Oilsands see technology as saviour from environmental dilemma

The economic benefits of Albertas oilsands are undisputed. Swollen government coffers and generous earnings for investors and workers alike make any talk of slowing down development seem absurd.

But as more dollars are generated from ever more production, there is a growing clamor to do just that.

The debate stems from the simple and in-escapable fact that more oil production in the region means more greenhouse gas emissions.

Last year Canada produced roughly 781 megatonnes of greenhouse gases, and will miss its Kyoto target of cutting them to 563 megatonnes by 2012.

Making up roughly 47% of such emissions between 2003 and 2010 the oilsands are the single largest contributor to the problem.

To tackle the issue the ruling Tories took a second shot at devising an environmental policy the first was criticized for setting modest targets at too distant a time in the future. The new policy targets a 20% reduction in greenhouse gas emissions by 2020.

It also lays the groundwork for emissions trading and within three years aims to reverse the steady upward climb of emissions.

But even if the new plan hit its own targets, Canada will still emit 630 megatonnes a year by 2020.

And with the new limits being based on the intensity of emissions per unit of production, rather than a hard cap on total emissions, the possibility remains that total emissions could go up further.

The seemingly irreconcilable tension between curtailing emissions and not hindering the economic boom has companies, government and citizens pinning their hopes on new technology.

Oilsands make for higher emissions

Producing crude oil from the oilsands is more energy-intensive than in many other parts of the world.

Not only are the massive digging and hauling machines not fuel efficient, but refining and welling technologies require roughly 30 cubic metres of natural gas per barrel of recovered oil.

The net effect is that a barrel of oil from the oilsands releases two to three times the volume of greenhouse gases than a traditional oil project would.

While varying strategies are being looked at to deal with the problem including using nuclear power to generate energy the potential of carbon capture storage (CCS) technology is establishing itself as the most favoured amongst executives on the oil patch.

Put simply, CCS involves separating carbon dioxide from power sources such as coal-fired power plants, transporting it by pipeline to a storage site where it is then injected into a geological formation suitable for long-term isolation.

And while the process may sound uncomplicated, the technology currently suffers from burdensome cash cost projections.

Most of those costs roughly 90% — are tied to the actual capture of the carbon dioxide. The capturing process can require 10 to 40% more energy from the power plant that it is capturing carbon dioxide from.

A 2005 report from the Intergovernmental Panel on Climate Change estimated that capturing, transporting and storing carbon dioxide from a new gas or coal-fired plant would increase the cost of the electricity at the plant by between 37% and 91%.

But the report cautioned that because there is so little commercial experience with CCS, the cost estimates are highly uncertain.

The industry, however, is hoping that such costs can be mitigated by re-using captured carbon dioxide to get better oil recovery in Central Alberta where there are large depleted conventional oil & gas reservoirs.

Injecting carbon dioxide under high pressure in oil reservoirs can push up oil that would otherwise be left behind.

The process has been used successfully by EnCana (ECA-T, ECA-N) at its Weyburn oil field in southeast Saskatchewan. The company began injecting carbon dioxide piped in from a coal plant in North Dakota back in 2000. It is currently one of the world’s largest greenhouse gas sequestration projects.

More importantly to the companys bottom line, it estimates that CO₂ injection will improve oil recovery by 50%, helping to produce roughly 130 million barrels of oil over the next 30 years.

Another big player on the sands — Suncor (SU-T, SU-N) — says CCS is on its radar as well.

We see carbon capture and sequestration as the main greenhouse gas emission reduction measure for Suncor and the oil & gas industry in general, Gordon Lambert, vice president, sustainable development at Suncor recently said in an interview with the Caiteur Group.

Underlining the optimism of companies like Suncor, is a recently released report from the Pembina Institute on the costs of getting to no net greenhouse gas emission in the oilsands.

The report pegged the cost to be as little as US$1.76 per barrel or as much as US$13.65 per barrel depending upon the operating scenario, not nearly as burdensome as some onlookers had believed it would be.

The report recommended using a variety of solutions including CCS, as well as energy efficiency, fuel switching, and carbon offsets.