Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr
Issue link: https://emj.epubxp.com/i/148853
OIL SANDS Following rejection of its initial application in 2012, the company now anticipates receiving its permits later this year, with completion of the $5.3-billion project targeted for 2015. However, permitting is by no means a foregone conclusion, with President Obama having stated in his speech at Georgetown University in June: "The net effects of pipeline impact on our climate will be absolutely critical in determining if the project is allowed to go forward." The U.S. Department of State has yet to reach its decision on Keystone XL, with presidential approval or rejection after that. The project has brought a number of issues to the fore, including both the potential for environmental damage in the event of an oil spill, and the wider challenge of carbon emissions in relation to climate change. TransCanada's case has not been helped by the rupture of an Enbridge pipeline carrying Canadian dilbit at Marshall, Michigan, in 2010, which released more than 830,000 U.S. gallons into the Kalamazoo River—and is likely to incur Enbridge at least US$1 billion in clean-up costs. Slow Development, Huge Investment In 2004, the industry was in the process of the first major expansion in terms of operators, with Shell's Albian Sands project under construction. Up to then, Suncor and Syncrude had the oil patch to themselves, at least in terms of surface mining, although both had increased their own capacities several times during the 30 or so years since mining had started. In addition, Syncrude and Suncor had converted their operations from draglines and bucket-wheels to conventional shovel-and-truck, with Syncrude bringing in the world's largest hydraulic excavators (O&K;'s RH400—now renamed as the Caterpillar 6090 FS). If the size of the operations was impressive, the costs involved in both expansions and new projects was eye-watering. At the time, Shell was budgeting C$5.2 billion to bring its mine and stand-alone upgrader on stream, with costs having increased from an initial C$4.1-billion estimate. Suncor had just spent C$3.4 billion on an expansion, C$1.4 billion more than anticipated, while the Syncrude 21 expansion program, then aiming to increase capacity to more than 500,000 bbl/d by 2015, carried a C$8-billion price tag. As far as new projects were concerned, True North Energy was promoting Fort Hills, at an expected cost of C$3.5 billion, while Canadian Natural Resources was budgeting C$8 billion to bring its Horizon surface mining operation on stream in three stages. In the event, Canadian Natural commissioned the first phase at Horizon in 2009 at a cost of C$9.7 billion. To put things into perspective, however, big budgets are nothing new to the Alberta oil sands industry. Indeed, the C$230 million Sun Oil spent to bring its "Great Canadian Oil Sands Project" into production in 1967 was at that time the largest single-project investment in Canadian industrial history. Today, the industry is facing an uncomfortable period for decision-making. With project financing hard to source, increasing public concerns over CO2 emissions and the long-term impact of U.S. shale gas and tight oil developments still unclear in relation to the wider energy market, expansion and development projects involving surface Tailings Pond 1 in 2002 (inset) and under reclamation in mid-2010. (Photos courtesy of Suncor) 30 E&MJ; • AUGUST 2013 mines are under review, and it would be a bold CEO to commit to spending such vast sums only to find that the market had shifted away from its presumed path. Ten years ago, Suncor was talking about its Voyageur expansion project. In March, after a strategic and economic review, and with the plant part-built, Suncor announced that the project was canceled. "Since 2010, market conditions have changed significantly, challenging the economics of the Voyageur upgrader project," said Steve Williams, Suncor's president and CEO. "This decision is in line with our commitment to capital discipline and our stated plan to allocate capital with priority given to developing higher-return growth projects." With a capacity of 200,000 bbl/d and a C$11.6-billion price tag, the Voyageur upgader was planned to produce synthetic crude from the Fort Hills mine, with production beginning in 2016. However, Fort Hills remains on the drawing board, and the new plant joined a list of upgraders that had been proposed but then canceled over the past five or six years. One of the problems, at least as far as the Alberta producers are concerned, is that it is cheaper to install cokers (which help convert heavy crude into lighter oils) at existing U.S. refineries than it is to build new Canadian upgraders, where the economics are closely tied to the price differential between bitumen and light oil. As light oil prices in the U.S. market have fallen, the viability of upgrading bitumen in Alberta has become much less attractive. Tailings Management: New Techniques With around 2 mt of "ore" needed to produce a barrel of bitumen, tailings management is a major aspect of oil sands mining, which since 2009 has been regulated by the requirements of Alberta provincial Directive 074. The tailings consist of sand, silt and clay, together with a small proportion of hydrocarbon that is not recovered as the bitumen is stripped away. The silt and clay means that tailings typically have a high water-retention capability, which requires treatment with desulphurization-sourced gypsum and "matured" tailings to help prepare the material for eventual reclamation. In September 2010, Suncor reported it had become the first oil sands company to complete surface reclamation of a tailings pond. Covering 220 ha, Pond 1 was its first tailings storage facility and was in operation for 40 years before being decommissioned in December 2006. Reclamation involved www.e-mj.com