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Alberta's Oil Sands: Not Just for Caulking Canoes

Used in previous centuries for tasks ranging from waterproofing canoes to paving roads, the abundant bitumen found in Alberta's Athabasca Oil Sands may serve another purpose: securing Canada's role as an important oil producer for generations to come.

Bigger than the Sunshine State
Athabasca is the largest of three designated oil sands areas (OSAs) in the northern half of the province. The other OSAs in Alberta include Cold Lake and Peace River. Together, the OSAs are believed to hold 1.7 trillion barrels of bitumen in place (oil sands are mixtures of bitumen, water, sand, and clay). The so-called "Carbonate Triangle" of the Athabasca, Cold Lake, and Peace River OSAs cover an approximately 54,400-square-mile area—slightly larger than the state of Florida.

The Energy Resources Conservation Board (ERCB), formerly formerly the Alberta Energy and Utilities Board (EUB), considers 175 billion barrels of the bitumen proved reserves, which can be recovered with current technology and under present and expected economic conditions. The ERCB also reckons that an additional 315 billion barrels could be recovered given the right technological advances.

Earlier this decade, one source of reserves data—the Oil & Gas Journal—began including the oil sands in its estimate of Canada's proved reserves. Though not universally accepted, this action propelled Canada's proved reserves from less than 5 billion barrels to approximately 179 billion barrels. Because the ERCB, Natural Resources Canada, and Canada's National Energy Board accept this figure, the remainder of this article will use the OGJ estimates. Based on these assumptions, Canada has the world's second-largest proved crude reserves after Saudi Arabia, which reports reserves of roughly 260 billion barrels.

Holding its own
Although an exceptionally large share of its proved reserves consists of non-conventional oil, Canada is now recognized by many observers as having more crude than 10 of the 11 individual members of the Organization of Petroleum Exporting Countries (OPEC). In addition, Canada holds some 46 percent of the world's non-OPEC proved reserves.

The vast majority of Canada's oil reserves are in Alberta. Viewing a graph comparing Alberta's conventional oil reserves against its non-conventional oil sands reserves, one can appreciate the extent of the province's abundance of crude bitumen. Note that the initial volume in place is the volume of crude oil or bitumen that is interpreted to exist before any production commences. Looking at the chart below, one may conclude that a total of 489 billion barrels of bitumen could conceivably be recovered with current and future technologies. To put the magnitude of this figure in perspective, consider that the U.S. produced 192.3 billion barrels of oil from 1859 through 2005. Or to put the comparison another way, 489 billion barrels is just 3 percent less then the entire combined reserves of Saudi Arabia, Iran and Iraq, which have the world's three largest reserve bases beside Canada.

Four Decades of Growth
Commercial production of Alberta's oil sands began in 1967 when the precursor to Suncor launched the Great Canadian Oil Sands plant, which is located in the northeastern city of Fort McMurray in the Athabasca Oil Sands region. Syncrude opened the second major facility in the region in 1978. Other major players in the Carbonate Triangle include Imperial Oil, Shell Canada, ConocoPhillips, and China National Petroleum Corp. Since 1967, approximately 4.6 billion barrels of the non-conventional resource have been produced (either as crude bitumen or upgraded synthetic crude)—a mere 2.6 percent of proved reserves. Much of the growth in oil sands production has occurred since the beginning of this decade, as the chart below illustrates.

Out of the world's major oil sand deposits, only Athabasca contains reserves shallow enough to be extracted by open-pit (surface) mining. The mineable oil sands, however, represent only 20 percent of Alberta's total recoverable bitumen deposits. The remaining 80 percent lie deep below the earth's surface. Hence they must be recovered with in situ methods. (In situ is Latin for "in place."). In situ techniques remove oil from oil sands without removing the sand from the ground.

Developing economical in situ recovery methods is crucial to helping Alberta's oil sands industry evolve. There is no "one-size-fits-all" in situ process because the characteristics of bitumen in a single deposit, let alone multiple deposits, are not uniform. Despite this variation, all in situ techniques must achieve two outcomes: lower the bitumen's viscosity so that it will flow and actually make it recoverable. Presently, the two most common commercial situ methods applied by Canada's heavy oil producers are Steam Assisted Gravity Drainage (SAGD) and Cyclic Steam Stimulation (CSS).

SAGD entails drilling two parallel horizontal wells through the oil sands formation. The upper well is used to inject steam into the reservoir. The steam heats the sand and makes the oil less viscous. The more freely flowing oil flows through a slotted liner into the lower production well, which pumps the oil to the surface. Water is then injected into the area from which the bitumen has been drained.

In CSS, steam is injected into an oil sand formation before the actual pumping begins. The steam saturates and thus softens the sand, and the water vapor aids in separating the bitumen from the sand. In addition, the relatively high pressure of the underground environment leads to the formation of cracks. These cracks help to push the bitumen toward producing wells. During production, the bitumen flows to the surface on its own or is pumped up the well. When production rates begin to decline, steam is reinjected and the process is repeated.

Another in situ method is the Vapor Extraction Process (VAPEX) method, which has not been deployed commercially to date. Similar to SAGD, VAPEX uses vaporized solvents—such as ethane or propane—rather than steam. Injecting solvent into the oil sands forms a vapor-chamber. Thanks to gravity drainage, oil flows through the chamber. VAPEX is suitable for paired horizontal wells, single horizontal wells, or a combination of vertical and horizontal wells. According to Petro-Canada, which is spearheading VAPEX's development, the method is still in the pilot stage.

More Growth Ahead
News accounts about Alberta's current oil sands boom typically portray Fort McMurray as a once-sleepy little town that now finds itself in the sights of majors from as far away as China. Tracking the growth of the oil sands industry, Fort McMurray's population has risen from roughly 2,700 in 1967 to more than 60,000 today. Increased production from the oil sands should continue to play an important role in the economic development of Fort McMurray—and Alberta in general—for the foreseeable future. Based on the projected increase of oil sands production in Western Canada—to approximately 3.5 million b/d and rising by 2015—in the chart below, Fort McMurray should retain its status as a boomtown for years to come.

According to a Canadian Energy Research Institute analysis, an estimated CDN$77.4 billion (US$76 billion) will be devoted to capital spending on oil sands projects in the period 2004 to 2020. Investment is expected to grow through 2010 and begin tapering off through the next decade as projects go onstream.

Although the prospects for developing Alberta's OSAs are promising, the industry will need to continue to address a number of associated challenges. Major hurdles to overcome include an ongoing shortage of qualified labor and the continual need to refine in situ recovery techniques and reduce recovery costs. Moreover, it is important to recognize that Alberta's Oil Sands—vast as they may be—will not be the panacea for increasing global oil demand. In fact, an official with the Alberta Energy Research Institute said that even aggressive development of the OSAs is expected to supply only 10 to 15 percent of new global oil demand.

Despite the challenges that remain, the record of Albertans in dealing with the thick, gooey black stuff so abundant in their province inspires optimism. After all, they have developed world-class expertise in turning what was once just natural caulk into an increasingly desirable energy source.

Matthew V. Veazey is the editor of Rigzone.com.

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