High Stakes in Canada's Vast Oil-Sands Fields

Article excerpt

The relentless search for oil has led explorers to the boreal forest of northeastern Alberta, among the jack pines and black spruce trees an hour's drive from the boom town of Fort McMurray. Kelly Hansen, operations manager at ConocoPhillips's $1 billion Surmont oil-sands plant, holds up the prize: a beaker of sticky black "synbit," a 50-50 blend of bitumen (a viscous, tarlike petroleum) and synthetic oil.

"The Athabasca oil sands contain the equivalent of 1.7 trillion barrels of oil," Mr. Hansen says. "About 20 percent of that total can be produced, using current technology" - namely, surface mining and steam extraction underground. Surmont, a facility of gleaming silver-colored steam generators, process pipes, and holding tanks, is jointly owned with French oil company Total. Its initial pilot phase has ended, and the company estimates it will produce 2.5 billion barrels of oil at Surmont.

Thanks largely to the prodigious AthaA-basA-ca oil sands, Canada ranks second only to Saudi Arabia in terms of total oil reserves. At a time of roller-coaster crude prices and concerns over the security of energy supplies, these oil-sand deposits have attracted more than $100 billion of investment from just about every major oil company in the world.

According to Matt Fox, vice president of oil sands at ConocoPhillips, "Canada represented 20 percent last year of US oil imports. By 2020, it could easily represent 40 percent."

Athabasca's oil sands produce a heavy oil. "Upgraders" in the province convert it into a blend of lighter oil so it can enter pipelines and reach markets across Canada and the United States for refining.

Fort McMurray is experienA-cing a gold rush, even if the gold is black. The two-lane highway into town is often jammed with full- size pickup trucks and prefabricated process plants on wide-load trailers. Life in town is a frenzy of skyrocketing house prices, inadequate municipal infrastructure, mountains of freshly earned cash with little for workers to spend it on, and a huge transient population, much of it in temporary work camps. There's a severe shortage of skilled labor. Mine workers are being recruited from as far away as South Africa and Venezuela.

Huge environmental footprintBut the biggest concern is the environmental footprint being created by oil-sands development. Extracting AthaA-basA-ca's oil is costly not only in terms of infrastructure, but also in water, energy used to produce steam, and the enormous amount of greenhouse gas that results. Some question whether the scale of new projects is wise. At today's prices, tens of trillions of dollars' worth of oil are at stake.

The oil sands exist in two formations: Surface deposits account for 20 percent of total recoverable reserves. The rest are at various depths underground.

At Syncrude's Mildred Lake plant, north of Fort McMurray, giant excavators have scarred the landscape. Like giant otherworldly beetles roaming the moon, 400-ton trucks haul the ore to the extraction plant. Two tons of loose rock and soil and two tons of ore have to be moved to produce a single barrel of oil. Surface mining also uses from 2 to 4-1/2 barrels of water per barrel of oil. The water is pumped from the nearby Athabasca River to produce steam, which helps separate sand and bitumen. Much of the water is recycled, but some is left to settle in highly toxic tailings ponds.

At the same time, Syncrude - a joint venture that includes Canadian Oil Sands Ltd., Imperial Oil (an ExxonMobil subsidiary), Petro-Canada, Nexen, ConocoA-Phillips, and others - is Canada's largest single emitter of greenhouse gas, since it must burn 750 cubic feet of natural gas to generate the steam needed to produce a barrel of bitumen. That's the equivalent of burning one barrel of oil for every eight barrels produced.

According to Steve Gaudet, Syncrude's manager of environmental services, gradual progress is being made to reclaim land at mined sites by replacing topsoil and replanting shrubs and boreal forest trees. …