Tuesday, September 07, 2010

Maintaining the Faith

Five visionaries who changed the path of the oilsands industry, and the wall over which the sixth must climb.Photo: Karl Clark
This article appears in the September 2010 issue of Oilsands Review
By Peter McKenzie-Brown

Oilsands development continually hits a wall of some kind, and obstacles to development seem insurmountable. However, at critical times in the history of the oilsands, a visionary leads the charge over the wall and an important new stage of development takes place. This is the idea behind an excellent presentation titled “Visionaries – Climbing the Wall” given by Dr. Clement Bowman. The present commentary develops that idea, but mostly uses different historical resources.

By the 1920s it was clear that the sands are not underlain by a huge pool of light, source oil. The oilsands are just what they appear to be: huge deposits of sand saturated with thick, gunky bitumen. Encouraged by government, some entrepreneurs tried paving roads with the stuff. No luck; now what?

Enter a research chemist Bowman’s first visionary. With tremendous determination and limited support from the newly fledged Alberta Research Council, his employer, between 1923 and 1930 Clark developed and demonstrated the bitumen extraction process which, with some tweaks, is in use today in oilsands mines. His work made it clear that oil can be extracted from the sands. His name was Karl Clark.

Over the next two decades a few small projects began producing. They were not commercially successful, however, and didn’t use Clark’s extraction process. Each was eventually destroyed by fire. After the Second World War there was no commercial interest in this intractable resource – especially after the 1947 Leduc discovery, which made it clear that large reservoirs of light oil were available in the province.

Despite the legacy of failed commercial efforts, a Canadian politician became the next visionary. He arranged for the province to commission the Bitumount demonstration plant using Clark’s hot water process, and had the entire legislature visit the plant in 1949. He also commissioned an independent evaluation by Sidney Blair – an oilsands expert who began his oilsands career as Karl Clark’s research assistant. Blair concluded that the oil sands were “a commercially viable source of crude oil that could compete on the world market.” The visionary’s name was Ernest Manning, Alberta’s longest-serving premier.

The industry acquired additional oilsands properties and undertook experiments in mineable oilsands development in the 1950s and 1960s. For his part, Manning maintained a life-long belief in the importance of the sands to Canada.

In the 1960s, Alberta announced that it would only approve small oilsands projects. Light oil production was still growing, and the province didn’t want too much competition between oilsands and conventional oil. The province’s insistence on small-scale projects led to thin private sector support.

The visionary who surmounted this obstacle was an octogenarian and a personal friend of Premier Manning. On his insistence, Sun Oil Company filed an application for a 31,500 barrel per day project (later amended to 45,000 barrels per day). In 1967, he told his audience at opening ceremonies for Great Canadian Oil Sands that “No nation can long be secure in this atomic age unless it be amply supplied with petroleum . . . . It is the considered opinion of our group that if the North American continent is to produce the oil to meet its requirements in the years ahead, oil from the Athabasca area must of necessity play an important role.”

The name of this visionary is J. Howard Pew, and he was then chairman of Sun Oil Company, Today, GCOS is known as the Suncor Oilsands Plant.

In 1973, a second commercial project was losing private sector support because of the alarming escalation of costs besetting major North American projects. The Syncrude budget had more than doubled to $2.3 billion, and a major corporate partner pulled out. One man more than any other saved the day. He kept the remaining partners onside while marshalling equity participation in the project from the Alberta, Ontario and federal governments. He set up the first lab dedicated to oilsands research, and developed a long-term plan for upgrading bitumen. He was Syncrude’s first president, Frank Spragins.

In the 1970s, multinational companies had few active development plans for in situ leases. While these deeper deposits represent 80 per cent of the resource, there were no viable in situ technologies for the Athabasca, Peace River, Carbonates, or Wabasca deposits. The major exception was Imperial Oil, which was making limited progress at its Cold Lake site.

Once again a provincial politician took the lead. In 1975, he created the Alberta Oil Sands Technology Research Authority (AOSTRA) to provide government support for private research. During its 15-year life, AOSTRA provided $670 million of funding for oilsands research. Roger Butler’s SAGD process was the single most important advancement from this program. The politician? Premier Peter Lougheed.

Visionary number six has the opportunity to change Canada over this decade, leading the shift to production of cleaner, higher-value products from the oilsands.

There are more major obstacles, they are here and now, and they are environmental. Water, air and land are no longer free; there is a powerful green consciousness demanding that they be protected. Many consumers do not want to use products manufactured from Alberta’s “dirty oil.” Financial markets are concerned about the burden of environmental risk.

Who will help the industry overcome these obstacles? According to Clem Bowman, the next visionary will be able to articulate energy as an integrated system with the oilsands, hydro, natural gas, coal, nuclear and renewable energy all performing key roles. As importantly, that person will have the skills to forge the national will to make Canada a sustainable energy superpower.

Bowman does not conjecture on who this person might be,but his or her name will be marked in history.
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