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February 2007
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Canadian oil sands: Opportunities, technologies and challenges

Energy resources found at the Arctic Circle have potential

S. PATEL, Petro-Canada, Calgary, Alberta, Canada

Comments? Write:
[email protected]

Increasing global oil demand and sustained higher commodity prices have raised questions about
the future of energy supplies in North America. Canada is the seventh largest producer of crude
oil—enough oil to meet both its domestic demand and supply export markets. Canada's
conventional oil production has been declining for over a decade. However, Canada's total oil
production will grow significantly in coming years and is estimated to become the world's fifth
largest oil producer (Fig. 1). This significant growth will be achieved through oil sands. Canada has
substantial reserves of oil sands, which are estimated to produce 175 billion bbl (B bbl) with
available technology.

Fig. 1 Top 10 global oil producers in 2005.

The total Canadian oil sands reserves, including those resources not yet recoverable with available
technology, are estimated at 1.7 trillion bbls to 2.5 trillion bbls. Saudi Arabia has only 259 B bbl of
proven reserves. Unlike many other nations, output in Canada is rising and will continue to
increase for many decades. At present production levels, the reserves will sustain crude oil
production of 2.5 million bpd (MMbpd) over 200 years. At present, Canadian oil-sands production
accounts for one out of every two barrels of supply. Rapid growth in developing Canada's oil sands
reserves is expected. By 2015, the oil sands share of production will rise to three out of every four
barrels. Factors supporting oil-sands development:

• High crude oil prices

• Rising global energy demand

• Technology innovations
• Stable investment climate in Canada.

The activity in the oil sands has ramped up sharply and is primarily due to sustained high oil prices
and greater awareness that oil sands do represent a very large, economically attractive oil
reserves in a politically stable country. Recent new projects or expansion plans for the existing
projects/facilities further emphasize keen interest in oil sands. Four operating upgraders are
present in Canada and include:

• Syncrude Canada Ltd.

• Suncor Energy

• Athabasca Oil Sands (Shell Canada Lead)

• Husky Energy.

All upgraders are under expansion. Two upgraders are under construction—OPTI/Nexen Long
Lake and CNRL Horizon. Other active upgrader projects are:

• Fort Hills (Petro-Canada Lead)

• Northern Lights Partnership (Synenco Energy/Sinopac)

• Heartland Project (BA Energy)

• North West Upgrader.

Besides the listed companies, several other companies are planning and studying upgrader
projects.

Most of the mentioned upgraders have their own mining and extraction facility. In addition, several
new mining and in-situ projects have been announced. The estimate of capital expenditures to
construct all the announced projects to be completed from 2006 to 2015 is C$125 billion (Fig. 2)

Fig. 2 Potential investment in Canada's oil-sands

projects.

Oil sand deposits are located worldwide. The major reserves are located in Canada, Venezuela,
Malagasy, Albania, Trinidad, Russia, Romania and the US. In Canada, the oil sand deposits are
concentrated in the Alberta provinces and found in three major areas—Athabasca, Peace River
and Cold Lake regions. The largest reserve is the Athabasca Oil Sands. Pioneers envisioned
commercial applications of this incredible resource. Through various companies, government and
scientific organizations, oil-sands production is becoming a reality and emerging as a major
supplier of oil.

What is oil sand? Oil sand is oil that is trapped in sand under the earth's surface and is composed
of sand, oil, clay and water. Oil sands are mined and processed to produce crude oil similar to oil
pumped from conventional oil wells. However, extracting and upgrading oil from oil sands is more
complex.

Until recently, Alberta's bitumen deposits were known as tar sands but are now referred to as oil
sands. The oil-sand grains are easily crumbled because they are not cemented together. Each
grain of oil sand is comprised a grain of sand surrounded by a layer of water that is covered by a
layer of bitumen. Bitumen is a thick, sticky form of crude oil; it is so heavy and viscous that it will
not flow unless heated or diluted with lighter hydrocarbons (Fig. 3). At room temperature, bitumen
behaves similarly to cold molasses.

Fig. 3 View of bitumen.

Oil sands are substantially heavier than other crude oils. Bitumen is a tar-like mixture of petroleum
hydrocarbons with a density greater than 960 kg/m3. The light crude oil, by comparison, has a
density as low as 793 kg/m3. Compared to conventional crude oil, bitumen requires more
upgrading before it can be used a feedstock by a petroleum refinery. In addition, bitumen must be
diluted with lighter hydrocarbons in order to be transported by pipelines.

The oil sands contain 10–12% bitumen. The remaining 80%–85% is a mineral matter (including
sand and clays) and 4%–6% water. The API of bitumen is 8°–14° and it contains 4%–5% sulfur.
Bitumen is composed of: carbon, 83.2%; hydrogen, 10.4%; oxygen, 0.94%; nitrogen, 0.36%; and
sulfur, 4.8%.

Remember: Oil sands are not produced in the same manner as conventional hydrocarbons. Two
methods are used to extract oil from sands:

• Surface mining involves removing substantial acres of fertile ground to expose the underlying oil
sand. About two tons of sands must be mined to produce one barrel of crude oil. With available
extraction technology and present oil prices, only about 20% of Alberta's oil sands can be mined
via surface mining.

• In-situ extraction is the other option to produce the trapped heavy oil. The majority of the
Canadian oil sands is located in deeper layers—75 m and below, and can be recovered using in-
situ methods. This method involves heating or diluting the bitumen in place to yield liquid
hydrocarbons that accumulate in a well. The heavy liquid hydrocarbons are pumped to the surface.
However, this technique poses severe groundwater contamination problems due to leakage of
diluting materials.

If surface mining is used, the bitumen-rich sand is sent to extraction systems to separate the
bitumen from the clay, sand and water. The recovered bitumen is further processed via upgrading
methods to produce high-grade oil known as synthetic crude oil (SCO). North American refineries
demand SCO because of its high quality. SCO can be sold at a premium to benchmark crude oil
prices due to its high quality over conventional crude oils. Figs. 4 and 5 illustrate how SCO is
produced using surface mining and in-situ extraction methods.
 Fig. 4 Synthetic crude oil production using truck-and-shovel method.

Fig. 5 Synthetic crude oil production using in-situ method.

TECHNOLOGIES

Methods available to produce oil sands include:

Surface mining. This technique uses the truck-and-shovel method to reach the oil or bitumen.
Often, the mineable oil sand areas are located less than 75 m (250 ft) below the surface and
covered by overburden material. Overburden is a layer of clay, sand and silt that lies directly above
the oil-sand deposit. Surface mining is the most efficient extraction to reach large bitumen deposits
with little overburden. Only 20% of Alberta's oil-sand deposits can be mined using surface mining
techniques. The remaining oil-sand deposits must be recovered with different techniques.

The first step in surface mining is removing muskeg and overburden. Muskeg is a water-soaked,
decaying plant material, which can be 1–3 m thick and lies on top of the overburden material.
Before the muskeg can be removed, it must be drained. This process can take up to three years to
complete. Once the muskeg is drained and removed, the overburden is removed.

When all of the overburden is stripped away, the oil sand is exposed and is ready for mining. The
mining process uses large hydraulic and electrically powered shovels to dig up oil sands. The
mined oil sands are loaded onto large trucks that can carry up to 400 tons of oil sands per load
(Fig. 6). The heavy hauler truck takes the oil sand to a conveyor belt, which transports the oil sand
from the mine to the extraction plant. At present, there are extensive conveyor-belt systems that
transport the mined oil sand from the recovery site to the extraction plant. With newer
technologies, these conveyors will be phased out and replaced with hydrotransport technology.
Hydrotransport is a combination of ore (bitumous sands) transport and preliminary extraction. The
mined oil sand is mixed with hot water to form a slurry, which is pumped through a pipeline to the
extraction plant. Fig. 7 is a typical mine site.
 Fig. 6 Side view of mining truck used to haul oil sands.

Fig. 7 Aerial view of a strip-mining operation for oil

sands.

Extraction. In the extraction process, oil or bitumen is removed from the oil sand. The slurry
mixture from the hydrotransport pipeline is sent to a large tank called the primary separation vessel
(Figs. 8 and 9) or separation cell. The slurry settles into layers—sand, water and bitumen. The
combination of hot water and agitation releases bitumen from the oil sand, and causes tiny air
bubbles to attach to the bitumen droplets. These droplets float to the top of the separation vessel.
The most important layer is the bitumen froth, which rises to the top. The sand (or tailings sand)
sinks to the bottom. The primary separation vessel has a rake at the bottom of the vessel. This
rake slowly rakes the sand in a downward motion, which aids in separation.

Fig. 8 View of primary separation vessel (extraction).

 Fig. 9 Flow diagram of primary separation vessel
(extraction).

The tailings sand and excess water is sent to special holding tanks called tailings ponds. Fig. 10 is
a typical tailings pond. The tailings sand is used to build dams and dykes around the tailings
ponds. The water is treated and recycled within the plant site.

Fig. 10 Aerial view of tailing pond.

The middle layer (called middlings) consists of bitumen, clay and water. The middlings remain
suspended between the sand and bitumen froth until it is drawn off and sent to a secondary
separation vessel. This vessel extracts the remaining bitumen from the middlings. Usually 2% to
4% more bitumen can be extracted.

The final two steps in the extraction process are the scroll centrifuge and disc centrifuge (Fig. 11).
This is an efficient way to extract large volumes of bitumen. In this process, gasoline-like product
naphtha (some oil companies use paraffin as well) known as diluent is added to the bitumen froth
to make the mixture less dense. Also, the diluent decreases viscosity, which aids separation. In the
disc centrifuge, the bitumen froth remains in the middle, while the clay, water and sand are thrown
to the sides of the centrifuge. The water, sand and clay mixture are pumped out as tailings to the
tailings pond. The diluted bitumen (bitumen + naphtha diluent) is separated from the rest of the
material and sent to the upgrader. The diluent is separated from the bitumen, and the bitumen is
upgraded into SCO. The recovered diluent (naphtha) is returned to the extraction process. Table 1
summarizes a typical bitumen sample.
 Fig. 11 View of centrifuges to extract hydrocarbons.

In-situ method. In this application, the bitumen is removed while the sand remains in place. These
methods are used for oil sands that are too deep to support surface-mining operations. In-situ
methods include steam injection, solvent injection and firefloods, in which oxygen is injected and
part of the resource burned to provide heat. Some extraction methods require large amounts of
both water and energy (for heating and pumping). The most common in-situ methods for bitumen
extraction are: steam-assisted gravity drainage (SAGD) and cyclic steam stimulation (CSS)
methods.

SAGD involves the drilling of two horizontal wells, one at the bottom of the formation and another
about 5 m above it. The upper well injects steam into the reservoir. The heat melts the bitumen;
fluid bitumen gravity flows to a lower well, and liquid bitumen is pumped to the surface. SAGD is
cheaper than CSS methods and allows very high oil production rates with recoveries approaching
60% of the oil. Using drilling technology, steam is injected into the deposit to heat the oil sand, thus
lowering the viscosity of the bitumen. The hot bitumen migrates to the producing wells, while the
sand is left in place.

The SAGD method is a type of in-situ technology; it uses innovative horizontal drilling to produce
bitumen. In-situ technology is expensive and requires certain conditions including a nearby water
source. Production from in-situ already rivals open-pit mining. In the future, in-situ methods will be
the preferred mining efforts for bitumen production from the oil sands.

CSS. In the CSS method, the well is put through cycles of steam injection, soak and oil production.
First, 300°C steam is injected into a well for several weeks to months. The well is allowed to sit for
several days to heat the oil sands. The hot bitumen is pumped out of the well, which can take
weeks. When the production rate declines, the well is put through several more cycles of injection,
soak and production, until the cost of steam injection exceeds production costs. Recovery factors
are around 20% to25%, but the cost of steam injection is high.
The vapor extraction process (VAPEX) is similar to SAGD. In this process, hydrocarbon solvents
are injected into the upper well to dilute the bitumen to enable flow. This method is more energy
efficient than steam injection. Some partial upgrading of the bitumen to crude oil also occurs in the
oil sands. VAPEX is a new and more expensive process; oil companies are testing this method.

SAGD, CSS and VAPEX are not mutually exclusive. For example, some wells go through a CSS
cycle to condition the formation before the SAGD production method is used. Some companies are
also starting to combine VAPEX and SAGD to improve recovery rates and decrease energy costs.
Challenges facing the in-situ process are efficient recoveries, water management for steam
makeup and co-generation of all (otherwise waste) heat sources to minimize energy costs. Other
in-situ recovery methods that are in research stages of development include:

Cold flow production process involves the pumping out of the bitumen without heat, often using
specialized pumps called progressive cavity pumps. This method only works well in areas where
the bitumen is fluid enough to pump. This is the cheapest method but only recovers about 5% to
6% of the bitumen.

Cold heavy-oil production with sand. Canadian oil companies discovered that, if the sand filters
are removed from the wells, production rates improved considerably. This technique became
known as cold heavy-oil production with sand (CHOPS). Research showed that pumping out sand
opened wormholes in the sand formation, allowing more oil to reach the borehole. Wormholes are
permeable sand tubes of very high porosity, which extend out from the borehole. The advantage of
CHOPS is better production rates and recovery (about 10%). The disadvantage is the problem of
disposing the large sand quantities.

Toe-to-heel air injection (THAI) is a very new and experimental method. A vertical air injection
well is combined with a horizontal production well. This process ignites the bitumen and creates a
vertical wall of fire, moving from the "toe" of the horizontal well toward the "heel." The heavier oil
components are burned, and the lighter components are driven into the production well, where
they are pumped out. In addition, the heat from the fire upgrades some heavy bitumen by
converting to lighter oil within the formation. The THAI has the advantage of not requiring steam.

In the listed methods, the bitumen is pumped to the surface as a bitumen-rich froth. This froth is
processed through a stripper that removes the air bubbles and moves the bitumen to froth storage
tanks. Sand particles in the froth settle to the bottom and are pumped to the tailings processing
system.

Upgrading. Unlike smaller hydrocarbon molecules, bitumen is carbon rich and hydrogen poor.
Therefore, the bitumen must be further processed in the upgrader to meet feedstock specifications
of petroleum refineries. Upgrading involves removing some carbon while adding hydrogen to yield
higher-value hydrocarbon products. This goal is achieved through four main processes:

• Coking removes carbon and breaks large bitumen molecules into smaller parts

• Distillation sorts the mixture of hydrocarbon molecules into their components

• Catalytic conversions transform hydrocarbons into more valuable compounds

• Hydrotreating removes sulfur and nitrogen and adds hydrogen to the hydrocarbon molecules.

The end product is SCO, which is shipped via underground pipelines to North American refineries.
The SCO is refined further into jet fuels, gasoline and other petroleum products. Some oil
companies do not upgrade the bitumen, but they ship their bitumen in a diluted form for upgrading
at other refineries.

Usually, upgrading is divided into two areas—primary upgrading and secondary upgrading. The
technologies used in primary upgrading are mainly coking (delayed and fluid coker) and
hydrocracking or a combination of these technologies. The other units of primary upgrading are
diluent recovery unit, vacuum unit, etc.

The secondary upgrading is hydrotreating units. The upgrading process includes other
processing units such as hydrogen plant, sour block (amine treatment, sour water stripper and
sulfur plant), tank farm and utilities and offsites. Fig. 12 is a typical block flow diagram for the
upgrader using coking as the primary conversion method. Other new technology being considered
in the upgrading is gasification for the hydrogen and power/steam generation.
 Fig. 12 Block diagram of the upgrader operation.

Diluent recovery unit. The feed for the diluent recovery unit is diluted bitumen, which comes from
the extraction. The diluent recovery unit recovers diluent from the bitumen and also separates
gasoil from the bitumen. The feed consists of diluent (naphtha) and bitumen. The typical diluent to
bitumen weight ratio is between 0.50 and 0.70. The main products are diluent (naphtha), which will
be returned via pipeline to the extraction, light gasoil, which will be further upgraded in the
hydrotreaters and atmospheric residue, which can be fed to either the vacuum distillation unit (if
available) or the coker.

Vacuum distillation unit. The feed for this unit is atmospheric residue from the diluent recovery
unit. The vacuum unit separates heavy gasoil from atmospheric residue. The vacuum gasoil
stream produced by this unit is sent to the hydrotreaters. The vacuum residue is sent to the cokers.

Coker unit. The coker removes coke from the residue (atmospheric and/or vacuum) and produces
fuel gas, naphtha, light gasoil, and heavy gasoil streams. The gasoil from the coker, vacuum unit
and diluent recovery unit are further upgraded by hydrotreating. Naphtha is treated in the naphtha
hydrotreater. Produced fuel gas is treated in the amine plant to remove sulfur impurities, and sweet
fuel gas is used in the upgrader's furnaces and boiler.

Hydrotreaters. The naphtha hydrotreater desulfurizes and denitrifies the naphtha feed stream. It
also saturates olefins. Many companies use a target of <1 ppmw nitrogen for reformer-grade
naphtha. A gasoil hydrotreater also treats gasoils and reduces nitrogen and sulfur concentrations.
The hydrotreated naphtha and gasoil are blended together to produce SCO, which is shipped to
the refiners via pipeline. The SCO specifications determine the level of hydrotreating the naphtha
and gasoil. Table 2 summarizes a typical analysis for SCO.
Hydrogen unit. Hydrogen is used in the hydrotreater and hydrocracker units. Usually, hydrogen is
produced using the steam methane reformer. However, due to the high natural gas pricing, many
oil companies are considering a gasification process to produce the hydrogen. Feedstock for
gasification could be either petroleum coke (a byproduct from the coker) or a heavy hydrocarbon
such as liquid asphaltene.

Sour block. The sour block consists of amine treatment, sour water stripper (SWS), and sulfur
recovery units (SRUs). The amine plant "sweetens" the sour fuel gas produced in the cokers by
removing sulfur components, mainly hydrogen sulfide (H2S). The sweet fuel gas is supplied to
various heaters and boilers across the upgrader. The SWS removes H2S and ammonia from the
sour water produced in the diluent recovery unit, vacuum unit, cokers and hydrotreaters. The sulfur
plant recovers sulfur from various H2S-rich streams, which are sourced to the amine plant and
SWS unit.

CHALLENGES

The economic potential of Canada's oil sands is undisputed. However, oil-sands developers face
enormous challenges since refining oil sands is more energy intensive than conventional oil
production. In addition, the process is a major source of greenhouse gas (GHG) emissions.

Capital cost. Oil-sands projects, particularly those involving upgrader facility, are capital sensitive.
Capital costs have increased significantly over the past five years due to higher expenses for labor
and materials. The fast development pace for oil sands has contributed to a shortage of skilled
workers. Expenses for equipment—such as the huge machines required to mine the sands and
dump trucks to haul it, and including construction expenses for facilities (extraction, upgrader,
infractures, etc.)—combine to a major consideration in starting a grassroots project.

Operating cost. According to a report by the National Energy Board of Canada, capital costs raise
the total production costs $18/bbl to $20/bbl for a new mining operation and $18/bbl to $22/bbl for
an SAGD operation. This does not include the cost of upgrading the crude bitumen to SCO, which
makes the final costs $36/bbl to $40/bbl for a new mining operation. Table 3 summarizes the
estimated operating and supply cost of bitumen and SCO using different technologies.

Because oil sands require much higher production costs than conventional reserves, profits will fall
fast for SCO producers when oil prices plummet. The main challenge of oil sands is that the
energy required for both extraction methods is so huge. Offsetting extraction energy costs through
energy from extracted oil is challenging. The process requires many trucks, shovels and other
heavy equipment to expose the oil sands. Tremendous energy is spent on hauling the sands to
upgrading plants for processing. The reclamation process required to return the mined area to its
natural state involves more energy. Beyond this, much of the energy used to extract oil from sand
and upgrade it to a form suitable for pipeline transport to a refinery comes from light hydrocarbons
such as diluent and natural gas. Natural gas markets have been wrestling with tight supplies, and
the price of natural gas has almost tripled in the past four years. Both naphtha and natural gas are
closely tied to the price of conventional oil. When the price of oil goes up, the price of these
products rises accordingly, making SCO production even more expensive.

Environmental impact. For every barrel of SCO produced in Alberta, more than 80 kg of GHGs
are released to atmosphere and between 2 bbl and 4 bbl of wastewater are dumped into tailings
ponds. The forecast growth in synthetic oil production in Alberta may affect Canada's commitments
to reduce GHG emissions. In ratifying the Kyoto Protocol, Canada agreed to reduce, by 2012, its
GHG emissions by 6% with respect to the reference year (1990). In 2002, Canada's total GHG
emissions had increased by 24% since 1990. In 2006, Canada declared this target to be
unattainable. Furthermore, the open-pit mining of the Athabasca oil sands destroys the boreal
forest, the bogs and rivers, as well as the natural landscape. However, industry believes that the
boreal forest will eventually colonize the reclaimed lands. HP

The authors
Sanjay Patel is employed by Petro-Canada and is a process lead for the sturgeon
upgrader of the Fort Hills project. Beside process design for the Fort Hill Sturgeon
Upgrader, he is responsible for the environmental issues and involved in the
preparation of an Environmental Impact Assessment application for the Sturgeon
Upgrader. Mr. Patel previously worked for Syncrude Canada and has 15 years'
experience in different areas of refining, upgrading and petrochemical plants. He
holds a chemical engineering degree from D.D.I.T., Gujarat University, India. He is a
professional engineer in Alberta, Canada, and can be reached by e-mail at:
[email protected].

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