDE BITUMEN AND SYNTHETIC CRUDE PRODUCTION

60,000 2016 2017 Crude bitumen 50,000

40,000 Synthetic crude

30,000

20,000 Thousand barrels

10,000 SOURCE: ALBERTA ENERGY REGULATOR 0 A M J J A S O N D J F M A M J J A S O N D

ALBERTA BITUMEN PRODUCTION BY EXTRACTION TYPE

3,500,000 2017 Primary 3,000,000

2,500,000 In situ thermal 2,000,000

bbls/d 1,500,000 Mining

1,000,000

500,000 SOURCE: ALBERTA 0 ENERGY REGULATOR J F M A M J J A S O N

OIL SANDS MINING PRODUCTION BY PROJECT OIL SANDS UPGRADER PRODUCTION BY PROJECT

350,000 400,000 September 350,000 300,000 2017 300,000 250,000 250,000 October 200,000 2017 200,000 150,000 150,000 November Barrels per day Barrels per day 100,000 2017 100,000

50,000 50,000

0 0 Aurora North &Base South OperationsFort Hills Horizon Jackpine Kearl Mildred Lake Base Operations Horizon Mildred Lake Scotford Upgrader (Syncrude) (Suncor Energy)(Suncor) Natural Resources)Natural AOSP)(Imperial Oil) (Syncrude) (Suncor Energy Inc.) Natural Resources Ltd.) (Syncrude Canada Ltd.) (Shell Albian Sands)

(Canadian (Canadian (Canadian

SOURCE: ALBERTA ENERGY REGULATOR SOURCE: ALBERTA ENERGY REGULATOR

10 THERMAL OIL SANDS PRODUCTION BY PROJECT OCTOBER 2017 – DECEMBER 2017 (Barrels per day)

MONTHLY PROJECT OCT NOV DEC AVERAGE Firebag 211,351.50 204,060.30 209,640.70 208,350.83 Christina Lake 200,248.70 206,844.20 212,518.90 206,537.27 Cold Lake 165,374.80 170,046.90 169,731.80 168,384.50 Foster Creek 158,166.70 152,638.00 152,663.80 154,489.50 Surmont 136,412.80 137,921.70 139,789.20 138,041.23 Jackfish 125,191.80 120,644.90 117,110.00 120,982.23 Christina Lake 82,775.20 86,453.40 90,836.20 86,688.27 Primrose & Wolf Lake 78,578.60 84,239.40 83,772.70 82,196.90 Sunrise 44,067.00 46,663.50 46,982.40 45,904.30 Long Lake 44,518.00 44,448.80 44,018.60 44,328.47 Kirby South 34,995.20 34,186.40 36,816.10 35,332.57 Mackay River 17,050.40 33,323.40 35,510.40 28,628.07 Tucker 23,378.00 22,886.70 21,377.20 22,547.30 Leismer Demonstration 20,891.00 20,956.40 21,134.40 20,993.93 Lindbergh 14,622.60 14,361.50 14,393.60 14,459.23 Great Divide 13,169.00 13,579.70 13,201.10 13,316.60 Hangingstone 8,802.60 9,658.00 13,950.20 10,803.60 Hangingstone 9,502.00 9,513.30 9,680.00 9,565.10 Orion 8,796.30 9,945.40 9,197.60 9,313.10 Mackay River 8,347.20 8,812.70 9,573.10 8,911.00 Peace River/Carmon Creek 3,661.90 4,257.60 3,909.70 3,943.07 West Ells 2,091.40 2,665.60 2,307.10 2,354.70 Blackrod 495 477.4 469.2 480.53 Peace River 5 40.9 37.7 27.87 Pilot 27 17.5 --- 22.25

SOURCE: AER (ALBERTA ENERGY REGULATOR)

CRUDE OIL PRICE DIFFERENTIAL (WTI-WCS) CANADIAN CRUDE OIL EXPORTS Recorded to Mar. 12, 2018 2016 2017 4,000,000 2016 2017 2018 $30.00 3,500,000

3,000,000 $25.00 2,500,000 /d

$20.00 3

m 2,000,000 3 10 $15.00 1,500,000 US$bbl

1,000,000 $10.00 500,000

$5.00 0 A M J J A S O N D J F M A M J J A S O N D

$0.00 Light oil Medium oil Heavy oil O N D J F M A M J J A S O N D J F M total volume total volume total volume

SOURCE: DAILY OIL BULLETIN SOURCE: NATIONAL ENERGY BOARD

11 OIL SANDS EXPORTS BY TYPE AND DESTINATION

JANUARY 2017 - DECEMBER 2017 (BBLS/D) 2,066,744 1,983,383 PAAD II Light Midwest 32,629

TOTAL US PAAD IV 242,589 241,894 Rocky Mountain

Heavy Heavy 301,714 437,794

3,257,370 3,060,224

PAAD I PAAD V East Coast West Coast 234,657 215,321 204,859 211,784

PAAD III Gulf Coast 508,522 407,842

2017 2016 SOURCE: NATIONAL ENERGY BOARD

CANADIAN OIL SANDS & CONVENTIONAL PRODUCTION

6 Actual Forecast June 2016 forecast

5 Eastern Canada

Oil sands 4

Conventional heavy 3 Conventional light million bbls/d million 2 Pentanes/condensate

1 SOURCE: CAPP

0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

12 GLOSSARY OF OIL SANDS TERMS

CRACKING F A An upgrading/refining process for FROTH TREATMENT ASPHALTENES converting large, heavy molecules into The means to recover bitumen from the The heaviest and most concentrated aromatic smaller ones. Cracking processes include mixture of water, bitumen and solids “froth” hydrocarbon fractions of bitumen. fluid cracking and hydrocracking. produced in hot-water extraction (in mining- CYCLIC STEAM based recovery). B STIMULATION (CSS) An in situ production method BARREL G incorporating cycles of steam injection, The traditional measurement for crude oil GASIFICATION volumes. One barrel equals 42 U.S. gallons steam soaking and oil production. The A process to partially oxidize any hydrocarbon, or 159 litres. There are 6.29 barrels in one steam reduces the viscosity of the typically heavy residues, to a mixture of cubic metre of oil. bitumen and allows it to flow to the production well. hydrogen and carbon monoxide. Can be used BITUMEN to produce hydrogen and various energy Naturally occurring, viscous mixture of by-products. D hydrocarbons that contains high levels GROUNDWATER of sulphur and nitrogen compounds. In DENSITY Water accumulations below the Earth’s surface its natural state, it is not recoverable at a The heaviness of crude oil, indicating that supply fresh water to wells and springs. commercial rate through a well because it is the proportion of large, carbon-rich too thick to flow. Bitumen typically makes up molecules, generally measured in 3 about 10 per cent by weight of oil sand, but kilograms per cubic metre (kg/m ) or H saturation varies. degrees on the American Petroleum HEAVY CRUDE OIL Institute (API) gravity scale. In western Oil with a gravity below 22 degrees Canada, oil up to 900 kg/m3 is C API. Heavy crudes must be blended or considered light-to-medium crude; oil mixed with condensate to be shippe COGENERATION above this density is deemed as heavy by pipeline. The simultaneous production of electricity oil or bitumen. and steam, which is part of the operations HYDROCRACKING DILBIT of many oil sands projects. Refining process for reducing heavy Bitumen that has been reduced in hydrocarbons into lighter fractions using COKING viscosity through the addition of a diluent hydrogen and a catalyst; can also be used in An upgrading/refining process used to such as condensate or naphtha. upgrading bitumen. convert the heaviest fraction of bitumen into DILUENT lighter hydrocarbons by rejecting carbon as HYDROTRANSPORT A light hydrocarbon blended with coke. Coking can be either delayed coking A slurry process that transports water and oil bitumen to enable pipeline transport. See (semi-batch) or fluid coking (continuous). sand through a pipeline to primary separation Condensate. CONDENSATE vessels located in an extraction plant. Mixture of extremely light hydrocarbons E HYDROTREATER recoverable from gas reservoirs. Condensate An upgrading/refining process unit that is also referred to as a natural gas liquid EXTRACTION reduces sulphur and nitrogen levels in crude oil and is used as a diluent to reduce bitumen A process unique to the oil sands industry fractions by catalytic addition of hydrogen. viscosity for pipeline transportation. that separates the bitumen from the oil sand using hot water, steam and caustic CONVENTIONAL CRUDE OIL soda. I Mixture of mainly pentane and heavier IN SITU hydrocarbons recoverable at a well from A Latin phrase meaning “in its original SOURCE: CAPP an underground reservoir and liquid at atmospheric pressure and temperature. Unlike place.” In situ recovery refers to various bitumen, it flows through a well without drilling-based methods used to recover stimulation and through a pipeline without deeply buried bitumen deposits. processing or dilution.

13 IN SITU COMBUSTION P SURFACE MINING An enhanced oil recovery method that Operations to recover oil sands by open- works by generating combustion gases PERMEABILITY pit mining using trucks and shovels. Less

(primarily CO and CO2) downhole, The capacity of a substance, such as rock, than 20 per cent of Alberta’s oil sands which then push the oil toward the to transmit a fluid, such as crude oil, natural resources are located close enough to the recovery well. gas or water. The degree of permeability surface (within 75 metres) for mining to depends on the number, size and shape of be economic. L the pores and/or fractures in the rock and SYNTHETIC CRUDE OIL their interconnections. It is measured by A manufactured crude oil comprised of LEASE the time it takes a fluid of standard viscosity naphtha, distillate and gas oil-boiling range A legal document from the province of Alberta to move a given distance. The unit of material. Can range from high-quality, giving an operator the right to extract bitumen permeability is the Darcy. from the oil sand existing within the specified light, sweet bottomless crude to heavy, lease area. The land must be reclaimed PETROLEUM COKE sour blends. and returned to the Crown at the end of Solid, black hydrocarbon that is left operations. as a residue after the more valuable T hydrocarbons have been removed from the LIGHT CRUDE OIL bitumen by heating the bitumen to high TAILINGS Liquid petroleum with a gravity of 28 temperatures. A combination of water, sand, silt and degrees API or higher. A high-quality light fine clay particles that is a byproduct of crude oil might have a gravity of about 40 PRIMARY PRODUCTION removing the bitumen from the oil sand degrees API. Upgraded crude oils from the An in situ recovery method that uses natural through the extraction process. oil sands run around 30–33 degrees API reservoir energy (such as gas drive, water TAILINGS SETTLING BASIN (compared to 32–34 for Light Arab and drive and gravity drainage) to displace 37–40 for West Texas Intermediate). hydrocarbons from the reservoir into the The primary purpose of the tailings settling wellbore and up to the surface. Primary basin is to serve as a process vessel, production uses an artificial lift system in allowing time for tailings water to clarify M order to reduce the bottomhole pressure or and silt and clay particles to settle so that MATURE FINE TAILINGS increase the differential pressure to sustain the water can be reused in extraction. A gel-like material resulting from the hydrocarbon recovery, since reservoir The settling basin also acts as a thickener, processing of clay fines contained within pressure decreases with production. preparing mature fine tails for final the oil sands. reclamation. THERMAL RECOVERY R Any in situ process where heat energy O RECLAMATION (generally steam) is used to reduce the OIL SANDS Returning disturbed land to a stable, viscosity of bitumen to facilitate recovery. Bitumen-soaked sand deposits located biologically productive state. Reclaimed in three geographic regions of Alberta: property is returned to the province of Athabasca, Cold Lake and Peace River. Alberta at the end of operations. U The Athabasca deposit is the largest, UPGRADING encompassing more than 42,340 square S The process of converting heavy oil or kilometres. Total in-place deposits of bitumen into synthetic crude either through bitumen in Alberta are estimated at STEAM ASSISTED GRAVITY the removal of carbon (coking) or the 1.7 trillion to 2.5 trillion barrels. DRAINAGE (SAGD) addition of hydrogen (hydroconversion). An in situ production process using two OVERBURDEN closely spaced horizontal wells: one for A layer of sand, gravel and shale between steam injection and the other for production V the surface and the underlying oil sand in of the bitumen/water emulsion. the mineable oil sands region that must be VISCOSITY removed before oil sands can be mined. The ability of a liquid to flow. The lower the viscosity, the more easily the liquid will flow.

OIL SANDS CONTACTS OIL SANDS PRODUCERS Athabasca Oil www.atha.com Baytex Energy www.baytex.ab.ca BlackPearl Resources www.blackpearlresources.ca Brion Energy www.brionenergy.com Canadian Natural Resources www.cnrl.com Cenovus Energy www.cenovus.com Chevron Canada www.chevron.ca CNOOC www.cnoocltd.com Connacher Oil and Gas www.connacheroil.com ConocoPhillips Canada www.conocophillips.ca Devon Canada www.dvn.com Enerplus Resources Fund www.enerplus.com E-T Energy www.e-tenergy.com Grizzly Oil Sands www.grizzlyoilsands.com Harvest Operations www.harvestenergy.ca Husky Energy www.huskyenergy.ca Imperial Oil www.imperialoil.ca Japan Canada Oil Sands www.jacos.com Koch Exploration Canada www.kochexploration.ca Korea National Oil www.knoc.co.kr ASSOCIATIONS/ORGANIZATIONS Laricina Energy www.laricinaenergy.com Alberta Chamber of Resources www.acr-alberta.com Marathon Oil www.marathon.com Alberta Chambers of Commerce www.abchamber.ca MEG Energy www.megenergy.com Alberta Energy www.energy.gov.ab.ca Nexen www.nexeninc.com Alberta Energy Regulator www.aer.ca North West Upgrading www.northwestupgrading.com Alberta Environment and Parks www.aep.alberta.ca Nsolv www.nsolv.ca Alberta Innovates www.albertainnovates.ca Oak Point Energy www.oakpointenergy.ca Alberta Innovation and Advanced Education www.eae.alberta.ca Occidental Petroleum www.oxy.com Alberta’s Industrial Heartland Association www.industrialheartland.com Osum Oil Sands www.osumcorp.com Building Trades of Alberta www.bta.ca Pan Orient Energy www.panorient.ca Canada’s Oil Sands Innovation Alliance www.cosia.ca Paramount Resources www.paramountres.com Canadian Association of Geophysical Contractors www.cagc.ca Pengrowth Energy www.pengrowth.com Canadian Association of Petroleum Producers www.capp.ca PetroChina www.petrochina.com.cn/ptr Canadian Heavy Oil Association www.choa.ab.ca PTT Exploration and Production www.pttep.com In Situ Oil Sands Alliance www.iosa.ca Sinopec www.sinopecgroup.com/group/en Lakeland Industry & Community Association www.lica.ca Statoil Canada www.statoil.com Natural Resources Conservation Board www.nrcb.ca Suncor Energy www.suncor.com Oil Sands Community Alliance www.oscaalberta.ca Sunshine Oilsands www.sunshineoilsands.com Oil Sands Secretariat www.energy.alberta.ca Syncrude www.syncrude.ca Petroleum Technology Alliance Canada www.ptac.org Teck Resources www.teck.com Total E&P Canada www.total-ep-canada.com Touchstone Exploration www.touchstoneexploration.com FOR MORE INFORMATION, PLEASE VISIT US AT Value Creation Group www.vctek.com www.albertacanada.com

15 Alberta Oil Sands Quarterly - Spring 2018 www.albertacanada.com/business/statistics/oil-sands-quarterly.aspx