CALGARY, Apr. 1 -- Alberta's oil sands, with remaining established reserves of 174 billion bbl of crude bitumen, is a supply powerhouse to help meet North America's oil demand. But the region faces numerous development challenges to reach its full potential.
That was the consensus view of industry experts at a Canadian Energy Research Institute (CERI) oil conference near Calgary. Areas of concern include natural gas prices and high gas usage in bitumen processing, shortages of skilled labor, and substantial cost overruns on several recent projects.
Increasing pressures and public concern over water supply and industry use of water for processing, injection and other purposes, as well as the need for effective planning and research and development efforts to develop new technology and reduce costs also top the list of issues.
Alberta currently is producing close to 1 million b/d of oil sands, about one-third of Canadian oil production. A recent CERI study forecast that production, based on a moderate growth scenario, would reach 2.2 million b/d in 2017 at a price of $25/bbl (West Texas Intermediate, at Cushing, Okla.).
Development pros, cons
John LeGrow, general manager, oil sands, for ConocoPhillips Canada, said pluses for the oil sands industry include proximity to the world's largest energy market, a skilled labor pool which needs to be expanded, regulatory certainty, and access to capital for development.
On the downside, he said, oil sands are one of the highest-cost sources of oil in the world. Also, there are long timelines for the regulatory process and development, cost overruns on projects, and the need for more skilled workers.
LeGrow said for the industry to succeed it must develop new technology and a skilled work force to compete in a global marketplace. Managing environmental impact and ensuring that all stakeholders are part of the development process also is an essential policy.
"If the oil sands industry is to grow, it must be competitive and efficient," the ConocoPhillips executive said.
Len Flint, a consultant to the Alberta Chamber of Resources, said that identifying technologies and focusing on future R&D activity beyond 2010 are essential to future development. He said the supply costs for bitumen mining have been reduced by half but there has not been the same gains in refining.
Flint said the industry "must kick the natural gas habit" and develop alternatives for processing. Oil sands in situ thermal recovery operations use large volumes of natural gas and are sensitive to gas prices.
The consultant added that additional upgrading to offer markets a range of value-added products is necessary.
Water use concerns
Dave Pryce, a vice-president for western operations for the Canadian Association of Petroleum Producers, said that there is increasing public concern over the oil sands industry's use of water. He said the industry is hearing from the public and other water consumers that the industry injects water and it is lost. Also, Pryce said that he's heard that because the oil sands industry is a large water user, which is contributing to water shortages, it should pay for the water it uses.
Pryce said the industry is bumping into the agricultural community on water issues. Pryce said water use is becoming a high-profile public issue. Public concern is good and should lead to a debate in which industry use can be put in context, he said, adding, water is used extensively in oil sands operations and also in enhanced recovery in a maturing basin.
The CAPP executive said the industry is putting emphasis on alternatives to water use, has substantially reduced water for injection, is making greater use of saline groundwater, is recycling water faster, and is looking at the possible uses of municipal waste water.
Pryce said companies can expect greater scrutiny of their water use licenses.
Contact Jim Stott at email@example.com.