CanadianCanadian OilOil Sands:Sands: DevelopmentDevelopment andand FutureFuture OutlookOutlook National Academies Workshop on Trends in Oil Supply/Demand and Peaking of Conventional Oil Production Oct 20-21, 2005 Eddy Isaacs Managing Director Alberta Energy Research Institute WWW.AERI.AB.CA ConventionalConventional vs.vs. UnconventionalUnconventional ResourcesResources 952 billion Conventional 0il & bbls gas USGS CBM 5.6 Trillion bbls Heavy Oil discovered Extra Heavy Tight Gas 900 billion bbls Shale Gas Bitum en Deep Gas Advanced Technology Increased Costs Market Price Sensitivity Gas Hydrate Oil Shale Environmental Concerns Modified from Holditch (2002) & Etherington (2005) HowHow MuchMuch willwill NonNon--conventionalconventional OilOil Contribute?Contribute? 120 World-Oil Production 100 Non-conventional oil emerges as a major new source 80 60 mb/d 40 20 0 1980 1990 2000 2010 2020 2030 OPEC Non-OPEC Non-conventional oil Courtesy: International Energy Agency, World Energy Outlook (2002) CanadianCanadian OilOil SandsSands –– HugeHuge ResourcesResources (billion m3 ) Canadian vs. World Oil Resources 400 300 Conventional Alberta, Canada 200 Heavy Oil Bitumen Athabasca 100 Peace River Fort McMurray 0 Peace River Canada World Wabasca Cold Wightman (1997) Lake Edmonton Calgary CanadaCanada’’ss OilOil SandsSands Three locations: • Peace River • Athabasca • Cold Lake Reserves (2003 - EUB) (Billion Barrels) Oil Sands Conv. Oil-in-place 1,629 62 Est. Reserves 175 2 Rem. Ult. Pot’l 310 5 ProvenProven WorldWorld OilOil ReservesReserves Canadian Oil Sands 1,800 1,600 Insitu Mineable 300 1,400 Mineable 1,200 250 1,000 800 200 Billion barrels Billion 600 400 150 200 0 Initial In-Place Initial Established billion barrels 100 50 0 a n q y ada Ira Ira n Lib Ca Kuwait ezuelaRussia Nigeria di Arabia n u Abu DhabiVe Sa United States Source: Oil & Gas J, December 2004 TheThe NatureNature ofof thethe OilOil SandsSands ResourceResource Production 2003 Production, Reserves 2004 Technology bbls/day Mining 19% 610,959 In Situ 81% 386,164356,164 OilOil SandsSands -- WhatWhat isis special?special? Quartz or Bitumen Clay Mineral Bitumen ~10 nm thick Sand Grain Water Fines Cluster “Technology Oil “ Continuous Innovation SinceSince thethe 19301930’s From Oil Sands To Bitumen to Synthetic Crude Oil ProducingProducing BitumenBitumen –– SurfaceSurface MiningMining 10,000,000 1,000,000 Surface Cold Lake Mining Athabasca 100,000 10,000 1,000 100 Viscosity (cP) 10 1 0 100 200 300 400 Temperature (C) Innovation in Mining Technology From Draglines to Shovel & Truck Operations 1970 2000 400400 tonnetonne OreOre TrucksTrucks Slurry Hydrotransport – Remote Mine (Separation during flow) MiningMining ExtractionExtraction toto ProduceProduce BitumenBitumen Mining Extraction Draglines, Bucketwheels Oil Sand Primary & Conveyor Systems Tumblers Separation Froth Vessel Treatment Truck & Shovel Feed System Oil Sand Slurry Hydrotransport System Upgrading (lots of H2) MiningMining ProjectsProjects –– WhoWho isis playingplaying thethe game?game? 1980 2000 2005+ Suncor Suncor Suncor Syncrude Syncrude Syncrude Albian/Shell CNRL Imperial Synenco Fort Hills Not an all inclusive list ProducingProducing BitumenBitumen –– InIn SituSitu 10,000,000 1,000,000 Surface Cold Lake Mining Athabasca 100,000 10,000 1,000 In Situ 100 Viscosity (cP) 10 1 0 100 200 300 400 Temperature (C) TransportingTransporting SteamSteam GeneratorsGenerators –– RadiantRadiant SectionSection Courtesy of Mark E. Doig SteamSteam GeneratorGenerator –– BurnerBurner FlameFlame Courtesy of Mark E. Doig CentralCentral PlantPlant UnderUnder ConstructionConstruction Courtesy of Mark E. Doig InIn SituSitu ProductionProduction TechnologyTechnology CyclicCyclic SteamSteam StimulationStimulation ProcessProcess DrillingDrilling TechnologyTechnology MinimizesMinimizes LandLand DisturbanceDisturbance Imperial Oil Cold Lake - Cyclic Steam Project 125,000 bbl/day Steam Assisted Gravity Drainage (SAGD)- Schematic SAGD Facility -horizontal drilling -Moderate pressure steam (500 psi) EAST -50% - 70% oil in place recovery Courtesy Neil Edmunds, EnCana Oil Producer Steam Injector Steam Chamber Slots Oil Sand Formation Steam Flow Oil Flow Gravity Drainage Concept (SAGD Process) Temperature Steam Chamber Development (°C) Injector Producer Courtesy: David Law, Alberta Research Council SteamSteam AssistedAssisted GravityGravity DrainageDrainage WellsWells Source: Suncor InIn SituSitu ProjectsProjects –– WhoWho isis playingplaying thethe game?game? 1980 2000 2005+ Imperial Imperial Imperial JACOS AEC EnCana Deer Creek CNRL Numerous CNRL OPTI/Nexen Shell Experimental Shell BlackRock PanCdn Projects Suncor ConocoPhillips Numac PetroCanada Husky Northstar MEG/CNPC Devon Murphy Total Not an all inclusive list UpgradingUpgrading TechnologyTechnology –– 19401940 -- TodayToday Thermal Cracking Visbreaking Hydrogen Addition Coking Shell/Albian Deasphalting Opti-Nexen Suncor Syncrude Gasification Husky CNRL Steam H2 After Murray Gray, University of Alberta Synthetic Crude Oil – desirable features Conventional Synthetic Light Sweet Crude Sweet Blend LPG Lower S Sulfur 150 - 300 Naphtha Sulfur 2 wppm wppm More Distillate Sulfur 0.028 wt% Sulfur 0.16 wt% Lower S Distillates Aromatics 34% LV Aromatics 20-25% LV More VGO Sulfur 0.4 - 0.6 wt% VGO Sulfur 0.29 wt% Lower S No Sulfur 1.4 - 1.8 wt% Residual Sulfur 1.4 - 1.8 wt% Residue OilOil SandsSands HydrogenHydrogen DemandDemand ScenariosScenarios 4,000,000 Low Scenario Medium Scenario 3,000,000 High Scenario 2,000,000 1,000,000 Hydrogen (tonnes/year) Hydrogen 0 2003 2013 2023 Source: Canadian Hydrogen. Current Status and Future Prospects, Dalcor Consultants & Intuit Strategies, August 2004 What the Future may look like Integrated Energy Industry, Diversified Products,Broad Markets Hydrogen and steam From Coke, Coal, Clean Power Bitumen Residue Gasification Value added Power Products Plants Natural Gas Resins and Homes & Businesses Plastics & NGLs Fibres and Petrochemical Primary Materials steam H2 Feedstocks Petrochemicals Film and Packaging Bitumen Synthetic Planes, Trains Adhesives and Composite Crude Oil & Automobiles Products Clean Transportation Fertilizers Fuels Integrating In-Situ Oil Sands Production and Upgrading to Reduce Cost and Increase Product Value OPTI – Nexen Long Lake Project Shell Gasification Process GasificationGasification CapitalCapital CostCost PayoutPayout –– SAGDSAGD withwith anan upgraderupgrader projectproject 16 12 8 4 Payout, years 0 0246810 Natural Gas Prices, US$/Mcf Adjusted for 17% volume shrinkage Source: FirstEnergy Capital OilOil SandsSands ProductionProduction CostsCosts Production Crude Cost per barrel (US$, 2003) Method Type Operating Supply Mining/Extraction Bitumen 5 to 8 10 to 13 Cyclic Steam Bitumen 6 to 11 10 to 15 Stimulation (CSS) Steam Assisted Gravity Drainage Bitumen 6 to 12 9 to 14 (SAGD) Production Crude Cost per barrel (US$, 2003) Method Type Operating Supply Mining/Upgrading Synthetic 10 to 14 18 to 23 Source: National Energy Board of Canada OilOil SandsSands ProductionProduction PotentialPotential • $US2O Billion under construction or approved • $50 Billion additional announced • ~ 70% of Canada’s production by 2020 WhatWhat AboutAbout Transportation?Transportation? ExpandedExpandedExpandedExpanded MarketsMarkets MarketsMarkets toto toto SustainSustain SustainSustain GrowthGrowth GrowthGrowth Gateway Project Capacity 400,000 bpd 5 (2010) Fort McMurray 1-5 are Far East Edmonton Hardisty New Kerrobert Markets Puget Sound Regina Markets Cromer 5a Gretna Great Falls Clearbrook Billings Superior Montreal Mandan St. Paul Salt Lake City Casper Toronto Sinclair Buffalo Detroit San Francisco Cheyenne 4 Chicago Toledo Canton Denver (2007)Wood River Lima Refineries McPherson Robinson Bakersfield Woodriver 3 El Dorado Patoka California Los Angeles Coffeyville (2007) Canadian Supplied Ponca City 1 Catlettsburg Cushing Tulsa Markets (2005) Memphis Not Canadian Supplied Artesia Borger/Sunray Ardmore 2 5b El Paso Big Spring (2005) Port Arthur Houston Lake Charles Texas City Freeport New Orleans 1 Corpus Christi Enbridge: New Market Access Plan Potential Markets - US West Coast & Far East Sea transport from Kitimat - similar distance to Asia as the Middle East SummarySummary ¾ Canadian oil sands resources are immense ¾ Serious challenges remain Technical – hard to extract and sensitive to market and input costs Environmental – land, water, emissions (including CO2) Social – community growth, native population Human resource – maintaining a skilled labor force ¾ 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 value Future co-production of clean fuels and Petrochemicals - technically and economically feasible ¾ Even this aggressive development can supply only some 10 - 15% of the required new global oil demand.