The Future of Oil Sands

The reputation, if it could be called so, of oils sands has been more about exorbitant costs and a dirty carbon footprint than about being a vast source of fossil fuel and associated profits. It seems that researchers have found a way to resurrect oil sands and, by association, oil companies with such properties in their portfolios. Granted, although the “new” future for oil sands has been long in the making, it has not yet reached critical mass. Still, it appears a viable vision and one worth presenting to our readers.

The vision involves underground, slow burning, oxygen-fuelled fires forced upon a mixture of oil, water and sand at a toasty 500-600 degrees Celsius. As counterintuitive as it sounds, these underground fires, notwithstanding the invoked images of hell, could be the cheapest way out of the conundrum that the meaningful and economically viable exploitation of oils sands represents.

I was curious about these fires burning the oil sands to produce crude oil. In the lab environment, huge test tubes are used to recreate the closest possible analogue to the oil sands of northeastern Alberta. Fuelled by air, these slow-burning fires slowly move down the tube, but burning only about 10% of oil, yet creating enough heat and pressure to free most of the crude trapped in the sand without using dangerous chemicals, loads of water, vast amounts of natural gas, or ugly open pits. The only thing needed is air that is forced into the oil sands at high pressure.

Such a virtually negligible environmental footprint that this new technology of exploiting oil sands would leave behind represents a dramatic departure from how oil sands are currently harvested. In contrast, now visualize open-pit drilling, steam-assisted gravity drainage (SAGD) and all the pollution that such technology creates. First, SAGD requires vast amounts of natural gas to boil water into steam, which is then used to heat the bitumen to separate the oil from the sand.

Of course, if it were easy, underground fires would have been a solution already in full implementation. The problem with underground combustion is not liberating oil from sand, but rather how to bring that oil to the surface. The SAGD technology creates enough pressure to propel the separated oil to the surface, much in the same way that traditional oil drilling does. With slow-burning fires deep beneath the surface, there is no such anti-gravity catalyst.

Additionally, although the combustion method is very efficient economically, there are other downsides, such as that it burns the well completely out. As the fires burn the bitumen, they leave nothing in their wake. They are also difficult to control and it seems that the extracted oil is not always completely free from sand, so further refining may be required.

The good news is that many global players have shown interest in developing this technology and making better use of their oil sands properties. The bad news is that even more have abandoned their “combustion pursuits,” too, particularly major energy companies in the U.S. and Canada. Those left in the playing field are limited largely to Romania and India, while the entire world’s in situ combustion-produced oil is about 30,000 barrels per day (or the utterly irrelevant 0.00035% of total global production of crude).

Where the picture of oil sands is changing and what is keeping me interested are smaller energy players in North America that are trying to return to the in situ combustion-produced oil. As the COO of mid-sized, Calgary-based Petrobank Energy and Resources Ltd. put it, “This can play a very big role in the oil sands. It has the potential to replace SAGD. I think that’s what people are looking for: a technology that will enable them to produce from these difficult resources with better efficiency and less environmental impact.”

Here is the catalyst that may propel large players’ return to the combustion method. The main issue with the SAGD is the enormous usage of water and natural gas. According to some estimates, companies currently exploiting oil sands could use four times more water and natural gas by 2030 than today. In other words, they might find themselves without both! Whereas air is not likely to be in short supply for the foreseeable future.

The in situ combustion method has many powerful arguments on the financial side of it, too. It has been estimated that a combustion project may require up to 26% less money than the SAGD, because it is much easier to compress air than it is to buy natural gas. With savings like those, profits from combustion-extracted oil could be massive.

To be fair and not to get carried away by exciting technologies, I should say that the oil sands are notorious for slow acceptance of different ways of thinking. The SAGD was invented over 30 years ago. Yet, it was not until early this year that one of the major SAGD projects has scored the first significant payout in the entire sector. Understandably, after billions of dollars have been poured into SAGD, switching now to something different is bound to meet resistance. On the other hand, it appears the SAGD technology has an expiration date of its own, which is why skeptical minds could be prevailed upon to come around to combustion.