Redrawing Mining Boundaries

Alberta's Regulator increases the size of the province's surface mineable area by 40 per cent.

By Peter McKenzie-Brown
Last year Alberta’s Energy Resources Conservation Board report rebalanced the provincial agency’s estimates of oilsands reserves, shifting them somewhat in the direction of surface mineable reserves. This raises questions about environmental impacts, for which the inimitable Pembina Institute have happily provided at least one group of answers.

The oilsands are a vast geological mystery, but last year the ERCB put into place a piece of the underlying puzzle 14.5 townships (1,350 square kilometres) in size. Mineable reserves are those with overburden of 65 metres or less. Based on an analysis of more than 2,000 exploratory wells drilled in recent years, the Board’s analysis increased the boundaries of the mineable Athabasca oilsands by almost 40%. The mineable oilsands area of north-eastern Alberta now measures 51.5 townships.

The first change in the surface mineable area since the Board first drew the boundaries in the early 1980s, this change increases total established mineable reserves – in many jurisdictions called “proved” reserves – by 11%, or about 3.5 billion barrels; more than Britain’s total reserves. These are new reserves. Previously, the Board had not done a resource calculation for the area.

While the mineable sands did well, deeper sands did not. As part of its report, the Board reduced established in situ reserves in the Peace River area on the principle that some previously booked reserves in the Bluesky-Gething deposit were too thin to be economic. As a result, the ERCB reduced the in situ component of established oilsands reserves by about 5.5 billion barrels. The net outcome was that Alberta’s established reserves of bitumen totalled about 170 billion barrels. About 20% of that resource is theoretically mineable. The balance will require in situ recovery procedures like SAGD.

Rick Marsh, a senior geologist with the Board, stresses that this report makes no differences for planning by individual companies, although he observes that landowners have posted this new assessment on their websites. “The purpose of this is to determine on a global or provincial basis what the bitumen reserves of the province of Alberta really are. There is no connection between the regulatory side and the (ERCB’s) resource assessment side. Whether regulatory approval to develop is given will determine whether our resource estimate is correct or not. If development doesn’t take place for environmental or economic reasons, or for any other reason, then we will have to de-book some of those reserves, adjust them downward.”

Marsh notes that there are spots within the boundary expansion that are not appropriate for mining (they would require in situ development) and stresses that, in any case, the new ERCB boundary has no regulatory effect. Leaseholders in the surface mineable expansion area include Shell, UTS Energy, Total S.A. and Synenco Energy; they can propose whatever approach to development they want, whether surface mining or in situ techniques. It’s up to regulators (primarily the provincial Department of Energy) to approve developments.

Economic and Environmental Implications
It isn’t difficult to figure out the energy implications of this analysis. From an economic and technical perspective, the ERCB report enlarges the technically more accessible sources of bitumen. The availability of more mineable reserves, if developed, would mean a lot more economic activity in Alberta, more royalties to the province and greater energy security to the world. Greater production would contribute greatly to Alberta’s status as an energy power. It would enable the industry to develop larger export markets – whether in the United States or, if a pipeline to the west coast is ultimately constructed, to East Asia. And, of course, the Canadian balance of trade would benefit. In a higher-oil-price world, the economics of oilsands development are terrific.

But what are the environmental costs? Especially in respect to air pollution, the balance of costs is well worth considering. According to an important 63-page Canadian Energy Research Institute (CERI) study, Green Bitumen, SAGD production generates 1.3 times the emissions of conventional oil. By contrast, integrated mining and upgrading projects produce 0.6 times the level of emissions. (Emissions from older plants are much higher than these averages.) As we shall see, this could dramatically change.

First, however, consider the notions of the Pembina Institute, which will always have an axe to grind in respect to bitumen production. “The technologies used to mine, extract and upgrade bitumen to synthetic crude make the product among the most environmentally costly sources of transport fuel in the world,” the organization proclaims.

In May, Pembina issued a report summing up its view of the relative environmental impacts of the two oilsands production systems as follows. In situ oil sands production generates more greenhouse gases and sulphur dioxide emissions per barrel. Oil sands mining affects habitat more from land clearing, generates more nitrogen oxides and uses more water during production.

This report follows Pembina’s release in March of a “report card” on nine non-mining plants in the oilsands. In that report Pembina observed that in situ plants are responsible for greater air pollution than mining plants. “When the land disturbance and fragmentation effects associated with natural gas production are considered,” the authors added, “the influence on wildlife habitat of in situ operations can reach (environmental impact) levels that are equal to and sometimes greater than mining.” According to Simon Dyer, the institute’s oilsands program director, “both mining and in situ oil sands development produce significant cumulative environmental impacts and those remain unaddressed.”

Plain Facts
It’s easy to find yourself flinching at the organization’s messianic sense of its own rightness. However, the Pembina Institute plays an important gadfly role within the oilsands industry. As an advocate for better environmental performance, it brings public and governmental pressure to bear on the industry.

Pembina does confirm its raw data with producers before conducting its analysis and releasing its publications, and that is to the ENGO’s credit. However, the organization then invariably puts its collective boots to the necks of lesser environmental performers – or, when justified, damns exceptional performers with faint praise. In one presentation on its website, Pembina labels statements from the Alberta government and the industry as “Spin” but describes its own biases as “Plain Facts.” Perhaps a reality check is in order. To use just one example from the table above, in situ projects mostly use non-potable groundwater, 90% of which they recycle, and then re-inject that water into underground formations. In the interest of spin, Pembina forgets to mention this plain fact.

The good news about the ERCB’s expansion of the surface mineable area in the Athabasca sands is that it describes a huge volume of petroleum that can be developed safely and, as technology and production practices improve, in more environmentally sustainable ways. Especially if your biggest concern is air pollution, oilsands mines are the way to go. Where to go is a plain fact of the ERCB report.

According to the highly-respected Canadian Energy Research Institute, combining carbon capture and storage or using nuclear energy as a component of production could create oilsands plants producing fewer greenhouse gas emissions per barrel than conventional crude oil. In the study noted earlier, CERI describes an astonishing scenario. “The oil sands could pave the way as a bold new energy system,” CERI argues, “producing hydrocarbons to power our economy with almost zero GHG emissions being released into the atmosphere.” Looking forty years into the future, the institute suggests that “by 2050 the reduction from CCS coupled with nuclear energy would enable the oil sands to produce at 2030 rates with zero emissions being released, creating the cleanest sources of produced crude oil on the planet.”

The irony, of course, is that in this case the real visionary is a research institute with ties to the University of Calgary and funded by industry and government. Like the Pembina Institute, most ENGOs are just gadflies. They have a role in the ecosystem, but revolutionary change is taking place without them.

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The Next Step

An image from Qingcheng mountain, near Chengdu, in Western China

One of the most under-appreciated alternatives to crude oil is biofuel from lowly algae. Algal oil is more than a good alternative. It’s good business.

By David DuByne
Media organizations continue to feed us down-turning economic news. That’s fine for now, but why isn’t anyone talking about the problems we will encounter as the global economy starts to strengthen and recover?

Economists and energy traders are increasingly coming to the same conclusion: When the economy begins to get back on its feet again, there will be an immediate ceiling of resistance due to high energy prices which will once again crash the markets. This recurring cycle will continue until world population begins to decline, the economy permanently contracts to keep step with falling oil supply, or we develop energy alternatives and environmental solutions. Of these choices, developing alternatives is better than standing in a soup line during a prolonged worldwide depression and fighting wars for the world’s remaining energy reserves.

Biofuels
We need substitutes for liquid fossil fuel and it looks as if the current options will have to be combined as a multi-solution approach with each part contributing to the whole. Biofuels are part of the solution.

We have all witnessed dramatic food price increases as our world first produced biofuel using corn, sugar cane, sorghum, canola and palm oil instead of putting that on our plates. Plus, many of these crops could only be harvested twice or three times a year. This led most governments to quickly realize that non-edible feedstock crops were needed on non-arable lands. Second-generation biofuels included jatropha, castor beans and Chinese tallow. Those products have important limitations: multi-year long “seed to harvest” growth times, high transportation costs and the need for additional seed treatment to get refined product.

Problem is, by next year when there are 80 million more mouths to feed on our planet, the availability of farm grown biofuel will diminish even further. The market for fuel is growing with our growing population. But so is the demand for food.

Now we have entered the third generation of biofuel. Algae bio-crude is stepping out in front as a real contender to make a difference as energy demand continues to increase. According to one authority, “In the beginning, there were algae, but there was no oil. Then, from algae came oil. Now, the algae are still there, but oil is fast depleting. In the future, there will be no oil, but there will still be algae.” We argue that common sense dictates that algae biodiesel will become one of the most important biofuels.

Profitability
Alternative methods are great in theory, but in our world “profit is king”. Projects must show a return so investors will seed the investment. Until the solution itself is profitable there will be no change-over. In this area, algae have important advantages. It has multiple product revenue streams from the bio-crude and associated by-products, and it qualifies for carbon tax credits.

As worldwide energy reserves dwindle, the Chinese government has had a serious wake up call and is now aggressively pursuing renewable energy projects including algae biodiesel. Newspapers around the country carry stories of how China is moving down the green path of development. If it’s true, China’s move in a new direction toward algae-derived liquid fuel may leave the west far behind in the number of installed hectares. Since the world’s manufacturing is done in China all they have to do is manufacture and install, the infrastructure is already there.

China can ramp up production on a scale to convert our existing liquid energy production within the next three to five years. It has the resources and motivation. Additionally, since many pollution and environmental problems exist in Asia, solutions could emerge from countries like China to tackle both issues in the energy production chain.

When we look back in history, production follows the same model. First a product is introduced but it is extremely expensive and there is no centralized manufacturing of that product. As more companies start to come out with the same product, than larger scale production begins and the price drops slightly. In the last stage many businesses are manufacturing in a centralized location with prices driven down to the lowest levels that make it affordable for the average person or family. The DVD player is a perfect example. It cost $1500 in the 1980s; now you can buy one for $50.

Algae growing equipment is still in the beginning stage where machinery is expensive and not readily available for the average person or family. DAO Energy intends to change that. I am one of the principals in this company.

Global Solutions
DAO Energy, LLC is an algae bio-diesel company registered in Texas. However, our staff live in Chengdu, in Western China. Our market research has led us to the opinion along with most others in the algae industry that manufacturing cost for photo bio-reactors and grow-out units is the major stumbling block on the way to viable mass production globally.

Our solution is to help algae bio-diesel companies worldwide to inexpensively source, manufacture and commercialize growing systems. This will provide a cheaper alternative for algal production in every country. We seek to cooperate and partner with international companies that wish to reduce material costs by manufacturing in China. These algae growth systems can then be maintained domestically in any country to create local jobs and support energy independence. Additionally, we will produce high quality, inexpensive “off-the-shelf” photo bio-reactors for schools, universities, and private individuals. I personally hope schools will use these as educational tools for students to see where we are heading with renewable energy and solutions that already exist. We are not out to reinvent the wheel, we want to offer basic photo bio-reactors. We want to seed the concept of “algae growth for everyone” at the individual level into the mind of the populace, because if we are going to convert systems for energy production it will take an effort from everyone, individually, not just at the corporate and governmental levels.

Dao Energy is in the process of designing, modeling and building algae bio-fuel prototype equipment with the purpose of lowering material costs and advising on materials sourcing and logistics in China. Local extrusion and injection molding factories already have everything we need right now for production of our “off-the-shelf photo bio-reactor”. There is a tremendous amount of overproduction and idle factories that are looking for different higher value chain products to manufacture. This is the consequence of the economic recession in China.

Our near-term plans are to build a grow-out photo bio-reactor next to an ammonia plant, sequester their excess CO2 and then harvest and process algae on site at the plant. In the future when algae production does evolve into a global industry this model of local production, local usage can be mimicked everywhere. Eventually, installation of mass grow-out units will increase and as with everything else over time the single dots will connect into a massive web that should cover the planet and provide some assistance as a liquid fuel replacement.

The Sichuan Trump Card
We have been courted by local business owners that have connections to Sichuan government officials who want us to conduct our project in Sichuan province. The reasons include earthquake reconstruction, job creation, environmental cleanup, carbon sequestration and energy production all in one program. Not surprisingly with mandatory CO2 emission compliance just around the corner, carbon credits have been one of the main subjects talked about in our discussions along with oil production.

Sichuan province remained one of the only electrical generation carbon neutral provinces in China as of 2008. In fact, provincial authorities sold all of 2008’s hydroelectric carbon credits to Saudi Arabia in early 2009. As we have been told, the current Chinese time line is three years before emissions controls take effect on a compulsory level and all carbon credit trading or sales go through China Construction Bank (CCB) in Sichuan. There has also been quite a bit of talk about a “Carbon Credit Trading Floor” being started in Sichuan to cover the western part of China. These are the reasons we have chosen Chengdu.

It’s all about Cost
Consider for a moment that we would be squandering our remaining energy reserves and commodities by building new facilities in every country to produce algae growing equipment while existing factories in Asia are unused. If we choose to go down that path it will be one of the greatest wastes of commodities, energy and investment in human history. During the last 15 years investment poured into Asia for this very purpose; centralizing world production of consumer goods. We should use that investment wisely in a way that benefits every nation.

I need to reiterate to everyone that although our system is manufactured in China for a lower cost, the installation, upkeep and repair of the grow-out and bio-reactors units will be done in each individual country along with growing, harvesting, de-watering and pressing of the algae. Refinement of the oil and processing of algae press cake by-products will be handled by companies in the local community. Local and interstate truck drivers will be driving on fuels produced as a supplement to existing nationwide supply chains. This idea of locality can be replicated everywhere.

At the end of the day, whoever manufactures the most affordable equipment will have the ability to produce oil at a lower cost than anyone else. Manufacturing algae bio-fuel equipment in China utilizing existing infrastructure should ultimately lower the cost of machinery, which in turn will lead us to our main objective; the production of inexpensive crude oil and local job creation in every country.

You can contact Dave Dubyne through his website.

The Next Step

An image from Qingcheng mountain, near Chengdu, in Western China

One of the most under-appreciated alternatives to crude oil is biofuel from lowly algae. According to a frequent contributor to this blog, who is developing production in China, algal oil is more than a good alternative. It’s good business.

By David DuByne
Media organizations continue to feed us down-turning economic news. That’s fine for now, but why isn’t anyone talking about the problems we will encounter as the global economy starts to strengthen and recover?

Economists and energy traders are increasingly coming to the same conclusion: When the economy begins to get back on its feet again, there will be an immediate ceiling of resistance due to high energy prices which will once again crash the markets. This recurring cycle will continue until world population begins to decline, the economy permanently contracts to keep step with falling oil supply, or we develop energy alternatives and environmental solutions. Of these choices, developing alternatives is better than standing in a soup line during a prolonged worldwide depression and fighting wars for the world’s remaining energy reserves.

Biofuels
We need substitutes for liquid fossil fuel and it looks as if the current options will have to be combined as a multi-solution approach with each part contributing to the whole. Biofuels are part of the solution.

We have all witnessed dramatic food price increases as our world first produced biofuel using corn, sugar cane, sorghum, canola and palm oil instead of putting that on our plates. Plus, many of these crops could only be harvested twice or three times a year. This led most governments to quickly realize that non-edible feedstock crops were needed on non-arable lands. Second-generation biofuels included jatropha, castor beans and Chinese tallow. Those products have important limitations: multi-year long “seed to harvest” growth times, high transportation costs and the need for additional seed treatment to get refined product.

Problem is, by next year when there are 80 million more mouths to feed on our planet, the availability of farm grown biofuel will diminish even further. The market for fuel is growing with our growing population. But so is the demand for food.

Now we have entered the third generation of biofuel. Algae bio-crude is stepping out in front as a real contender to make a difference as energy demand continues to increase. According to one authority, “In the beginning, there were algae, but there was no oil. Then, from algae came oil. Now, the algae are still there, but oil is fast depleting. In the future, there will be no oil, but there will still be algae.” We argue that common sense dictates that algae biodiesel will become one of the most important biofuels.

Profitability
Alternative methods are great in theory, but in our world “profit is king”. Projects must show a return so investors will seed the investment. Until the solution itself is profitable there will be no change-over. In this area, algae have important advantages. It has multiple product revenue streams from the bio-crude and associated by-products, and it qualifies for carbon tax credits.

As worldwide energy reserves dwindle, the Chinese government has had a serious wake up call and is now aggressively pursuing renewable energy projects including algae biodiesel. Newspapers around the country carry stories of how China is moving down the green path of development. If it’s true, China’s move in a new direction toward algae-derived liquid fuel may leave the west far behind in the number of installed hectares. Since the world’s manufacturing is done in China all they have to do is manufacture and install, the infrastructure is already there.

China can ramp up production on a scale to convert our existing liquid energy production within the next three to five years. It has the resources and motivation. Additionally, since many pollution and environmental problems exist in Asia, solutions could emerge from countries like China to tackle both issues in the energy production chain.

When we look back in history, production follows the same model. First a product is introduced but it is extremely expensive and there is no centralized manufacturing of that product. As more companies start to come out with the same product, than larger scale production begins and the price drops slightly. In the last stage many businesses are manufacturing in a centralized location with prices driven down to the lowest levels that make it affordable for the average person or family. The DVD player is a perfect example. It cost $1500 in the 1980s; now you can buy one for $50.

Algae growing equipment is still in the beginning stage where machinery is expensive and not readily available for the average person or family. DAO Energy intends to change that. I am one of the principals in this company.

Global Solutions
DAO Energy, LLC is an algae bio-diesel company registered in Texas. However, our staff live in Chengdu, in Western China. Our market research has led us to the opinion along with most others in the algae industry that manufacturing cost for photo bio-reactors and grow-out units is the major stumbling block on the way to viable mass production globally.

Our solution is to help algae bio-diesel companies worldwide to inexpensively source, manufacture and commercialize growing systems. This will provide a cheaper alternative for algal production in every country. We seek to cooperate and partner with international companies that wish to reduce material costs by manufacturing in China. These algae growth systems can then be maintained domestically in any country to create local jobs and support energy independence. Additionally, we will produce high quality, inexpensive “off-the-shelf” photo bio-reactors for schools, universities, and private individuals. I personally hope schools will use these as educational tools for students to see where we are heading with renewable energy and solutions that already exist. We are not out to reinvent the wheel, we want to offer basic photo bio-reactors. We want to seed the concept of “algae growth for everyone” at the individual level into the mind of the populace, because if we are going to convert systems for energy production it will take an effort from everyone, individually, not just at the corporate and governmental levels.

Dao Energy is in the process of designing, modeling and building algae bio-fuel prototype equipment with the purpose of lowering material costs and advising on materials sourcing and logistics in China. Local extrusion and injection molding factories already have everything we need right now for production of our “off-the-shelf photo bio-reactor”. There is a tremendous amount of overproduction and idle factories that are looking for different higher value chain products to manufacture. This is the consequence of the economic recession in China.

A close-up of Dao Energy's reactor

Our near-term plans are to build a grow-out photo bio-reactor next to an ammonia plant, sequester their excess CO2 and then harvest and process algae on site at the plant. In the future when algae production does evolve into a global industry this model of local production, local usage can be mimicked everywhere. Eventually, installation of mass grow-out units will increase and as with everything else over time the single dots will connect into a massive web that should cover the planet and provide some assistance as a liquid fuel replacement.

The Sichuan Trump Card
We have been courted by local business owners that have connections to Sichuan government officials who want us to conduct our project in Sichuan province. The reasons include earthquake reconstruction, job creation, environmental cleanup, carbon sequestration and energy production all in one program. Not surprisingly with mandatory CO2 emission compliance just around the corner, carbon credits have been one of the main subjects talked about in our discussions along with oil production.

Sichuan province remained one of the only electrical generation carbon neutral provinces in China as of 2008. In fact, provincial authorities sold all of 2008’s hydroelectric carbon credits to Saudi Arabia in early 2009. As we have been told, the current Chinese time line is three years before emissions controls take effect on a compulsory level and all carbon credit trading or sales go through China Construction Bank (CCB) in Sichuan. There has also been quite a bit of talk about a “Carbon Credit Trading Floor” being started in Sichuan to cover the western part of China. These are the reasons we have chosen Chengdu.

It’s all about Cost
Consider for a moment that we would be squandering our remaining energy reserves and commodities by building new facilities in every country to produce algae growing equipment while existing factories in Asia are unused. If we choose to go down that path it will be one of the greatest wastes of commodities, energy and investment in human history. During the last 15 years investment poured into Asia for this very purpose; centralizing world production of consumer goods. We should use that investment wisely in a way that benefits every nation.

I need to reiterate to everyone that although our system is manufactured in China for a lower cost, the installation, upkeep and repair of the grow-out and bio-reactors units will be done in each individual country along with growing, harvesting, de-watering and pressing of the algae. Refinement of the oil and processing of algae press cake by-products will be handled by companies in the local community. Local and interstate truck drivers will be driving on fuels produced as a supplement to existing nationwide supply chains. This idea of locality can be replicated everywhere.

At the end of the day, whoever manufactures the most affordable equipment will have the ability to produce oil at a lower cost than anyone else. Manufacturing algae bio-fuel equipment in China utilizing existing infrastructure should ultimately lower the cost of machinery, which in turn will lead us to our main objective; the production of inexpensive crude oil and local job creation in every country.

You can contact Dave Dubyne through his website.

Contractor Survival

The infrastructure business shifts as the economy reels

This article appears in the March 2009 issue of Oilsands Review; photo from here.

By Peter McKenzie-Brown

Infrastructure reflects the times in which it is created. In Alberta, a literally off-the-wall example can be found in the control panels at the Turner Valley Gas Plant – a mothballed facility now being prepared for restoration as a historic site. Made in Germany during the 1930s, its control panels sport swastikas welded into the steel – a reflection of the political turmoil of the day.

The network of firms that create and maintain roads and industrial facilities make up the infrastructure business. Combined, they represent a huge segment of the modern economy. In Alberta in recent years, this business has been increasingly dominated by efforts to develop oilsands infrastructure, but since the beginning of the global financial crisis that has changed.

Infrastructure firms with contracts to design, engineer and construct massive projects like Petro-Canada’s postponed Fort Hills project have led to layoffs in professions where, a year ago, the demand was almost desperate. However, these cases have not yet been large. Indeed, many companies sense a need to rebalance the sector. Once that’s done, they say, demand for new and revitalized infrastructure will remain strong. Indeed, there is even a sense among some firms that both the province and the oilsands industry itself can benefit from the breathing room the slowdown is providing. Perhaps the irrational exuberance of the last few years really needed a pause for serious contemplation.

Spider webs and feeding chains: The infrastructure business consists of a spider web of design, engineering, manufacturing and contracting firms working with owners to build and install roads, pipes, wires, vessels and related technology. And in recent decades, the business has changed in dramatic ways. For example, said Bernie McAffrey, “It used to be that electrical and instrumentation was maybe 10 percent of the cost of a compressor station, say. Today that part of the equation I would guess is over 23 percent. A typical project now needs more than twice as much automation technology as it did a couple of decades ago.”

McAffrey founded Ber-Mac Electrical and Instrumentation in 1981. As last year wound down, a largely unnoticed item in the news – the acquisition of Calgary-based Ber-Mac by Swiss multinational ABB – received regulatory approval to proceed. More than three times larger than ABB’s previous western Canadian operation (built up through a combination of organic growth and small acquisitions), the new entity is an especially big player in the oil patch. McAffrey is now a vice president of ABB Ber-Mac, which employs about 750 technical and field people in the three western provinces, including 715 in Alberta.

Even though the financial crisis became apparent while the acquisition was in the works, ABB did not pause in its efforts to acquire the Canadian firm. According to ABB Ber-Mac’s new vice president and general manager, Marcus Toffolo, “This acquisition was not for cost-cutting but for growth. Long term, we may take skills out of Alberta to the rest of the world but that’s not feasible just yet because of regional demand.” He added, “When we looked at this acquisition (we were impressed with Ber-Mac’s) basic business model of vendor neutrality, regional distribution, customer satisfaction. We don’t want to change that.”

In broad terms, the infrastructure business applies technical and scientific knowledge and uses resources to build systems that benefit the economy. It employs a feeding chain that begins with minnows – firms of just a few technical staff – but ranges up to large multinationals like Zurich-based ABB. That global giant has more than 100,000 employees and annual revenues in the tens of billions of dollars.

McAffrey, whose company has successfully risen from the bottom toward the top of the feeding chain, has seen huge changes in the entire business since he set up his firm. “The amount of installed technology in Alberta has grown by leaps and bounds. In the beginning there were only two oil sands plants. In terms of magnitude and sophistication (infrastructure in Alberta) has grown dramatically.” The good news for the business is that these huge amounts of installed infrastructure have to be maintained and continually upgraded. Nowhere is this truer than in the oilsands.

Colleaux Engineering vice president Al Striga sketches out the size of the challenges. “It’s very unusual to see so many huge facilities packed into such a small area as (the Fort MacMurray area). If you throw in the need for cold weather operation, you don’t see anything else like this anywhere in the world. You have to specify cold-weather compatible equipment, instrumentation and metallurgy. Enormous pieces of equipment have to move at temperatures ranging from -40 to +30, and everything has to be reliable. The challenges are huge.”

His company is one of the minnows at the bottom of the feeding chain, but has done some oilsands work. “Large firms get the project. We get involved as subcontractors to the big firms. We get awarded a module or component of a facility.” Like other firms, Colleaux Engineering has been hit by the postponement of oil sands projects. “Within 72 hours of the time Fort Hills went down, we got a call saying our part of the action was all over.”

Like everyone else interviewed for this article, the principals at Colleaux Engineering are optimistic about Alberta’s medium-term outlook. “We’re hearing everything from doom and gloom to an optimum environment,” said Striga’s sidekick and the company president, Steve Colleaux. “We aren’t too worried about the future. We’re in an interesting part of the market. We don’t need a lot of work to stay busy. A company with a thousand people needs 200 hours per person per month. That's a lot of hours.” His 20-year-old company only employs ten technical staff.

What’s hot, what’s not:Although many oilsands projects are disappearing into the black holes of indeterminate postponement, opportunities for the infrastructure business in Alberta still abound. The amount of effort needed for infrastructure maintenance is vast. Consequently, there will be a rebalancing of the infrastructure industry in the province, with the slack from project cancellations being shifted toward these other areas.

The construction of new oil sands projects is an area of disappearing opportunity, and the business is alive with reports of large-scale oil-sands related layoffs. Some projects are staying the course, however – notably Imperial Oil’s Kearl project.

According to a source who requested anonymity, “Kearl is going ahead like crazy…. Rather than scaling back their efforts, (the project team at Imperial) are doing the opposite. They are spending about $1.5 million dollars per day on more than 1,000 engineers to engineer the hell out of it right now while contract engineers are cheaper. (Because of parent ExxonMobil’s strong cash position), they have the option to be greedy when others are frightened and frightened when others are greedy. In a couple of years when the competition is just starting to re-examine their preliminary plans, they will be digging holes and welding steel based on contracts formed in a down market.”

Despite the cancellation or downsizing of some projects (notably two Enbridge proposals to take bitumen to US markets via Ontario and Quebec), transmission is still a solid area of growth. So is the creation of new infrastructure in areas where oilsands operations are strong.

Asked how the shifting sands of the bitumen business have affected his business, Mark Wrightson – president of Whaler Industrial Contracting – was direct and to the point. “We submitted a proposal (for a SAGD project) to Connacher Oil and Gas in the fall. Just prior to the contract being awarded, the project was shelved. When Petro-Canada postponed Fort Hills, half a dozen projects fell off our project board.” However, he said, “our primary focus is on transmission – pump stations primarily. Eighty percent of the work we are doing is in transmission infrastructure, and Enbridge, TCPL, Husky and others have projects to take away bitumen. There is such an infrastructure deficit in take-away capacity that we expect these projects to remain strong.” The downside, such as it is, is that “there will be a lot more competition for that kind of work.”

Similarly, built-up infrastructure needs to be maintained, and basic oilsands maintenance presents tremendous opportunities. According to Pinal Gandhi, a project manager with Whaler, “It’s not going to stop. Syncrude and Suncor have old plants. They have a tremendous need for maintenance. They will cut down on the expansion side, but they will continue to put a lot of money into maintenance.” His enthusiasm is infectious. “Until recently (Suncor’s) upgrader was operating at 150 percent of capacity. Pumps were worn out” and so was a lot of other equipment. The company “wanted production. They didn’t care about the cost. The downturn is an opportunity to slow down on production but put money into maintenance.”

He adds that “Fort MacMurray itself has a huge need for infrastructure. They need (highway) flyovers, all kinds of supporting facilities. Anyone who works outside of the city has to spend a minimum of three hours per day to commute to work.” Again, he believes that the slowdown in oilsands development provides the opportunity for the infrastructure business to work with the city and the province to upgrade roads and develop other infrastructure. Wrightson concurs: “It’s embarrassing how little has been invested in infrastructure at Fort MacMurray.”

A construction manager with the Trotter and Morton group of companies, Mike Dickson has the ironic motto that during construction “contractors are merely an inconvenience to someone else making money.” In today’s environment, he says, “long-term projects that are three to four years out are being cancelled. (That is why our company) sees opportunity and is more interested in the smaller projects involving the necessary infrastructure maintenance and not mega-expansion.”

In general, newer infrastructure employs fewer people than the systems it replaces. According to Colleaux Engineering’s Al Striga, it develops in a virtuous cycle. “The more automation you implement, the lower the cost becomes, and the more automation you want.”

An oilsands automation engineer with one of North America’s largest engineering firms (he requested anonymity) discussed the potential of recent breakthroughs. “Digital automation has been around forever and a day, but the fact remains that if you go to any plant anywhere in the world, you will find that 80 percent of the loops are on manual. So we are not doing our job correctly. Ideally, you should have a plant that operates on automatic 100 percent of the time. We’re missing the boat somewhere, and I just can’t put my finger on why. If we can put more loops on automatic, we can approach that Holy Grail.”

As beguiling as such a development sounds, it’s going to be a long time coming. As Steve Colleaux acknowledges, automation (one of his firm’s specialties) controls processes better than people. “In a perfect world, automation can do everything. However, in the real world things aren’t like that. The system may come up with an alarm that says ‘We have a malfunctioning pressure transmitter. We can’t see what’s happening in this vessel.’ You need operators around to deal with those real-life problems.”

There are other problems in the wind. According to Trotter and Morton’s Mike Dickson construction used to be founded on the “three-legged stool of owner, engineer and contractor.” That changed, he says, with the advent of engineering, construction and procurement (EPC) teams serving as project managers. “Contractors are now the labour, which really means the risk.”

He believes relationships between owners and contractors may become strained in the emerging marketplace. “The sustainable win/win contract philosophy we have been experiencing (which was based upon the owner’s need to woo contractors and the contractors’ need to see repeat or possibly evergreen contracts) has given way to the more win/lose style of heads-up construction.” This, he says, may result in a more litigious environment.

What will mark the infrastructure development of the next few years? Nothing like the swastika in the gas plant – that much is for sure. Perhaps the mark of infrastructure during the next few years will be welded instead on the bottom line. “In the boom,” said Whaler Industrial’s Mark Wrightson, “just-in-time construction didn’t work at all – in fact, it rarely works well at the best of times. You couldn’t get deliverables on time. Everything was delayed. But today you can get turbines and gensets (electrical generators combined with engines). They are now being manufactured for a smaller market. A lot has changed.”

For the infrastructure business, perhaps the real mark of this changed era will be slower-paced, lower-cost, more orderly development. Surely that isn’t all bad.