Heavy Oil from Tar Sands Could Pay Off with Improved Processes, Technology

SRI Consulting published its new "Heavy Oil from Tar Sands" report, a technical and economic analysis of production processes, capital and operating cost estimates, important issues that impact the industry, and key drivers for success and failure.

Tar sands are a mixture of hydrocarbon-rich bitumen mixed in sandstone layers. When the hydrocarbons are separated, the bitumen released is a heavy, black and sticky semi-liquid of high viscosity.

Author and Senior Consultant Anthony Pavone commented, “With rational engineering and prudent business decision making, grass roots tar sands projects should be economically viable at benchmark crude oil prices below US $60 a barrel.”

The report acknowledges that from a simple model of cost to extract, producing heavy oil from tar sands is significantly more costly than producing conventional crude oil. However, after a closer examination of the prevailing recovery technologies in new tar sands projects, it is clear that improvements to processing and upgrading operations can result in the cost of producing heavy oil from tar sands being competitive with conventional crude oil.

Key factors include: the scale of the operation, bitumen content of the tar sands, dimensions of target oil bearing reservoirs, steam-to-oil ratio in steam assisted gravity drainage (SAGD) production, and process configuration of upgraders that convert bitumen to synthetic crude oil, using conventional oil refining process technologies.

Global energy demand is expected to increase 50-60% by the year 2030, driven primarily by population growth and the desire for better living standards. In a 2007 report, the U.S. National Petroleum Council, an organization of U.S. oil companies reporting to the U.S. President, acknowledged that conventional oil and gas alone are unlikely to satisfy this demand, and called for the development of supplemental energy sources such as clean coal, biofuels, alternative renewable energy, nuclear, and non-conventional fossil fuels such as tar sands.

SRIC’s "Heavy Oil from Tar Sands" report reviews the status of the global tar sands business focusing on Alberta, Canada where sand deposits represent 174 billion barrels of oil, 15% of the global reserves and second only to Saudi Arabia. The report presents itemized production economics using rational engineering design for producing bitumen via surface mining and SAGD, and producing synthetic crude oil by upgrading bitumen.