Subj: Sierra Club-Canada/Oil sands the Saudi Arabia of the future?
Date: 5/25/2005 12:02:11 PM Central Daylight Time
From: [log in to unmask] (irvin dawid)
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Chairs Forum)
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snip:
"The fact remains that the oil sands are the most dirty, wasteful way of
obtaining energy on the planet," said Elizabeth May, executive director of
the Sierra Club of Canada. "At a time when global warming is an increasing
problem, why should this industry be expanded willy-nilly to make the
problem worse?"
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FUELING AMERICA
OIL'S DIRTY FUTURE
Canadian oil sands: Vast reserves second to Saudi Arabia will keep America
moving, but at a steep environmental cost
Robert Collier, S.F. Chronicle Staff Writer
Sunday, May 22, 2005
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/05/22/MNG46CMUPL60.DTL
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FUELING AMERICA
OIL'S DIRTY FUTURE
Canadian oil sands: Vast reserves second to Saudi Arabia will keep America
moving, but at a steep environmental cost
- Robert Collier, Chronicle Staff Writer
Sunday, May 22, 2005
Fort McMurray, Alberta -- At the end of a long northern highway, surrounded
by a flat horizon of spruce forest and muskeg swamp, lies the energy future
of the United States: the largest known petroleum deposit in the world
outside Saudi Arabia.
This future isn't a pretty sight. Just north of the oil boomtown of Fort
McMurray, the forest suddenly falls away into a series of enormous strip
mines as deep as 250 feet and covering many square miles each. Viewed from
the rim, 60-foot-tall shovel loaders look like toys as they claw ton after
ton of tar- like sands from the ground.
Nearby, refineries burn natural gas to steam-cook the sands, separate the
tarry residue and purify it into oil.
These oil sands are the world's most expensive, most polluting source of oil
under large-scale production. Wringing four barrels of crude oil from the
sands requires burning the equivalent of a fifth barrel. The mines and
refineries release huge amounts of greenhouse gases -- the equivalent each
day to more than a third of California's daily car emissions.
Yet Alberta's oil sands are destined to be the main supply of foreign oil to
the United States for at least the next century. The sands hold proven
reserves of 175 billion barrels, second only to Saudi Arabia's 262 billion,
and far more than the Arctic National Wildlife Refuge's estimated 10
billion.
If Americans want to keep filling their gasoline tanks at a reasonable cost,
they will need the oil sands industry to push ahead on its expected path of
doubling, tripling and even quadrupling production in coming years.
Nowhere else is the conflict between energy use and ecological cost so
stark.
"The oil sands are a big challenge," Canada's environment minister, Stephane
Dion, who has fought publicly with other Cabinet officials for a tougher
line on global warming, said in an interview. "They are sending out a lot of
greenhouse gas emissions.
"But there is no minister of the environment on Earth who can stop this from
going forward, because there is too much money in it," Dion said.
The sands make up three broad oil fields, the combined size of Florida, in
northern Alberta 500 miles from the U.S. border. Up close, a visitor quickly
enters a world of vast industrial scale, in which the tar-like scent of the
sands permeates everything.
The largest of the pits is a 50-square-mile moonscape of slag heaps and
tailings ponds owned by Syncrude, a consortium of Canadian and American
companies. Next to the pit is a refinery -- or upgrader, in oil sands
terminology -- whose towers, tanks, pressure chambers and spaghetti-like
piping cover 1,000 acres.
Long white barracks house hundreds of workers, who have been recruited from
as near as Alberta's farm country and as far away as Newfoundland province,
Venezuela and even the Middle East.
In the pits, the sand sticks to the bottoms of shoes like new asphalt on a
hot summer's day. In the cab of a shovel, an operator drinks coffee and
makes locker-room jokes while he calmly tweaks the computerized controls and
levers that rip apart a hillside, the shovel grabbing and dumping 100 tons
of sands at a time as the huge platform bucks and sways.
The sands are carried in trucks with 400-ton payloads to a processing tower
and mixed with warm water. The oily slurry that separates from the grains of
sand is then sent on to the refining process.
About 20 percent of the oil-sand deposits lie close enough to the surface
that they can be strip-mined, and nearly all current production uses this
process.
But as these pits are depleted, companies will be forced to go after deeper
deposits. Those are extracted by a process known as "in situ," or in
position, in which steam is pumped into underground deposits to dissolve the
thick oil and allow it to be piped to the surface.
In-situ work is much more expensive than open-pit mining, requiring about
four times as much natural gas to create the steam.
In both methods, the extremely heavy oil that is produced, called bitumen,
has to be further refined into lighter synthetic crude oil before it can be
piped to customers, mostly in the U.S. West and Midwest, for further
refining and distribution.
Even though costs have dropped, the oil sands process remains inefficient.
Two tons of sand yield a single barrel -- 42 gallons -- of oil. On average,
each barrel creates more greenhouse gas emissions than four cars do in a
day.
Fort McMurray's boom time has been a long while coming. The first large mine
began operations in the 1960s. But for the next few decades, as oil prices
often sank below the $25-a-barrel cost of recovering crude from the sands,
the deposits were viewed as a vast money hole, as an improbable long- term
investment play by deep-pocketed oil majors.
But recently, as international prices have rocketed above $50 a barrel and
technology advances have pushed production costs down to about $18 a barrel,
the sands suddenly are stunningly attractive.
Nearly every major U.S. oil company has entered the market, despite initial
investment costs that far surpass those of traditional drilling. By industry
estimates, companies plan to spend more than $25 billion over the next
decade on developing mines and upgraders.
"This is not for the faint of heart or those short on capital," said Neil
Camarta, senior vice president of Shell Canada Ltd., the lead partner in a
consortium that has spent $5 billion in the last five years.
The consortium, which includes Chevron and ConocoPhillips, is producing
155,000 barrels of high-quality synthetic crude a day. It plans to invest
more than $1 billion a year for the next several years to increase its
output to 500,000 barrels -- an output that, at current prices, would be
worth more than $8 billion a year.
Camarta's project, like most in the area, has been plagued by delays and
cost overruns as it applies new technologies at top speed under severe
conditions. Winter temperatures stay at 30 degrees below zero for weeks on
end.
A shortage of skilled labor adds to the problems. "Just getting people here,
keeping them here and keeping them happy is a big part of the competitive
edge," Camarta said. "We're out here in the Canadian north, where it's cold
and dark half the time, and we're pulling off one of the world's biggest
projects."
Camarta, like most oil sands executives, runs his operations from a
skyscraper in Calgary, the nation's oil headquarters. The logistics hub is
300 miles north at Fort McMurray, a city of 56,000 on the Athabasca River,
amid the pancake-flat boreal forest that covers thousands of miles of
northern Canada.
Fort McMurray is deceptively suburban, with nondescript strip malls,
subdivisions and equipment yards spreading for miles. But it is feeling the
strain of rapid growth.
Downtown holds a modest red-light district, with a half-dozen bars, a
casino, two strip clubs and a Salvation Army shelter that is full year-round
with workers who cannot afford housing despite part-time wages of $30,000 a
year. The elite workers who drive the shovels can earn $60,000.
The four-lane freeway to the oil sands is at a standstill three times a day,
when shifts change at the 24-hour-a-day mines.
In the rapidly growing community -- the 2004 census reflects a 33 percent
increase in population over four years -- builders of homes and apartments
have not been able to keep pace with the dramatic influx. Just 24 percent of
dwellings are rentals. The average two-bedroom house sells for $340, 000
Canadian, or about $300,000 American -- 40 percent more than a similar house
in Calgary, and a large amount even for the unionized trade workers who
operate the giant pit machines.
For those on government salaries or working lesser jobs, the boom can be a
bust.
"If you're a schoolteacher, you're probably shacking up in an apartment with
two or three others, and then the first job offer you get anywhere else in
Alberta, you'll take it and leave town," said Melissa Blake, the mayor of
the Regional Municipality of Wood Buffalo, which includes Fort McMurray and
the oil sands.
Blake is calling on Alberta's provincial government to provide $1 billion
during the next five years for transportation, schools, health care and
other services.
"The oil sands industry brings in a huge amount of revenue, but this town
has not gotten the attention it deserves," Blake said.
She has pledged to block regulatory approvals for oil sands expansions until
the town gets more help. Provincial officials are preparing a counteroffer.
Canada is already the leading source of foreign oil for the United States,
providing one-sixth of the 10 million barrels imported each day. But output
from Canada's conventional drilling areas is in decline.
At the oil sands, in contrast, production is expected to soar from the
current 1 million barrels a day to 2 million a day by 2010, rising to 3
million by 2020 and later to as much as 5 million for decades to come. And
every rise in oil prices increases the amount of oil that can be profitably
produced.
In 2001, as oil was doubling to $30 a barrel, the U.S. Energy Department
quintupled its estimate of "proven" reserves in the oil sands -- the amount
that is known to exist and that can be profitably extracted -- to 175
billion barrels.
Now, with $50-a-barrel oil making it profitable to extract even deeply
buried or dispersed formations of oil sands, producers say the reserves
could be as large as 314 billion barrels.
"Alaska is an important source, but the level of attention has been
disproportionate to the importance of the tar sands," said Greg Stringham,
vice president of the Canadian Association of Petroleum Producers, referring
to the battle in the United States over drilling in the Arctic National
Wildlife Refuge.
Most industry analysts agree that despite political attention focused
elsewhere, the oil sands are North America's main energy gamble for the next
century.
"Oil sands production is very expensive and complicated, but with prices as
high as they are now, it finally is highly profitable," said Roland George,
an analyst at Purvin & Gertz, a petroleum industry consulting firm in
Calgary.
"In addition," he said, "it's so close to major markets, and it's in Canada,
where you don't have to worry about a revolution or terrorism or getting
your investment confiscated tomorrow. And finally, because the reserves are
so huge, you know your investment will pay off for a very long time."
Dion, the environment minister, said that the federal government's plan for
complying with the Kyoto Protocol includes a mandate for the oil sands
industry to reduce its output of greenhouse gases by 12 percent a barrel
over its expected 2010 level. The Canadian government and the oil industry
note that efficiency improvements have reduced emissions in recent years,
and they hope research in new extraction and refining technologies will
enable dramatically greater reductions. As a possible solution, for example,
companies are experimenting with production methods that turn the bitumen
into a gas, which would allow greenhouse gases to be siphoned off and
"sequestered" in depleted oil wells in southern Alberta.
But these techniques are many years from being ready for wide use. In
addition, analysts say, efficiency improvements from new technologies are
likely to be partly offset by a gradual switch to the more energy-intensive
in- situ methods and by a shift in refining to higher-grade synthetic
blends.
The oil sands industry now consumes about 400 billion cubic feet of natural
gas per year, an amount that could triple by 2015 as oil production rises by
the same amount.
Environmental groups remain highly doubtful.
"The fact remains that the oil sands are the most dirty, wasteful way of
obtaining energy on the planet," said Elizabeth May, executive director of
the Sierra Club of Canada. "At a time when global warming is an increasing
problem, why should this industry be expanded willy-nilly to make the
problem worse?"
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FUELING AMERICA
Coming Monday: Opposition from native tribes is blocking Canada's
construction of a natural gas pipeline from the Arctic Ocean that would help
fuel oil sands processing in Alberta.
E-mail Robert Collier at [log in to unmask]
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URL:
http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/05/22/MNG46CMUPL60.DTL
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©2005 San Francisco Chronicle
Best,
Irvin Dawid ([log in to unmask])
Palo Alto, CA
415-977-5500*7017, day
[home: 650/853-0558; cell: 650/283-6534]
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