Canada's Oil Sand Bitumen Production to Surge Ahead

Shell Canada recently outlined growth initiatives for the Athabasca Oil Sands Project (AOSP), to increase bitumen production to between 270,000 and 290,000 barrels a day by 2010.

Canada's overall oil sands production is increasing significantly and it is expected to offset the decline in conventional crude oil production, becoming Canada's major source of oil supply. As a result of this oil sands production, Canada now holds the second highest proven crude oil reserves in the world, after Saudi Arabia. The country's oil production has been increasing since 1999, as new oil sands projects and production off the coast of Newfoundland have come onstream.

According to research conducted last year, Canada's total proven crude oil reserves in 2004 stood at 178.9 billion barrels. The majority of these reserves are sourced from Canada's oil sands.

The Athabasca Oil Sands Project

The AOSP is the first fully integrated oil sands project in 25 years. At full production, it is expected to supply 10% of Canada's oil needs for more than 25 years. The Project consists of two main components, these being the Muskeg River Mine located 75 kilometers north of Fort McMurray, Alberta, and the Scotford Upgrader next to Shell's Scotford Refinery north of Fort Saskatchewan, Alberta.

It is a joint venture between Shell Canada (60%), Chevron Canada (20%) and Western Oil Sands (20%). As the majority owner, Shell is the overall project administrator as well as operator of the Scotford Upgrader. Albian Sands Energy, a company created by the joint venture, operates the Muskeg River Mine.

A variety of commercial partners have constructed facilities that assist the project's success. For example, Terasen built the Corridor Pipeline, a 493-kilometer interconnecting pipeline that transports the diluted bitumen from the mine to the upgrader and returns the diluent to the mine for re-use.

Accelerated bitumen throughputs

Over the next three years, a number of debottlenecking projects are proposed at the Muskeg River Mine and Scotford Upgrader to increase the bitumen production rate to between 180,000 and 200,000 barrels per day. Modifications are also proposed at the upgrader to enable the processing of the heaviest product stream into lighter, higher value crude blend components.

Over the 2006 to 2010 period, planned expansions of the Muskeg River Mine and Scotford Upgrader are expected to further increase bitumen throughputs by approximately 90,000 barrels per day, taking total expected AOSP production to between 270,000 and 290,000 barrels per day. Expansion of the Muskeg River Mine would include mining plans and additional mining equipment to recover resources from additional areas located on Lease 13 and from Lease 90, and an additional train for bitumen extraction and froth treatment processing. Expansion of the Scotford Upgrader would include the addition of a third hydro-conversion unit and associated utilities. The preliminary capital cost estimate for these expansion projects is in the range of a massive $4.0 billion.

Neil Camarta, Shell Canada's Senior Vice President of Oil Sands, says that the successful ramp-up of the Athabasca Oil Sands Project is now complete. "While we need to continue working hard on increasing reliability and reducing costs, we're now ready to take the next steps towards our long-term growth target of over 500,000 barrels per day."

He continues that it is expected that construction of the Muskeg River Mine and Scotford Upgrader expansions will take place over the 2006 to 2009 timeframe and that full bitumen production will be achieved in 2010.

Furthermore, peak construction workforces will apparently be 2500 at the mine and 4000 at the upgrader. Actual timing for these projects will depend on the outcome of the regulatory process, market conditions, final project costs and approvals and sustainable development considerations.

The AOSP is operated in strict accordance with the principles of sustainable development. Sustainable development involves balancing short-term wants with long-term needs and integrating the economic, social and environmental aspects involved.

Evidently, additional growth projects may follow over the longer term, including the mining of oil sands resources on the eastern part of Lease 13 and Leases 88 and 89, as well as on the recently acquired Leases 9 and 17 to increase total bitumen production to over 500,000 barrels per day. Planning is currently focused on ways to integrate the development of resources on the east side of Lease 13 (the Jackpine Mine development) with operations at the Muskeg River Mine. Upgrading options to process this additional bitumen production are also currently under review.

This article provided courtesy of EyeForEnergy