Engineering & Mining Journal

AUG 2017

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OIL SANDS 28 E&MJ • AUGUST 2017 www.e-mj.com ket, Suncor stated in its annual report. The first of three secondary-extraction units should be on stream by the end of 2017, with the other two scheduled to be commissioned in the first half of next year. Ramping up to 90% of the expected capacity will continue during 2018, with Suncor evaluating ways of reducing the ramp-up period. Meanwhile, Canadian Natural achieved record average annual production during 2016 of about 123,000 bbl/d of synthet- ic crude oil as the ramp-up of its Phase 2B expansion was completed on time and budget late in the year. However, the average masked a significant upturn in daily capacity as the expansion came on stream, with the company reporting out- put of more than 178,000 bbl/d during the fourth quarter — a figure that rose to 195,000 bbl/d in January. Nearly 90% complete at the end of 2016, Horizon's Phase 3 expansion will add a further 80,000 bbl/d of syn - thetic crude oil capacity, and is sched- uled for commissioning in the fourth quarter of 2017. ExxonMobil and Imperial Oil also ben- efited from expanding capacity at Kearl, where average output rose from 72,000 bbl/d in 2014 and 152,000 bbl/d in 2015 to 169,000 bbl/d last year. In March, ExxonMobil announced a joint venture with the Korean steelmak- er, Posco, to mass-produce and supply high-manganese steel slurry pipes for transporting oil sand raw materials. The two companies have been working to- gether on the project for the past five years, including field trials at Kearl on a 1.2-km-long pipeline. With abrasion from the sand-bitumen- water slurry a major issue, the high-man- ganese pipe has demonstrated wear resis- tance five times greater than those made of conventional steel. According to Posco, it expects benefits to include lower main- tenance costs and less downtime for pipe- line section replacement. "Collaboration and teamwork have enabled rapid commercialization of the new advanced high-manganese steel technology, which sets a new bench- mark for use with slurry in oil sands mining production operations," said Tom Schuessler, president of ExxonMobil Upstream Research Co. ...and on Hold Meanwhile, Total's Joslyn North, Suncor's Voyageur South, Shell's Pierre River and Teck's Frontier projects are all either on the back-burner or slowly wending their way through regulatory reviews, although Teck announced in January it has signed an agreement with the Fort McKay Métis community over participation in any fu- ture project. Designed to replace depleted capacity at Suncor's existing surface mines, Voya- geur South is unlikely to come on stream much before the late 2020s, the compa- ny has stated, much the same timeframe that Teck has for spending an estimated US$20 billion on developing Frontier. However, oil prices will need to rise to between US$70 and US$80/bbl before large oil sands mines like Frontier can be economically viable, said Mark Oberstoet- ter, Canadian oil and gas analyst at Wood Mackenzie, quoted by the energy intelli- gence firm JWN earlier this year. "In our current outlook, we don't have any new-build mines," Oberstoetter said. "We could see some bottlenecking-type expansions from the existing ones, but we think investors and capital markets will focus more on U.S. tight oil, deepwater sources, in-situ steam-assisted gravity drainage (SAGD) and SAGD expansions before tackling a large mine. "When we run the numbers and costs and the economics, it doesn't make sense to go ahead and spend $20 billion. The break-even prices are going to be higher than we have in our forecast," Oberstoet- ter added. The Pipeline Conundrum As noted in previous E&MJ reviews of the oil sands industry, transport sys- tems for both synthetic crude oil and diluted bitumen ("dilbit") from northern Alberta to refineries in the USA and in other parts of Canada have the potential to place constraints on output, especially as production capacity continues to grow. President Donald Trump's reversal of the previous U.S. administration's refusal to permit completion of the controversial Keystone XL pipeline through the Mid- west removed one potential bottleneck there, although the state administration in Nebraska still has to grant permits for the proposed pipeline route there. Another report from IHS Markit, pub- lished in April and entitled Piplines, Pric- es and Promises, looks at how pipeline access, or the lack of adequate pipeline capacity, has the potential to impact Western Canada's oil industry, includ- ing the oil sands. "Transportation con- straints have, in the past, contributed to price volatility and a loss of economic value for western Canadian producers," the report stated, before going on to ex- plain the effects of the long lead times needed for high-volume pipeline con- struction. "The average pipeline review process, from application to early 2017, has spanned more than five years, with no major additions constructed in recent years," the report pointed out. "The pro- Pipework at TransCanada Corp.'s oil hub at Cushing in northern Oklahoma. The company plans to build a further 6.2 million bbl of storage capacity at Cushing, which is where the Keystone XL pipeline will terminate, linking in to TransCanada's existing pipeline network.

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