Get Rich Quick at the Oil Sands:
A Complete Guide
What are the Oil Sands?
The Oil and How It's Extracted
The gooey mixture extracted from the ground in northern Alberta is not conventional oil. It falls under the heading of unconventional oil. Getting at it requires more money, more energy and better technology than the Saudis need to extract their conventional oil. Most of the technologies used to do this were pioneered by Canadian companies and are just now coming into the mainstream, one of the main reasons this building boom is reaching its zenith now. Before we delve into the technology let's look at the oil itself.
The proper name for the oil in the sands is bitumen. Bitumen is a mixture of water, clay and hydrocarbons that resembles cold molasses. At room temperature it does not flow. The oil sands are sometimes called tar sands but that term is falling into disuse because of its imprecision: oil is derived from the bitumen, while tar is a different substance altogether. Opponents of oil sands development make a point of calling them term tar sands because of the supposed negative connotations of the word ‘tar’, turning the name itself into a political football. Ironically, opinion polls indicate more Canadians support developing the tar sands than developing the oil sands (the same thing). This is probably because 'oil' actually has so many more negative connotations than tar (oil spill, oil company, oil tanker). Therefore someone using the term 'tar sands' merely tips off the listener to their personal bias without doing any service to their cause. It seems likely that this misguided public relations effort will soon be discarded and ‘tar sands’ will drop from the lexicon entirely.
Where did it Come From?
Oil is not, as is often supposed, the bones of dinosaurs. Most of the world’s vast oil deposits began forming in large lakes or shallow oceans hundreds of millions years ago. In these nutrient-rich environments zooplankton, algae and tiny marine invertebrates lived and died at a fantastic pace, carpeting the seafloor with their remains. As new remains covered up the old before they had time to decompose, the material at the bottom was compressed and eventually descended into the earth’s crust. There it was subjected to intense heat and pressure that broke down the chemical bonds between the molecules. At a specific heat and temperature, known as the ‘oil window’, oil was formed. Too much heat and pressure and the window was missed and natural gas was formed instead. Today’s Gulf of Mexico was one such propitious shallow sea, while the ancient Tethys Sea has now become the modern Middle East.
The Canadian Prairies were also once a region of shallow seas and plains. Oil formed there the same way it did elsewhere, but over the vast gulf of time geological processes forced the nascent oil to migrate back to the surface, where microorganisms began breaking down the lightest of the oil (the kind Saudi Arabia has so much of). This process went on for tens of millions of years and it is thought about 2/3rds of the oil originally present in this region (the best oil) was gobbled up by voracious microorganisms. Nature would have continued eating away at the oil had we not interrupted the process. Now we are only left with the remaining third of lower quality heavy oil, the bitumen. As we will see, that third is still a tremendous amount; it is just harder to get at.
Reserves - Just How Much Is There?
The oil sands are located in three large patches in the north of the Canadian province of Alberta, extending in some places into Saskatchewan. The total volume of oil in the region is thought to be somewhere around two trillion barrels, perhaps twice as much as has been used by all humanity since the beginning of the Industrial Revolution. But estimating exactly how much of it we can get at is a tricky business. It is important to understand that oil reserves are as much an economic concept as a geological one, dependent just as much on the price of a barrel of oil and the technology available as the amount of oil physically beneath our feet. In reality the vast majority of these two trillion barrels will never be extractable at anything approaching a feasible rate of return. The Government of Alberta believes only about 8.5%, 170 billion barrels, is recoverable with today’s technology at current prices. This is still staggering: Only Saudi Arabia and Venezuela have larger reserves. If all of North America’s oil reserves were to be added up - conventional, offshore, shale, Alaska’s Arctic Wildlife Refuge, everything - the oil sands would still constitute over 75% of the total. If history is any guide, those 170 billion barrels are going to change this country dramatically over the next 50 years.
Saudi Arabia and the other Persian Gulf countries have reserves of mostly conventional high-grade oil. Venezuela's huge reserve numbers come from the massive heavy oil deposits in the Orinoco Basin where large scale extraction has yet to begin. Extracting that oil will be even more environmentally damaging than Canad's oil sands. Canada's come almost entirely from the oil sands. Though extracting these heavier oil sources is more energy and carbon-intensive than the high-quality oil in the Persian Gulf, Canada's political and economic stability makes it a more appealing target for investors.
The recent flurry of activity around the oil sands might give one the impression the they had just been discovered. In fact the local First Nations peoples have known of this resource for thousands of years: they used the sticky substance to caulk their canoes. Early fur traders like Peter Pond (namesake of Fort McMurray’s mall) remarked on viscous seeps of oil oozing onto the ground or into rivers. It didn’t take long for people to begin thinking about the economic possibilities.
In the 1880s, in Texas, Pennsylvania and Ohio, men were plunging wells into the ground and being rewarded with towering gushers of oil. Alberta did have some light conventional oil like this, but the real prize has always been to figure out how to get the plentiful bitumen to flow down a pipe. How to suck it out of the ground like a milkshake up a straw? For the past century Canadian scientists, geologists and engineers have been quietly chipping away at this problem.
After some experimental projects in the first half of the 20th Century, the Great Canadian Oil Sands project opened for business in 1967. They didn’t solve the problem of how to get the oil to flow down a pipe. Instead they simply dug it out of the ground.
They used gargantuan bucketwheel excavators capable of digging up tens of thousands of cubic metres of earth a day. The earth would be deposited along conveyer belts leading to an upgrader. When light conventional oil is extracted from the ground it needs only be refined. Refining turns crude oil into gasoline, aviation gas, kerosene and the many other useful oil derivatives. Bitumen has to be upgraded, removing the dirt and water, before it can even be sent for refining.
At the Great Canadian Oil Sands project, now known as Suncor, many extraction and upgrading technologies were pioneered; but the mining operation, which was soon joined by Syncrude, remained on the margins of Alberta’s oil sector. It was simply too expensive. Most of the province’s oil production was conventional.
The Building Boom
In 2003, around the time of the Second Iraq War, oil prices surged from around $30 a barrel to $60. In 2008 they were nearing $150 a barrel, but have since stabilized at about $100. It is unlikely the price will ever drop much below this point for an extended period. Suddenly extracting oil from the sands went from being a loss-maker to extreme profitability. Unlike so many other oil producing nations, Canada is a stable democracy, where the rule of law is enforced, making large foreign investment viable. Alberta was already well connected to North America’s dense pipeline network. It’s hardly surprising other companies began piling in to the oil sands and the result is the building boom we see today.
When people think of the oil sands, they think of mining. Mining is how the oil sands got its start, and it still constitutes a large proportion of the total extraction that goes on. The techniques have changed since the 1960s, giant shovels and dump trucks as big as single family homes have supplanted bucketwheels, but the scarred landscapes and eerily unnatural tailing ponds remain the same.
The Suncor and Syncrude mines 40km north of Fort Mcmurray are the source of most of the images people see of the oil sands. You can see them from Highway 63, stretching to the horizon. The tailings ponds are bigger than many lakes. The constant flow along the highway of tractor-trailers and heavy equipment beggars belief. One might expect the world’s largest mine to be a coal mine in China or a diamond mine in South Africa. Actually Syncrude’s mine is the largest of any kind in the world.
Extraction through mining is not going to be the future of the oil sands. I’ve no doubt it will remain the ugly poster child of the industry, but only about 20% of the bitumen is at a shallow enough depth to be recovered through mining. The other 80% required a solution to the flow problem. They found one.
Fort McMurray is dwarfed by the gigantic Suncor and Syncrude mines 40 km north of the city.
SAGD, short for Steam Assisted Gravity Drainage, is the technology that suddenly opened up that other 80% of oil for extraction. It is proof of petroleum geologist Wallace Pratt’s famous maxim “Oil is found in the minds of men.” Developed through rapid and sustained technological advancement by Canadian companies since the 1980s, the technology works like this:
- A natural gas plant heats water and creates vast quantities of steam.
- The steam is pumped underground and expelled from a pipeline running through the bitumen formation.
- The superheated steam melts the bitumen and makes it fluid enough to flow.
- The bitumen flows down to a second parallel pipeline where it can be sucked up to the surface and sent for upgrading.
Almost all new oil sands projects are SAGD, though you wouldn’t know it from the stock photos of mining that accompany every article on the oil sands. In 2012 SAGD overtook mining as the primary source of unconventional oil in Alberta. This lead is set to grow. All three of the projects I worked at were SAGD facilities.
There are advantages to SAGD. Unlike mining, these projects (and a couple related technologies, like Cyclic Steam Stimulation, together sometimes referred to as in situ) don’t require stripping the land bare, and they require less energy and water. There is no need for tailings ponds and expensive and risky land reclamation. But there are drawbacks too: the impact of SAGD projects on local wildlife can be devastating.
So much for the technology. Next we will examine the future, not just of the oil sands but the entire global economy. We will see that the existence of these oil sands jobs is intrinsically tied to the course of global civilization itself, a realization with disturbing implications.