Like all other industries, the petroleum industry needs a base of natural resources to work with. There could not be anything created out of nothing. The foundation of the petroleum industry is mainly made up of various types of hydrocarbons. There are also many other "goodies" found in oil sands, such as bitumen. No matter what the substance being mined is, if a company knows their science and finance there should be a rewarding profit in the end. Located on the Western Canada Sedimentary Basin, Alberta has played a major role in extracting hydrocarbons.

OIL SANDS

   There has been much development in Alberta with oil sands. There are three major projects in progression in Alberta (figure 5): Athabasca, Cold Lake and Peace River.

Figure 5; Oil Sands Projects
Athabasca, Cold Lake and Peace River are Alberta's three major oil sand projects.

Athabasca: AEC, CNRL, Gulf, JCOS, Koch, Mobil, Petro-Canada, Shell, Suncor, Syncrude

Syncrude Canada Limited, since 1978

   Syncrude is the largest producer of light crude oil and supplies 13 percent of the Canadian market's demand. Syncrude was in operation of its Syncrude 21 project in the North Mine starting October 1998 and Aurora project in May of 2000. The Aurora Project is operated in the Athabasca oil sands and is split into the "North project" and "South project". Plenty of bitumen is extracted from the Athabasca oil sands. Currently, the North project is being done first. The Aurora North has known to exceed 2.5 billion barrels of bitumen, the regular amount extracted by Syncrude doubled. To fulfill the high demand for hydrocarbons, Syncrude Canada has developed its latest in surface mining and extraction in the Aurora North, while using cost-effective and environmentally friendly methods of extraction. Such methods of extraction include truck-shovel mining, hydro-transport, low energy extraction, and froth pumping, which utilizes natural lubricity.⁴ As far as 1999 went for Sycrude, $6 billion was spent on projects. A profit of double-the-normal in oil production per year was made, with 150 million barrels of oil extracted that year.

Suncor Energy Incorporation

   Suncor planned $600 million input for a program to expand plant facilities and the Steepbank Mine in the Athabasca region. In 1999, a 105 000 barrels of bitumen per day average seemed to be help the confidence to work on the two phases of Project Millennium. The Project Millennium was to double production allowing mine and processing operations to produce as much as 2 000 barrels per day by 2002.⁵ Project Millennium is a venture of Suncor, Bantrel Inc, Fluor Daniel Canada Inc, SNC-Lavalin Engineers & Constructors Incorporation, and Millenium Construction Ltd (a joined venture of Bechtel Canada Company and Fluor Constructors Canada Limited. The first phase of Project Millennium is the "Production Enhancement Phase", with 135 000 barrels of bitumen to be produced by 2001, costing $190 million. Phase two will consist of further development of Steepbank Mine, expanding extraction, upgrading plants, while increasing requirements for steam, water and electricity. 220 000 barrels of bitumen were to be produced by 2002 and to cost $ 2 billion.

Shell

   In advance to 1997, Shell has made plans for the development of Athabasca. They had considered expansion of the Muskeg River Mine, the extraction plant near Fort McMurray, and the Scotford Upgrader north of Edmonton, which would be connected by the Corridor Pipeline. With a $4 billion investment plan, the anticipated return would be about 150 barrels of bitumen per day by late 2002. Scotford would process this bitumen into high-quality synthetic crude products. During the August of 1999, an agreement was made with Western Oil Sand Incorporation and Chevron Canada Resources Limited to work on the project together. Shell owned 60% of the shares, Western Oil Sand owned 20% of the shares and Chevron Canada owned the remaining 20%.

Koch Canada Limited

   As the largest exporter of Canadian crude oil, Koch Canada Limited had 78% interest in leases in Fort Hills as of May 1998. Koch Canada had also become the partner of UTS Energy. In the Fort Hills project, 90 000 barrels of bitumen was produced in a day on average for 25-30 years straight, at a cost of $1 billion. So far, one billion barrels of bitumen that can be mined readily have been identified in the Fort Hills project.

Cold Lake: AEC, CNRL, Imperial, Murphy, PanCanadian, Ranger

Imperial Oil Limited

   Imperial Oil Limited owns the operations of Cold Lake entirely, sharing a 25% interest rate with Syncrude Canada Limited. Imperial Oil Limited has been known to be the leading developer of Canada's oil sand resources. In fact, two-thirds of the oil sands from Canada are to be used for production of hydrocarbons, which is to increase 50% by 2007.⁶ Imperial Oil Limited has planned their Cold Lake project out in ten phases. Imperial has become Canada's largest in-situ bitumen recovery operation and largest source of crude oil production. 1235 000 barrels of bitumen are mined per day. In addition to their ten already-in-session phases, phases 11-13 have been planned, based on a $500 million budget, to eventually increase production by 30 000 barrels.

Peace River: Shell

Shell

   See more on Shell under Athabasca.

"BLACK GOLD"

   Canada has had an extensive history in the international oil market. We have started way back from discovery of "black gold" during the "dirty thirties" in southern Alberta.⁷ Within our nation, Alberta has produced the majority of oil at 82%, British Columbia and Saskatchewan have produced 16% of our oil, while the remaining 2% of oil have been extracted from Manitoba, Ontario, in the Atlantic offshore region and in the Northwest Territories. What is the reason behind Alberta's success? The major reason behind Alberta's success is that it is located on the Western Canada Sedimentary Basin (WCSB). 23 billion barrels of light crude oil and 27 billion barrels of other oil are believed to exist here. However, many believe that at 7 billion barrels of total mined conventional heavy oil, resources from the surrounding area will have decreased by 82%. Canada's Energy Outlook (1996-2020 projections) has made predictions that indicate a bright future of Canada. The Canada Energy Outlook is as follows:⁸

   Canadians have a high demand for oil. Of all energy sources we use, 40% originates from oil, 26% is from natural gas, and 20% is from electricity. The market of the oil industry has always been and will always be in a boom-and-bust pattern. Boom-and bust is an unpredictable pattern in one industry, where prices and production go up and down because of war, scarcity, etc. However, production for oil of 1.6 million barrels per day in 1999 is believed to increase to 1.7 million barrels per day until 2010. Demand of oil is also increasing. Right now, there are 65% demand from transportation, 25% from heating, industrial process and electricity generation, and 10% for asphalt, lubricants and production of petrochemicals.

   Since fossil fuels can not produced in a short period of time, there is a decreasing supply of it. $19 billion is spent per year on exploration, development, field equipment, etc. The government grants taxes, crown royalties and bonus payments of a $6 billion total at various levels to companies each year. The light oil supply seems to be decreasing the fastest, however, forcing companies to be digging for heavy oil instead. However, heavy oil extraction is hard, since it is so viscous. The thickness of heavy oil makes it very hard for machines that are regularly used to extract light oil to drill it out. To solve this, new technology was needed.

   In assistance of extraction of the very viscous heavy oil, engineers considered using steam. The steam-assisted gravity drainage (SAGD) drills two parallel wells into oil-bearing ground. Steam is injected through the upper well, which raises the temperature of the heavy oil. A raise in temperature means a decrease in viscosity, which results in an easy extraction of temporarily thinned heavy oil. However, SAGD is very expensive. Horizontal drilling, steam injection and three-dimensional seismic technology are all put in one "fruit salad" during the process. A successful example of the use of SAGD is PanCanadian's Senlac project situated in east central Saskatchewan.

   Another method of heavy oil extraction was discovered and was also used by PanCanadian starting 1997. This method also reduced viscosity of the heavy oil. It is called a CO₂ miscible flood. A pump is inserted into an old reservoir where carbon dioxide is injected and used as a solvent for the oil. This reduces viscosity, which increases flow rate and makes extraction of heavy oil easier.⁹ PanCanadian and 36 other partners spent $1.1 billion on planning a project to use CO₂ miscible flooding on the Weyburn Oil field in southeastern Saskatchewan. PanCanadian and their partners expect an increase of medium crude oil from 20 000 barrels per day to 30 000 barrels per day in 2008 and is to last for 25 more years after.

NATURAL GAS

   A lot of Canadians are highly dependent upon natural gas to heat homes. With no surprise, the majority of Canada's natural gas supply is extracted from the Western Canadian Sedimentary Basin (WCSB). In fact, western Canada's hydrocarbon growth potential is dependent upon natural gas. PanCanadian extracts 800 million cubic feet of gas daily. They have 6 million acres of mineral rights in western Canada, in which they believe has great potential. In 1998, 722 million cubic feet of natural gas was produced per day, making PanCanadian one of the largest gas producers in Canada.

   Although the WCSB has gives us hope, the Rocky Mountains have served as a minor barrier. Deep gas exploration in the WCSB area has been quite challenging. Despite the Rocky Mountains being a "fence", large, low reservoirs of up to 100 billion cubic feet have been discovered at 12 000 feet deep, which is worth a $4-6 million well.

   Other than the WCSB, there are other regions with natural gas potential, such as the Arctic and East Coast Offshore Basins. In the East Coast Offshore Basin, the Sable Offshore Energy Project is in session with six offshore gas fields off of the Nova Scotian shore. The size of the Sable Project is 3.1 trillion cubic feet. In the Arctic Basin, there are also some projects being operated. In May 1999, Chevron Canada Resources discovered a gas pool of 400-600 billion cubic feet of gas in the southern Northwest Territories near Fort Liard. In total, there is thought to be a 1 trillion cubic feet of natural gas in the southern Northwest Territories.¹⁰ The Mackenzie Delta consists of reserves of the far north worth 10 thousand to 65 thousand cubic feet of natural gas. Gulf Canada Resources owns 75% of the Parsons Lake Gas Field on the Mackenzie Delta.

   Besides the big gas companies, transportation companies find profits indirectly from natural gas sales. Companies that help other industries get their products to market are called midstream businesses. Pipeline companies look forward to expansion into the Northwest Territories of the Arctic Basin. In July 1999, TransCanada PipeLines Limited and the government of the Northwest Territories had signed an agreement in a partnership for development of the natural gas transportation of the area around Fort Liard. Transportation of natural gas to markets at reasonable costs is a major goal.

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