Oilsands See Technology as Saviour From Environmental Dilemma

Swollen government coffers and generous earnings for investors and workers alike make any talk of slowing down development at Alberta’s oilsands seem absurd.

But as production generates more dollars than ever, there is a growing clamor to do just that.

The debate stems from the simple and inescapable 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 Canadian emissions between 2003 and 2010, the oilsands are the single largest contributor to the missed target.

The country’s ruling Conservative Party took a second shot recently at devising an environmental policy to tackle the issue — its first attempt was criticized for setting targets too far 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 hits its own targets, Canada will still emit 630 megatonnes a year by 2020.

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

The difficult task of curtailing emissions without curbing the economic boom has companies, government and citizens pinning their hopes on new technology.

Producing crude oil from the oilsands in Alberta is more energy intensive than it is at traditional projects in 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, according to the Fort McMurray-based Oilsands Discovery Centre, is that producing a barrel of oil from the oilsands releases three times more greenhouse gases than it does from conventional sources.

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 favourite among executives in the oilpatch.

Put simply, CCS involves separating carbon dioxide from power sources such as coal-fired power plants, and transporting it by pipeline to a storage site where it is 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, which requires energy. Capturing CO2 requires using 10% to 40% more energy from the same power plant that emissions are being captured 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 reusing captured carbon dioxide to improve oil recovery in Central Alberta, where there are large, depleted conventional oil and 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 oilfield in southeastern 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 company’s 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 Energy (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 and gas industry in general,” said Gordon Lambert, vice-president of sustainable development at Suncor in a recent interview with the Caiteur Group.

Underlining the optimism of companies like Suncor is a recently released report from the Alberta-based Pembina Institute that estimated reasonably low costs for reducing greenhouse gas emissions from the oilsands.

The report pegged the cost to get to a level of no net emissions at US$1.76 to 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.