Requirements For Major Oil Sands Mining Projects In Canada

Abstract

Abstract Canadian conventional oil production is declining and any significant new conventional oil discoveries are located in remote, high cost frontier areas. Synthetic crude oil and bitumen production from the vast, known oil sands in Alberta could offset the decline. Although oil sands tend to be an expensive source of supply, their abundance and proximity to markets and industrial centres, as well as the significant potential for reducing production costs through technology improvements, make them attractive candidates for commercial development. For this to become reality, certain prerequisites need to be in place. Since oil sand leases were first granted in northeast Alberta in the late 1950s, only two major oil sands mining projects have been developed. Although several similar oil sands projects have been proposed since then, none hove proceeded much beyond the design stage. This paper reviews the development history and nature of oil sands mining projects, examines the requirements for major oil sands mining projects in Canada and the lessons leaned from previously proposed projects. The paper focusses on the impact that stakeholder commitment, appropriate fiscal terms, corporate financial strength, technology development and readiness, quality project development and operational excellence market understanding, resource quality and the balancing of resource development with environmental responsibility have on the feasibility of developing this resource. Introduction Over the next 15 years, production from Canada's conventional established oil reserves are expected to decline by up to 50%. New conventional oil discoveries in remote high-cost frontier areas and synthetic crude oil (SCO) and bitumen production from vast known oil sands resources could help to offset this decline. Already Alberta's oil sands are playing a significant role in meeting current energy demands. The combined bitumen and SCO production from these in situ and surface mining projects account for about 20% of Canada's daily oil production. Although the potential of the Athabasca oil sands has been known for more than 200 years, development of the resource did not begin until the 1930s. The first commercial project started production in 1967. In 1990, the Athabasca deposit, home of the Suncor Inc. and Syncrude Canada Ltd. commercial mining projects, was the source of 33 130 m3/d (208 390 bbl/d) of SCO or 13% of Canada's oil production. Since production from these two operations first began, six similar oil sands mining projects have been proposed. However, none have proceeded much beyond the design stage. The seventh project, the OSLO Project is in its pre-appropriation stage. The OSLO Project promises an additional 12 700 m3/d (80 000 bbl/d) of SCO or 5% of Canada's daily oil production. Development History Background Development of the Athabasca oil sands as a source of crude oil reserves has been slow. Research into the nature of the oil sands started in the early 1880s when researchers at the Geological Survey of Canada in Ottawa conducted an experiment to separate the bitumen from the sand using hot water.