Environmental Engineering Reference
In-Depth Information
Canadian Oil Sands
Canada began producing its oil sands in 1967 after decades of research and development
that began in the early 1900s. Wells were drilled between 1906 and 1917 in anticipation of
finding major conventional oil deposits. The area around Fort McMurray, Alberta, was
mapped for bituminous sand exposures in 1913 by Canada's Federal Department of Mines.
By 1919, the Scientific and Industrial Research Council of Alberta (SIRCA), predecessor to
the Alberta Research Council (ARC),[26] became interested in oil sands development. One of
its newly recruited scientists, Dr. Karl Clark, began his pioneering work on a hot-water
flotation process for separating the bitumen from the sand. In this separation process, the
mined oil sand is mixed with water and a sodium hydroxide base and rotated[27] in a
horizontal drum at 80 degrees centigrade. Dr. Clark's efforts led to a pilot plant in 1923 and a
patented process by 1929. He continued to improve the process through several experimental
extraction facilities through the 1940s.
The technical feasibility was demonstrated in 1949 and 1950 at a facility in Bitumont,
Alberta, located on the Athabasca River near Fort McMurray. The technology being tested
was largely adopted by the early producers of oil sands — Great Canadian Oil Sands
(GCOS), Ltd., and Syncrude. Sunoco established GCOS, Ltd., in 1952 and then invested
$250 million in its oil sands project. Another major player in the oil sands business in Canada
was Cities Services, based in Louisiana. Cities Services purchased a controlling interest in the
Bitumont plant in 1958, then in 1964, along with Imperial Oil, Atlantic Richfield (ARCO),
and Royalite Oil, formed the Syncrude consortium.[28]
The ARC continued its involvement with oil sands R&D throughout the 1950s and
1960s. Several pilot projects were established during that period. Suncor [29] began
construction of the first commercial oil sands production/separation facility in 1964 and
began production in 1967, using the hot water extraction method developed and tested by
ARC. In 1967, Suncor began to produce oil sands at a rate of 12,000 barrels per day.
Just a year later, in 1968, the government of Alberta deferred an application by Syncrude
Canada for a $200 million, 80,000 barrel oil sands facility. Eventually, in 1978, the Energy
Resources Conservation Board of Alberta approved Syncrude's proposal to build a $1 billion
plant that would produce up to 129,000 barrels per day.
However, ARCO, which represented 30% of the project, pulled out of the consortium as
costs of the plant climbed toward $2 billion. At that point (1978) the federal and provincial
governments joined in. The federal government purchased a 15% share, Alberta a 10% share,
and Ontario 5%, making up the 30% deficit. At the time, the Canadian government was
promoting the goal of energy self-sufficiency, and the Alberta government agreed to a 50/50
profit-sharing arrangement instead of normal royalties for Syncrude.[30]
The Alberta Energy Company[31] purchased 20% of Syncrude and then sold 10% of its
share to Petrofina Canada, Ltd., and Hudson Bay Oil and Gas, Ltd.[32] The consortium grew
from four to nine owners. From 1983 to 1988 Syncrude spent $1.6 billion to boost production
to 50 million barrels per year. In 1984, the government of Alberta agreed to a new royalty
structure for oil sands producers coinciding with Syncrude's capital expansion plans. In 1985,
the Alberta government announced that existing oil sands operations and new plants would
not be taxed on revenues, and the petroleum gas revenue tax would be phased out. During the
same time-frame, Syncrude's cash operating costs were just under $18 per barrel with total
costs over $20 per barrel,[33] while the market price of oil fluctuated under $20 per barrel.
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