In Situ Oilsands Growth Accelerates
In situ crude production has grown an average of 11.5 per cent per year since 2002, and last year grew to 157,700 cubic metres per day from 135,400 cubic metres per day in 2011 for a 16.5 per cent increase, higher than the increase of 12.7 per cent from 2010 to 2011, according to the Energy Resources Conservation Board (ERCB).
The number of producing bitumen wells has increased along with in situ crude bitumen production to about 11,500 cubic metres per day in 2012 from 2,300 cubic metres per day in 1992, said the ERCB in its Energy Reserves 2012 and Supply/Demand Outlook 2013-2022 report.
For the third year, production from the Athabasca oilsands area (OSA) was higher than that from the Cold Lake OSA, with the Athabasca and Cold Lake OSAs accounting for 55 per cent and 40 per cent of total in situ production, respectively.
In 2012, the Athabasca, Cold Lake, and Peace River OSAs produced 87,000 cubic metres per day, 62,700 cubic metres per day, and 8,000 cubic metres per day, respectively.
In 2012, annual production growth rates for the Athabasca, Cold Lake, and Peace River OSAs were 29 per cent, three per cent, and 23 per cent, respectively.
Significant increases in production within the Athabasca OSA since 2002 are due to SAGD development, while increases in the Peace River OSA are largely the result of increased primary production of bitumen in the Seal area, southeast of Shell Canada Limited’s Peace River thermal in situ bitumen production project.
Annual mined production growth was 6,000 cubic metres per day in 2012 as daily volumes grew to 147,800 cubic metres per day, up from 141,800 cubic metres per day in 2011.
Output growth in 2012 at 4.2 per cent was very similar to growth in 2011 at 4.1 per cent, said the report.
Production gains at Shell and Canadian Natural Resources Limited of 2,400 cubic metres per day and 8,800 cubic metres per day, respectively, were sufficient to offset Suncor Energy Inc. and Syncrude Canada Ltd. production declines of 3,400 cubic metres per day and 1,800 cubic metres per day, respectively. Currently all mined bitumen in Alberta serves as feedstock for upgraders.
Syncrude (Mildred Lake and Aurora), Suncor, Shell (Muskeg River and Jackpine), and CNRL (Horizon) account for 36, 29, 24, and 11 per cent of total mined bitumen, respectively, said the ERCB.
Syncrude’s mined bitumen volumes in 2012 of 53,300 cubic metres per day fell by 3.3 per cent from 55,100 cubic metres per day in 2011. The decline was a result of decreased production at its Aurora mine, which saw output fall by 2,200 cubic metres per day. Production at its Mildred Lake mine increased by 4,000 cubic metres per day.
Mined bitumen production at Suncor decreased by 7.5 per cent in 2012. Production in 2012 averaged 42,300 cubic metres per day, down from 45,800 cubic metres per day in 2011.
Shell’s Muskeg River and Jackpine mining projects produced 35,800 cubic metres per day in 2012, a 7.3 per cent increase over 2011 production of 33,400 cubic metres per day. Following decreased production of 7,600 cubic metres per day in 2011 due to a coker fire, CNRL’s Horizon project produced 16,400 cubic metres per day in 2012, an increase of 115.8 per cent.
By 2022, the ERCB expects mined bitumen production to reach 254,600 cubic metres per day. This is slightly lower compared with the end of the forecast period in last year’s report.
Mined bitumen production compared to total bitumen production is expected to decrease from 48 per cent of output in 2012 to 42 per cent in 2022.
In situ production
The ERCB expects in situ crude bitumen production to increase to 350,800 cubic metres per day by 2022, an increase of eight per cent compared to the end of the 10-year forecast period in last year’s report.
Based on this projection, in situ bitumen will account for 58 per cent of total bitumen produced by 2022, it said.
Projects that have been approved are considered for inclusion in this forecast. Announced projects are generally not included in the forecast.
The ERCB has estimated that the supply cost for a generic in situ SAGD project — producing 30,000 bbls per day with a capital cost range of $750 million to $1.5 billion — is equivalent to $50 to $80 ($US WTI equivalent per bbl).
For a generic standalone mine producing 100,000 bbls per day with a capital cost range of $5.5 billion to $7.5 billion, supply cost would be $70 to $85 ($US WTI equivalent per bbl).
The supply cost calculation for 2012 has changed significantly from previous years. Among the changes were the addition of a capacity utilization factor, a change in the discount rate used, and for SAGD the gas use rate for the high case was increased from 2,650 cubic metres per cubic metre to 3,540 cubic metres per cubic metre. As a result, the 2012 results are not comparable to those calculated last year.
Upgraded bitumen production in 2012 was 142,900 cubic metres per day, compared with 137,100 cubic metres per day in 2011.
In 2012, about seven per cent of in situ production in Alberta was upgraded.
The percentage of in situ bitumen upgraded is expected to vary throughout the forecast period before reaching about nine per cent in 2022, which is lower than the projection in the 2011 forecast as a result of a reduction in the ERCB’s forecast for upgrading.
Over the forecast period, the percentage of crude bitumen upgraded is expected to decline from 52 per cent of total crude bitumen in 2012 to 38 per cent in 2022. This is a result of the in situ production growth outpacing the growth in upgrading capacity.
Overall, total Alberta demand for upgraded and non-upgraded bitumen was 55,200 cubic metres per day in 2012, which is two per cent above the 2011 level of 54,200 cubic metres per day. The increase was primarily due to higher-capacity utilization rates of refineries.
In 2012, the five refineries in Alberta, with a total capacity of 74,600 cubic metres per day, used 46,500 cubic metres per day of upgraded bitumen and 2,900 cubic metres per day of non-upgraded bitumen.
Additional demand for upgraded bitumen as diesel fuel and plant fuel accounted for 5,800 cubic metres per day in 2012, compared with 5,900 cubic metres per day in 2011, a decrease of two per cent.
Alberta refineries consumed 32 per cent of Alberta upgraded bitumen production and two per cent of non-upgraded bitumen production in 2012, compared with the 33 per cent of Alberta upgraded bitumen production and two per cent of non-upgraded bitumen volumes consumed in 2011.
Overall demand for Alberta upgraded bitumen and blended bitumen is influenced by many factors, including the price differential between light and heavy crude oil, the expansion of refineries currently processing upgraded bitumen and blended bitumen, the altering of current light crude oil refineries to process upgraded bitumen and blended bitumen, and the availability and price of diluent for shipping blended bitumen.
Upgraded bitumen is also used by the oilsands upgraders as fuel for their transportation needs and as plant fuel.
Suncor reports that it sells bulk diesel fuel to companies that transport it to other markets in tanker trucks. Suncor also operates a “cardlock” station where it sells diesel fuel supplied from its oilsands operation in the Fort McMurray area.
In 2012, the sale of refined upgraded bitumen as diesel fuel oil accounted for about eight per cent of Alberta upgraded bitumen demand, similar to 2011.
The ERCB forecasts that by 2022, Alberta demand for upgraded and non-upgraded bitumen will increase to about 65,600 cubic metres per day.
It projects that, on average, upgraded bitumen will account for approximately 84 per cent of total Alberta demand, and non-upgraded bitumen will account for approximately 16 per cent throughout the forecast period.
Removals of upgraded bitumen from Alberta will increase from 90,500 cubic metres per day in 2012 to 145,600 cubic metres per day in 2022, with removals of non-upgraded bitumen increasing from 139,400 cubic metres per day to 364,900 cubic metres per day over the same period.
Given the current quality of upgraded bitumen, Western Canada’s eight refineries, with a total capacity of 99,800 cubic metres per day, are able to blend up to 34 per cent upgraded bitumen and a further two per cent of blended bitumen with crude oil.
These refineries receive upgraded bitumen from both Alberta and Saskatchewan.
The four refineries in the Sarnia area of Eastern Canada, with a combined total capacity of 56,600 cubic metres per day, are currently the sole Canadian market for Alberta upgraded bitumen outside of Alberta.
With resurgent light oil supplies in Western Canada and the U.S. Midwest, and an oversupplied U.S. Midwest market, discounting of upgraded bitumen and Western Canada light oil is expected to continue in the short term.
The largest export markets for Alberta upgraded and non-upgraded bitumen have traditionally been the U.S. Midwest, with a refining capacity of 569,000 cubic metres per day, and the U.S. Rocky Mountain region, with a refining capacity of 98,000 cubic metres per day.
However, these markets are now currently oversupplied due to the increase in light oil production and limited pipeline capacity to other markets. As such, there is increasing interest in accessing other market regions going forward. Among the other regions is the U.S. Gulf Coast, with a refining capacity of 1.4 million cubic metres per day.
Access to this region is of particular importance for non-upgraded bitumen, as this region has traditionally been served by heavy oil and maintains refineries capable of handling the non-upgraded bitumen, the ERCB said.
Photo: In situ oilsands growth—including at Suncor Energy’s Firebag SAGD project, seen here—is on a steady upswing. Credit: Suncor Energy
WANT MORE OF OILSANDS REVIEW? SUBSCRIBE TODAY
Latest News View All
- CERI: Alberta greenfield bitumen refinery would be a "hard sell"
- Levelling the field: Industry-First Nations partnerships arent new, they just make more sense today than ever
- IHS: Despite recent price volatility, crude-by-rail is here to stay
- ConocoPhillips' four-year hiring campaign meets its oilsands labour challenges
- International companies to own more oilsands production than ever in 2015
- Oil & Gas Super Majors Struggle In Upstream Sector In Q3 2014
- Peters & Co.: No change in robust oilsands activity level expected in 2015
- From Kabul to Christina Lake
- Service and supply sector urged to embrace Aboriginal partnerships
- Oilsands growth may slow in short term, but long term outlook remains robust—S&P