Companies dig deep for Canada’s oil

Sean Cole Aug 4, 2010

Companies dig deep for Canada’s oil

Sean Cole Aug 4, 2010


Bob Moon: Let’s drill a bit further now into a story we began yesterday about the exploitation of vast oil resources in Canada. It’s not actually oil in the ground, but a hydrocarbon known as bitumen. It has to be separated from the oil sands, before it’s turned into synthetic crude. An estimated 170 billion barrels could be produced up in the northeast corner of Canada’s Alberta province. Only Saudi Arabia can top that number. But most of the stuff in Alberta is buried too deep for traditional mining techniques.

But as Marketplace’s Sean Cole reports, where there’s a decent profit margin, there’s a way.

Sean Cole: There are two industry phrases you need to know off the bat: When you go deep underground to get the bitumen, you’re extracting it “in situ,” which is Latin for “in place.” The most common method of “in situ” extraction is “Steam Assisted Gravity Drainage” or SAG-D.

Cole: Oh, you can smell a kind of, like a butane smell almost.

I took a tour of a SAG-D operation run by Devon Canada. Very basically, they pump steam into the ground, melt the bitumen “in place,” and pressure it out with natural gas.

Gordon Lynch was the supervisor on duty.

Gordon Lynch: All of our pipes are labeled. That is the lift gas line. The line behind that is steam.

“In situ” isn’t quite as dramatic as mining, and it uses less water. More notably, there are no huge toxic water storage ponds like at the mines. There are also no mines. Everything is happening hundreds of feet down in the earth. So some folks in the industry tout in situ as the cleaner, greener face of the oil sands. But an environmental group in Calgary called the Pembina Institute did a study comparing in situ and mining, and it wasn’t favorable.

Terra Simieritsch is a policy analyst at Pembina.

Terra Simieritsch: In situ development on a per barrel basis is actually more greenhouse gas intensive than mining, produces more sulfur dioxide.

That’s because it uses more natural gas than mining — like four times as much. And Pembina says SAG-D producers, on average, emit 91 kilograms of CO2 per barrel of oil, which it says is two and a half times the average emissions for mining.

Cal Watson: We know that greenhouse gas emissions is a hot topic.

Cole: A huge deal, actually.

Watson: A huge deal.

Cal Watson is the GM of Thermal Heavy Oil for Devon Canada. He says emissions at Devon are actually on the low side of the average, 57 kilograms per barrel.

Watson: And Devon as a socially responsible company — we wanna see how good we can get.

Thus, Devon is testing out new technology that would lower its CO2 emissions. And it’s not the only one. A company called Petrobank has come up with a way to actually burn some of the bitumen underground, which would then melt the rest. The process is called “Toe to Heel Air Injection,” or THAI. These people love their acronyms.

I first learned about it from Oil Week magazine columnist David Yager.

David Yager: So it uses no water and it uses no natural gas.

Cole: Write that guy a huge check! So why aren’t…

Yager: Well they are! They’re licensing it and it’s experimental technology. I mean then somebody else says, “Well, you’re starting giant fires underground, you’re gonna destroy the world.” I mean, there’s always somebody.

Somebody like Terra Simieritsch from Pembina who… Actually, she thinks all of this innovation sounds pretty good, but that it should be spurred on a little more.

Terra Simieritsch: The government has to be in a place where they’re rewarding innovation. You know, companies should be doing it in order to gain their social license to operate, but their bottom line is really to earn money on their project for their shareholders.

That said, Petrobank has a patent on its new process, so if another company wants to use it, there will be a fee. And I’d be remiss if I didn’t mention one other thing: Four days after my visit with Devon, one of its pipes sprung a leak, and sent a misty spew of water and bitumen 30 or 40 feet into the air for 36 hours. Most of it landed on site. But a little, just a little, ended up in a local creek known to the teeny nearby town of Conklin as Monday Creek.

Nadine Barber: And Monday Creek goes into Sunday Creek.

Nadine Barber is a spokesperson for Devon.

Barber: And then Sunday Creek goes into Christina Lake.

Cole: Ah.

Barber: Christina Lake is where Conklin gets their drinking water.

Cole: This seems terrible.

Barber: It’s an anomaly for Devon. It’s an anomaly for the industry. It’s certainly not the way we normally operate.

Luckily, no one was injured. Clean up began as soon as the affected pipes were shut off. Devon lost one-seventh of its daily production. And the leak gave critics of the oil sands more fodder for their case.

Still, oil companies wouldn’t be mining and in situ-ing the oil sands if we weren’t demanding so much fuel from them. The International Energy Agency says oil demand could go up 40 percent worldwide over the next 20 years. If they’re right, then it’s going to come from somewhere. And those of us who drive cars and take planes should at least know where that is.

I’m Sean Cole for Marketplace.

Moon: If you wanna see those oil sands for yourself, there’s a slideshow.

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