Image: Alberta Oil, Marco Cibola
Writing farcical nonsense in the pretend voice of an energy executive insults Albertans, important topic
Sigh. Graham Hicks is why Alberta can’t have nice things. By “nice things” I mean a rational debate about the provincial oil and gas sector, especially the downstream portion, which was the subject of a major announcement by the Notley Government last week and ostensibly the target of the Edmonton Journal columnist’s Friday rant, “Alberta is no longer viable.”
The Energy Diversification Advisory Council’s report was released and the Province committed $1 billion over eight years to help stimulate the commercialization of partial upgrading of raw bitumen into medium or heavy crude oil, which a School of Public Policy paper estimates could net oil sands producers an extra $10 to $15/b and free up as much as 30 per cent more capacity in the pipeline system.
Full disclosure: I was contracted as a copy editor for the final draft of the report.
More announcements about the petrochemical industry and the role the government can play to dramatically increase downstream investment are slated for the next few weeks.
This is serious business, folks. If the report’s recommendations are fully implemented, over the next 20 years Alberta could enjoy tens of billions in new investment and create as many as 100,000 new jobs, according to the report.
A primary theme of the EDAC report was mitigating risk for Alberta’s upstream oil and gas producers in the face of a transforming global energy system in which there is likely to be abundant supplies of crude oil and natural gas – and lower prices – for a very long time.
Doubling the size of the Alberta petrochemical industry can provide another sizable market for upstream producers, especially on the natural gas side, which is being squeezed by ferocious competition from American shale companies.
Partial upgrading is made in Alberta technology that requires strategic investment to help developers (there are 10 companies with tech in various stages of development) get over the “valley of death,” that stage between initial research and full commercialization where so many promising technologies expire every so slowly and painfully, never fulfilling that early potential.
Unfortunately, Hicks doesn’t treat the topic seriously at all.
Here are a few samples of the Hicks approach to oil and gas analysis, in the form of fictional comments from a hypothetical oil and gas CEO:
“We (the energy sector) were flattened by the 50% drop in oil prices at the end of 2014. And, ever since, your governments have been kicking us while we’re down – in the stomach, the groin, the head …We haven’t got a thing done in Alberta and Canada for three years.
“The Little Prince in Ottawa is infatuated with his social agenda – gender equality, righting the wrongs done to the aboriginal community, being a leader on climate change. Those are good things. But it takes a healthy economy to cover the costs, and Justin hasn’t a clue what makes business tick. In Alberta, it’s all the Climate Leadership Plan, to hell with economic consequences.
The rest of the column was in a similar vein.
Instead of writing half-baked fiction, perhaps Hicks could have actually interviewed industry representatives like a real journalist.
For instance, here’s a quote from my interview with Ben Brunnen of the Canadian Association of Petroleum Producers: “The government has definitely heard messages from industry of what we think needs to be done to encourage investment. They’ve taken a comprehensive approach. They’re finding ways to try and de-risk investment and R&D. We think the government is really leaning into this in a way that’s pretty much doing the best they can to encourage investment.”
Since the first EDAC announcement concerned partial upgrading, let’s take a peek at where a couple of the approximately 10 developers are at with their technology.
Gerard Monaghan, CEO of Calgary-based ETX Systems, which has spent 10 years and $95 million in R&D capital to get its partial upgrading technology out of the lab and needs funding to proceed to the 14,000 b/d field demonstration phase with a “senior oil sands producer.”
“We think that with proper support from industry and government, we could be putting feedstock into a 14,000 barrel per day demonstration units within two-and-a-half years,” he said in an interview. If the demonstration plant worked as hoped, “I believe we could start looking at detailed engineering of larger plants within three years and inputting feedstock into larger plants within four-and-a-half years.”
Charlie Parker of FluidOil Limited thinks his company can get to 20,000 b/d commercial-scale output within three years. It already has three pilot projects running, one of which is in Alberta.
“Our system is simple, we don’t use distillation on the front-end or the back-end,” he said in an interview. “We would be typically looking at a year for engineering and then we would hope for a year for construction for a 50,000 barrel a day plant.”
Both Monaghn and Parker said government support could significantly shorten the time it will take to get their technologies to commercial production.
Now, critics could argue that the innovators are being overly optimistic about immature technology. Or that the time to finish commercializing partial upgrading is too long and the oil and gas industry needs more immediate fixes.
Maybe those critics could even argue that it’s not the role of government to “de-risk” investments that will will mostly benefit private investors.
Any of those criticisms could lead to a healthy and constructive debate in the media that would leave Albertans better informed than the frivolous nonsense Graham Hicks and the Edmonton Journal passed off as serious comment on a serious topic.
Shame on them.
I found a mistake in the above comment. It needs to be replace with:
I took our partial upgrading technology and figured out that it makes Athabasca Bitumen 40% less CO2 emitting than the average US Oil produced in 2005. In doing so, the netback to the producer is $32.15 CA/bbl ($25.20 US$/bbl) of bitumen and that only reflects the transportation savings from Hardisty to Cushing, Oklahoma and the diluent is at Edmonton. The diluent requirements are 46% less than without our technology, and the volume being shipped is 33.61% less than without our technology. This technology is a novel way of removing the asphaltenes from the bitumen and a novel use of a gasification reactor as an asphaltene combustor, that sequesters the flue gas underground. Nearly every refinery in the world can process this oil. And the simple payback period is less than 7 months for 30,000 barrels per day.