Alberta's Oil Sands: The Blessing and the Curse

The Canadian state of Alberta sits on an energy deposit larger than that of Saudi Arabia, but this energy comes in the form of oil sands - bitumen, the cost of its production is high and it causes environmental damage

The huge oil pipeline that interests in the American oil industry are seeking to pull from Alberta in Canada to the shores of the Gulf of Mexico has sparked interest in the Alberta oil sands phenomenon. Some see them as a solution that pushes the need to switch to green energy, while others see it as an ecological disaster in the making.
The article was first published in 2008 in the "Shalom Toronto" newspaper at the invitation of the editor.

The oil sands are a very large reservoir of oil-rich bitumen in northern Alberta, Canada. These oil sands contain a mixture of crude bitumen (semi-solid crude oil), slag sands (Silicone in BAZ, the sand we know), minerals in the form of clay, and water. Unlike crude oil, oil sands, which as mentioned are deposits of bitumen - oil in a viscous hump state, will not be able to flow unless heated or diluted with lighter hydrocarbons (hydrocarbons).

The Athabasca field is the largest of the three oil sands deposits in Alberta, together with the Peace River and Cold Valley deposits they constitute the largest oil reserve in Canada. The weekly magazine Time described these three deposits as Canada's largest buried energy treasure as well as a deposit that "could supply the world's oil needs for the next century". The website of the Canadian Ministry of Energy states that it is the second largest deposit after Saudi Arabia.

The deposits lie underground in an area of ​​140,200 square kilometers in northeastern Alberta - an area larger than the state of Florida, or twice the size of New Brunswick, 4.5 times larger than Vancouver Island, and 26 times larger than Prince Edward Island. However, only about two percent of this area has been utilized for these resources so far. Historically, bitumen was used by the local Cree and Dene tribes to seal their boats from the water. These mortises were first discovered by European settlers in 1788.

Oil sands are heavier than oil, and technically, bitumen is a tar-like mixture of petroleum hydrocarbons that has a density greater than 960 kg/gal. Light crude oil, for comparison, has a density of 793 km³. Compared to conventional crude oil, bitumen needs upgrading before it can be refined. As mentioned, it also requires dilution with lighter hydrocarbons so that it can be transported in pipelines. However, the bitumen itself constitutes only 10-12 percent of the oil sands content in Alberta. The rest are other minerals - mainly sand and clay, and 4-6 percent water. While crude oil flows freely in pumps located on the ground, oil sands must be mined or exposed in situ. The process includes excavation and separation systems designed to separate the bitumen from the sand and water. The water sands of Alberta are one of two areas of its kind in the world, the other area being in Venezuela.

However, this is a rather wasteful process. It is necessary to dig two tons of oil sands, and carry out the separation process to get one barrel of oil. About 75% of the bitumen can be separated from the sand in this way. Processed sand is returned to the mine pit for its rehabilitation. Covered mining is done when the bitumen deposits are too deep, that is, they are more than 75 meters deep, and then pit mining is not practical. Most of the bitumen mined in underground mines comes from ores more than 400 meters below the surface of the earth.

About 10% of the oil sands are found in a shallow layer, at most 75 meters below the surface of the ground which consists mainly of clay. The Alberta government has designated an area permitted for mining of approximately 3,400 square kilometers bordering the territories of 37 settlements north of Fort McMurray. The thickness of the Bitman layer is 40-60 meters and it stands above a layer of limestone. As a result of the convenient access, the Great Canadian Oil Sands company (now known as Suncor) began producing oil from the deposits in 1967. The Syncrude mine, which is the largest mine in the world, was established in 1978, and another mine - the Albian Sands mine (operated by Canada's in 2003. All three mines are equipped with bitumen upgraders that turn it into oil that is sent to refineries in Canada and the USA.

In the 80s, the town of Fort McMurray was mostly an isolated settlement on the prairie, and several hundred residents lived there, with the main economic activity being setting bear traps for fur production, and salt mining. Since the energy crisis in the seventies, the town has become a city of XNUMX residents who struggle among themselves to provide services and housing for immigrant workers, many of them from Eastern Canada, and especially Newfoundland.

Alberta Energy, the agency of the Government of Alberta established for the purpose of exploiting the province's energy resources encourages the responsible development of these vast deposits through planning and liaison with the government, industry and communities in the area to ensure a fair regime of revenue distribution that will attract investors, for appropriate regulation and protection of the environment, and To manage the Crown's rights in everything related to the oil sands while taking into account some of the limitations - higher technological risk and high production costs faced by the developers of the oil sands.

Alberta's oil sands industry is the result of billions of dollars of investment in the infrastructure and technology required to develop this unconventional resource. According to the Canadian Association of Petroleum Producers (CAPP), in 2005, the industry invested about 10 billion dollars in Alberta's oil sands. That year, Alberta's oil sands accounted for about 58 percent of the province's total crude oil sales and equivalent to producing 39 percent of Canada's entire crude oil production. During the last three fiscal years from 2003/2004 to 2005/2006, oil sands development generated $1.865 billion for Alberta in the form of royalties paid to the provincial government.

The annual output of the oil sands is gradually increasing as the industry matures. The marketable production output of the oil sands increased by 966 thousand barrels per day in 2005. The expected growth will bring the output to the level of 3 million barrels per day in 2020 and may aspire to 5 million barrels per day by the year 2030. This level of activity will support the development of additional industries and Alberta Become a world leader in the field of energy.

Despite the large reservoir, the cost of extracting oil from the sands has so far made oil production unprofitable. The cost of selling the crude oil produced did not cover the direct costs of discovering the resource, the cost of manpower required to mine the sands and fuel to extract the crude oil. In 2006, the National Energy Board of Canada estimated that the operating cost of new mines in the Anthabasca oil sands is around $9-12 per barrel, while the cost of production in another way, such as using two horizontal wells, would be between $10 for 14 dollars per barrel. This is compared to operating costs of less than a dollar per barrel of regular crude oil in Iraq and Saudi Arabia and 6 dollars in the US and Canada.

In addition, the capital cost needed to purchase equipment such as the huge machines used to mine the sand and the dump trucks used to load it into the processing process results in a huge cost of production. It is estimated that this cost reaches 18-20 dollars per barrel for surface mining and 18-22 dollars for covered mining. This cost does not yet include the cost of upgrading the crude bitumen to synthetic oil, which increases the final cost to $36-40 per barrel in new mines.

Therefore, although crude oil prices make the cost of production attractive, sudden drops in price levels will not allow producers to recover their huge capital costs - even though the companies in question are companies with a strong financial backbone and can survive long periods of low oil prices since the capital is mostly already invested and they can always cover the operating costs themselves.

However, the development of commercial production becomes easier due to the fact that the costs of discovering the deposits are close to zero. These costs are a major factor in evaluating the economics of drilling in traditional oil fields. The location of the oil deposits within the sands themselves is well known and the cost of production can be estimated easily. More importantly, the oil sands are in a politically stable area and companies can be sure that their valuable assets will not be nationalized by any government and that they will not be exposed to war or revolution.

 Lack of skilled personnel

As a result of the rise in oil prices in 2004-2006, the economic viability of the oil sands improved dramatically. With crude oil prices hovering around $50 per barrel, it was estimated that the open pit mining operation would bring in profits of 16-23 percent while the underground operation would bring in 16-27 percent profit. The prices in 2006 were even higher than this price. As a result, the companies announced capital investments in the coming decade (2006-2015) with a total value of 100 billion dollars, twice the estimates made in 2004. However, due to an acute labor shortage in Alberta, it is unlikely that all of these projects will actually be completed.

Currently, the area around Fort McMurray in Alberta has been particularly affected by the increase in revenues from the oil sands. However, even though jobs are plentiful, residential construction has not caught up and apartments in the area are expensive. People looking for work often arrive in the area without prior notice and this increases the cost of accommodation in the various guesthouses. This area is isolated, and only one two-lane road connects it with the rest of the province, and there is now pressure on the Alberta government to improve accessibility, as well as hospitals and other infrastructure.

Despite the companies' ongoing efforts to do as much of the system construction work as possible outside of Fort McMurray and even outside of Abelarta, the shortage of skilled workers is spreading to the rest of the province. Even without the oil sands, Alberta's economy was very strong, but the development of the oil sands is occurring during a period of economic boom and the highest growth in Kennedy County ever, and this has driven the unemployment rate in Alberta to historically low levels.

environmental issues

But the development of Alberta's oil sands resources represents a triumph of technological innovation. Over the years, government and industry have worked together to find innovative and economical ways to extract and process the oil sands and energy research is more important today than ever. Through the Alberta Energy Research Institute, the Government of Alberta is committed to a collaborative approach with the goal of spurring innovative programs and new technologies that will reduce the impact of greenhouse gas emissions and other emissions, and reduce water and gas consumption in the production process.

The international newspaper Epoch Times reports from its reporters in Alberta, Kaylan Ford and Omid Gureishi, that many residents complain of high concentrations of mercury in the fish caught in the Athabasca River and many other environmental problems.

Extracting the bitumen requires the clearing of large areas of land - usually northern forests - to dig huge open pits. Separating the oil from the bitumen is not a simple task either. The energy-intensive process used to extract oil from the sands emits two to three times more greenhouse gases than the process of extracting conventional oil. "[Alberta's] oil sands are the most polluting and dirtiest of the fossil fuels available today," said Iain Bruce, a climate change expert at the David Suzuki Foundation.

The development of the oil sands also takes a heavy toll on the land. Four tons of dirt are moved to produce just one barrel of oil. A report by the World Wildlife Fund (WWF) stated that Canada's Syncrude, the world's largest oil sands producer, alone moved more land than was used to build the Great Wall of China, the Suez Canal, the Great Pyramid of Giza and the ten largest dams in the world, all together.

The Alberta government requires that after the bitumen is removed from the ground, the oil companies rehabilitate the land through reclamation processes. "The restoration plan is partially working, but it will never return the land to its former state," said Stan Laurent, a resident of the Fort McKay Native Reserve. "The efforts are there, but they will never bring back the traditional fruits grown here; They will never bring back the traditional trees that the Canadian natives used for medicinal purposes, for food and for any other purpose. These will never return."

Fort McKay is located at the edge of the Athabasca tar sands, about 50 kilometers north of Fort McMurray, the hub of oil sands development. Here, in the middle of a dense and ancient northern forest, in the area overlooking the Athabasca River, the air carries with it a poisonous stench and the river is polluted; The fish living in it, the residents say, are dangerous to eat. "No one eats fish from the Athabasca River anymore," says Laurent. "In the past, the residents survived thanks to themselves."

The reserve, which itself is located on oil sands, is surrounded on all sides by mining companies. Many residents find employment in the oil sands, and the prosperity they bring to the reserve cannot be denied. Here, the distant hum of heavy machinery and house-sized trucks carrying bitumen out of the mines can be heard 24 hours a day. Every few seconds, loud explosions echo in the area - water cannons that startle birds and drive them away from the "waste pools" of toxic and black water. Extracting one barrel of oil from tar-like bitumen requires between two and five barrels of water, most of which is pumped from the Athabasca River. Many oil companies say they are improving the efficiency of their water use, sometimes recycling it more than ten times to minimize the impact on the river, but the benefit of water recycling is offset by the accelerated spread of development. The Pembina Institute estimates that water consumption will increase by 50 percent in the next six years. Eventually this water will be returned to the river or stored in waste ponds. No oil company has come close to rehabilitating these toxic pools.

The tiny Israeli equivalent - the oil shale

Oil shale is calcareous sedimentary rocks soaked in oil and easily split. Energy can be extracted from them, but their economic and environmental viability is questionable. The State of Israel was blessed with very large deposits of oil shale in the Rotem area (south of Dimona) and now, as mentioned, it turns out that the Adolim region is also full of them, although at a greater depth. And the Scientific American magazine dedicated an article to this, which will be published on the science website soon.

The Ministry of Energy states that the experiments were completed about 6-7 years ago and the ability of both burning the shale and extracting oil from it was proven, but at the time the viability was low because oil prices were low. Today, when oil prices are rising, the viability of shale is increasing again. Although there are reserves there for the entire consumption of the State of Israel for 30 years, it must be remembered that both the burning of shale pollutes and the oil produced from the shale is of very poor quality, and this is something that works in the opposite direction to the environmental trend - because their sulfur level is very high and the direction is to reduce the sulfur level. There are not many options but to export this oil or use it in small quantities and mix it with higher quality fuels, so this issue is still in the testing stages and not in actual production stages.