Engineering & Mining Journal

JUL 2019

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OIL SANDS 20 E&MJ • JULY 2019 Oil sands producers have faced more than their fair share of challenges in recent years. Despite battling wildfires, pipeline disputes and tough environmental regu- lations, the sector pumped almost C$13 billion (US$9.7 billion) into the Canadian economy last year, with roughly the same expected for 2019. However, with politi- cal tensions running high and a 12-month limit on production levels in place, 2019 may prove their toughest year yet. Canada is the world's fifth biggest oil producer, boasting the third-largest prov- en reserve (Saudi Arabia and Venezuela hold the top two spots) at 171 billion barrels (bbl). The vast majority of this, around 97%, is locked up in oil sands — a naturally occurring mixture of water and bitumen plus sand, clay and other min- erals — that can be surface mined or ex- tracted using in-situ techniques such as steam-assisted gravity drainage (SAGD) depending on the depth of the deposit. Canada's most significant depos- its — Athabasca, Peace River and Cold Lake — stretch across Alberta and into Saskatchewan. The vast majority of oil sands operations are located in Alberta, and these are primarily developed by the private sector with investment from com- panies based in Canada, the U.S., Europe and Asia. As a result, the economic im- pact of decisions that affect oil sands de- velopments reach right across the globe. The government of Alberta estimates that over the next 20 years, the oil sands industry will pay C$1.7 trillion in provin- cial and federal taxes, including royalties. However, competition for capital invest- ment in the oil and gas market is tough, and a recent report from the Canadian As- sociation of Petroleum Producers (CAPP) on the sector's competitiveness estimates that capital investment in Canada's oil and natural gas industry has declined 50% since 2014, from C$80 billion dollars in 2014 to C$40 billion dollars in 2018. With a mandated bitumen production limit currently in place in Alberta, and decisions expected in the coming weeks over some rather questionable federal bills, the fate of some important projects hangs in the balance. Let's take a look at the challenges and how some key players are faring. Imperial Feels the Cold 2019 began as it meant to go on, and the weather proved a big challenge for many oil producers. Alberta faced one of the coldest February's on record thanks to a polar vor- tex that drew down cold air from the Arctic. Temperatures in Edmonton dipped below -26°F and the cold snap lasted well into March, thwarting many miners attempts to reach their production targets. Imperial Oil, which is majority owned by Exxon Mobil, published its 2019 first-quar- ter interim report in May, detailing a net in- come of C$293 million (down significantly from the C$516 million earned during the same period in 2018) with C$1 billion in cash generated from its operations. "First-quarter operational perfor- mance was impacted by challenges in both the upstream and downstream early in the quarter, in part due to extreme cold weather across the country," said Rich Kruger, Imperial's chairman, president and CEO. "Furthermore, the government of Alberta's production-curtailment order significantly affected financial perfor- mance, as improved upstream realiza- tions were more than offset by reduced downstream margins." Gross production of bitumen at Impe- rial's Cold Lake in-situ operation in north- eastern Alberta averaged 145,000 barrels per day (bbl/d), compared to 153,000 bbl/d in the same period of 2018 thanks to the weather that hampered production timing and steam management. Despite the cold weather, work at Im- perial's Kearl operation soldiered on. Lo- cated 70 km north of Fort McMurray, the operation has an estimated 4.6 billion barrels of recoverable bitumen, which is expected to support production for the next 40 years. Production at Kearl's initial development began in April 2013, while an expansion project in mid-2015 brought production capacity to 220,000 bbl/d. According to Imperial, Kearl averaged 180,000 bbl/d in the first quarter (not quite the 200,000 bbl/d it is capable of), and the company confirmed that a C$550 million debottlenecking project that began in 2018 is on track for com- pletion at the end of the year. The project will increase Kearl's production capacity by 20,000 bbl/d, to a total of 240,000 bbl/d, and will add additional crushing capacity to create an offset when plant equipment is undergoing maintenance. Kearl's autonomous haul truck pro- gram also received regulatory approval from Alberta Occupational Health and Safety, granting Imperial the ability to automate its entire fleet. Plans include expanding the scope of the ongoing pi - lot program from seven to 20 Cat 797F trucks through 2020, before the company makes a final decision on full automation. Imperial said the project is expected to Oil Sands Operators Weather the Perfect Storm A production limit mandated by the Albertan government is just one of the difficulties facing oil sands producers this year By Carly Leonida, European Editor A handful of bitumen ore. (Photo: Suncor Energy Inc.)

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