Canada's Tarsands-Is The Oil Extraction Worth It?

[ralph124c]

My question is in GD-because I have the feeling that the economics of heavy oil extraction (from deposits like the Athabaska Tarsands) are not fully understood.
From what I understand, extraction this heavy oil involves a complex, energy-intensive process that used natural gas to heat the oil, and make it flow. There is also a lot of water used, and the extraction lays waste to large areas of land.
My question is: would it be better to simply pipe the natural gas away and sell it? You are usung a very clean fuel (natural gas) to make a “dirty” fuel 9gasoline, diesel), and losing energy in the process.
Is it possible that the real cost of heavy oil extraction is a lot higher?

[XT]

WAG on my part but:

My question is in GD-because I have the feeling that the economics of heavy oil extraction (from deposits like the Athabaska Tarsands) are not fully understood.

I would say that the economics are very much understood. It costs more in both up front capital costs as well as continual processing and production costs, which is why it’s only been fairly recent that the resource has been seriously exploited.

From what I understand, extraction this heavy oil involves a complex, energy-intensive process that used natural gas to heat the oil, and make it flow. There is also a lot of water used, and the extraction lays waste to large areas of land.

From Wiki:

Bitumen extraction
Main article: Oil sands#Extraction process

The original process for extraction of bitumen from the sands was developed by Dr. Karl Clark, working with Alberta Research Council in the 1920s.[32] Today, all of the producers doing surface mining, such as Syncrude Canada, Suncor Energy and Albian Sands Energy etc., use a variation of the Clark Hot Water Extraction (CHWE) process. In this process, the ores are mined using open-pit mining technology. The mined ore is then crushed for size reduction. Hot water at 50 — 80 °C is added to the ore and the formed slurry is transported using hydrotransport line to a primary separation vessel (PSV) where bitumen is recovered by flotation as bitumen froth. The recovered bitumen froth consists of 60% bitumen, 30% water and 10% solids by weight.[33] The recovered bitumen froth needs to be cleaned to reject the contained solids and water to meet the requirement of downstream upgrading processes. Depending on the bitumen content in the ore, between 90 and 100% of the bitumen can be recovered using modern hot water extraction techniques.[34] After oil extraction, the spent sand and other materials are then returned to the mine, which is eventually reclaimed.

More recently, in situ methods like steam-assisted gravity-drainage (SAGD) and cyclic steam stimulation (CSS) have been developed to extract bitumen from deep deposits by injecting steam to heat the sands and reduce the bitumen viscosity so that it can be pumped out like conventional crude oil.

The standard extraction process requires huge amounts of natural gas. Currently, the oil sands industry uses about 4% of the Western Canada Sedimentary Basin natural gas production. By 2015, this may increase 2.5 fold.[35]

According to the National Energy Board, it requires about 1,200 cubic feet (34 m3) of natural gas to produce one barrel of bitumen from in situ projects and about 700 cubic feet (20 m3) for integrated projects.[36] Since a barrel of oil equivalent is about 6,000 cubic feet (170 m3) of gas, this represents a large gain in energy. That being the case, it is likely that Alberta regulators will reduce exports of natural gas to the United States in order to provide fuel to the oil sands plants. As gas reserves are exhausted, however, oil upgraders will probably turn to bitumen gasification to generate their own fuel. In much the same way the bitumen can be converted into synthetic crude oil, it can also be converted into synthetic natural gas.

In-situ extraction on a commercial scale is just beginning. A project nearing completion, the Long Lake Project,[37] is designed to provide its own fuel, by on-site hydrocracking of the bitumen extracted.[38] Long Lake Phase 1 is extracting 13,000 barrels/day of bitumen as of July 2008, ramping towards a target of 72,000 in late 2009. and “upgrading” of bitumen to liquid oil in 2007, producing 60,000 bbl/day of usable oil. The hydrocracker is scheduled to complete commissioning by September 2008.[39]

My question is: would it be better to simply pipe the natural gas away and sell it? You are usung a very clean fuel (natural gas) to make a “dirty” fuel 9gasoline, diesel), and losing energy in the process.

Not sure exactly what you are getting at here, to be honest. Might be the alcohol. What I think you are asking is why would they want to extract the oil to produce nasty gasoline and diesel (and a host of other related products that are part of the cracking and production process) when they could instead content themselves with just getting the natural gas. The answer to this question (if it is indeed the one you are asking) is fairly simple…it’s worth more to extract the oil and produce that host of products.

Is it possible that the real cost of heavy oil extraction is a lot higher?

Higher than what? I don’t think the economics of the extraction process are all that mysterious. Exploiting the resource requires that the price of crude oil be at a certain level in order to make enough of a profit to make it worth while for some company to invest all the initial capital into setting up to exploit it in the first place. I don’t think it’s possible that those costs are a big mystery though, no. What IS a mystery, though, is what the actual price of crude oil will do over a given period of time. If it shoots up then the folks who have the tar sands in production will make a bundle…if it goes below a certain level then they will either make less or take a loss. Pretty simple, really.

-XT

[Tapioca_Dextrin]

A few years ago, the cost of extraction was around $50-60 a barrel. Today, the cost of crude is over $80. Money talks.