“Technology renaissance” transforming oil sands in situ production – lowering costs, carbon-intensity

oil sands
Steve Williams, Suncor president and chief executive officer.

“Oil and gas producers need to be carbon-competitive and cost-competitive” – Suncor CEO Steve Williams

A technology revolution is taking place in the Alberta oil sands. Suncor and Cenovus, two of the largest oil sands producers, released their sustainability reports earlier this week and both are making steady progress toward the goals of reducing the carbon-intensity of their crude oil by a third by 2026.

Think about that for a moment. After being vilified as “dirty oil” by former President Barack Obama and a “carbon bomb” by environmentalists, in situ-produced bitumen will soon have the carbon-intensity of the average American light sweet crude oil.

Or maybe even lower, which might be a difficult feat, but not an impossible one, Dinara Millington, VP research of the Canadian Energy Research Institute, told me in an interview.

And why would we be surprised at the remarkable innovation taking place in the oil sands?

The world is awash in crude oil at the moment because American producers responded to the Saudi attempt in 2014 to drive them from global markets by innovating – driving costs down and productivity up, largely with new technologies and new techniques.

Alberta oil sands producers are simply doing the same in their industry.

And in the process of innovating they are preparing their companies to compete in a carbon-constrained, long-term low price environment.

New solvent-based technologies can lower costs AND greenhouse gas emissions

“It’s evident that to remain a central part of the energy equation, oil and gas producers need to be carbon-competitive and cost-competitive,” according to Suncor CEO Steve Williams.

“We are moving aggressively towards the goal of harnessing new technology that transforms the GHG footprint of our operations and our impact on the life-cycle of our product. Technology and innovation are taking us there.”

oil sands
Brian Ferguson, CEO of Cenovus.

“Canada’s oil sands industry is experiencing a renaissance driven by innovation and the application of new technologies to help us develop our resources in a cost-competitive way that supports a low-carbon future,” says Cenovus CEO Brian Ferguson, who retires at the end of Oct.

“At Cenovus, we’re challenging ourselves to be a leader in this renaissance.”

Kevin Birn, IHS Markit director Oil Sands Dialogue, says the steam assisted gravity drainage technology that enables in situ oil sands production is only 16 years old and was due for the next iteration.

That next tech generation will likely be linked in one form or fashion to the substitution of solvents for steam.

There are two horizontal wellbores in the SAGD process, one a few metres above the other. High pressure steam is pumped into the reservoir through the upper well, the bitumen is heated up and becomes less viscous, then the bitumen is able to flow into the second well and be pumped to surface.

SAGD is “dirty” because it uses plenty of natural gas to create steam. Swap solvent, which can be recycled, for steam and companies not only lower costs, but they significantly lower greenhouse gas emissions created by burning the gas.

“Solvents may be the next iteration of SAGD, may define the next 16 years of oil sands development,” Birns said in an interview. “There is a reason to be optimistic and industry may be poised for the next chapter in the future of the oil sands.”

Oil sands well-positioned to compete in low price, low carbon world – counter-intuitive but true

Here is a key point often missed in the public debate over the oil sands future, courtesy of Fiona Jones, general manager, sustainability for Suncor:

“Conventional wisdom suggests that, when faced with an uncertain energy future, long-life assets like the oil sands should be at greater risk of being stranded. But, in fact, the unique characteristics of this resource base suggest the opposite: we are well positioned to continue to generate value for investors across a variety of possible energy futures…while often characterized as the oil basin most vulnerable to a low oil demand scenario, the very long operating life and low decline rate of our assets are, paradoxically, a competitive advantage – both under a scenario of declining demand for crude oil and a correspondingly low oil price. If we are to remain competitive and resilient, we must continue to aggressively lower costs and carbon intensity throughout our business.”

Loosely translated, production from American shale wells is high at first, but then declines very rapidly, often within a year or less. That means producers have to spend a lot of capital to drill news wells or re-fracture the old ones.

oil sands
Suncor Firebag well pad 2. Photo: Suncor.

The oil sands, by contrast, are like a factory. Once the capital is spent to build the facilities and infrastructure, the factory can pump out product at a relatively low cost for a very long time. And the factory owners, Suncor and Cenovus in this case, can invest capital to optimize operations, bringing in new ways of extracting bitumen at a lower cost.

Millington was lead author of a CERI study released early this year that estimated production cost savings of adopting new solvent-based technologies to be 34 to 40 per cent.

“The world is moving towards a low-carbon future. We believe Canada has a tremendous opportunity to develop and become a global supplier of carbon-reducing technologies that will ensure that oil and natural gas can continue to play a role in a clean-energy future,” Cenovus spokesperson Brett Harris said in an email.

“With Canada’s vast resources, we also have the opportunity to become a preferred supplier of low-carbon oil to the world.”


Low-cost and competitive, able to compete long-term against other heavy crude oils in a global market that might not see higher prices for a long time.

Declining carbon-intensity – soon to be much lower than heavy crude from competitors like Venezuela, Mexico, and Nigeria – in a world that is decarbonizing its energy systems and will soon be penalizing oil with high greenhouse gas emissions.

Made in Canada technology that not only gives Alberta oil sands producers a competitive advantage, but opens opportunities to export that could generate significant revenue.

What a terrific story! One that Canadians in other provinces (hello, British Columbia) need to hear, but one that is rarely promoted outside Alberta.

oil sands

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