Athabasca Oil Sands

The Athabasca Oil Sands are a large deposit of oil-rich bitumen (also known as petroleum asphalt) located in northern Alberta, Canada. These oil sands consist of a mixture of crude bitumen (a semi-solid form of crude oil), silica sand, clay minerals, and water. The Athabasca deposit is the largest of three oil sands deposits in Alberta, along with the Peace River and Cold Lake deposits. Together, these oil sand deposits cover about 141 000 km² of sparsely populated boreal forest and muskeg (peat bogs). The Alberta deposits are in turn a part of the vaster Western Canadian Sedimentary Basin, stretching from British Columbia to Manitoba, as well as parts of Montana and North Dakota.

Surface mining

The key characteristic of the Athabasca deposit is that it is the only one shallow enough to be suitable for surface mining. About 10% of the Athabasca oil sands are covered by less than 75 metres of overburden. The mineable area as defined by the Alberta government covers 37 contiguous townships 3400 square kilometres north of the city of Fort McMurray. The overburden consists of 1 to 3 metres of water-logged muskeg on top of 0 to 75 metres of clay and barren sand, while the underlying oil sands are typically 40 to 60 metres thick and sit on top of relatively flat limestone rock.

History

The Athabasca oil sands are named after the Athabasca River which cuts through the heart of the deposit, and traces of the heavy oil are readily observed on the river banks. Historically, the bitumen was used by the indigenous Cree and Dene Aboriginal peoples to waterproof their canoes. The oil deposits are located within the boundaries of Treaty 8, and several First Nations of the area are involved with the sands. The oil sands were first seen by Europeans in 1788.

As a result of the easy accessibility, the world's first oil sands mine was started by Great Canadian Oil Sands (now Suncor) back in 1967. The Syncrude mine (the biggest mine in the world) followed in 1978, and the Albian Sands mine (operated by Shell Canada) in 2003. All three of these mines are associated with bitumen upgraders that convert the unusable bitumen into synthetic crude oil for shipment to refineries in Canada and the United States, though in Albian's case, the upgrader is not co-located with the mine, but at Scotford, 439 km south.

The Athabasca oil sands are primarily located in and around the city of Fort McMurray which was still, in the late 1950s, primarily a wilderness outpost of a few hundred people whose main economic activities included fur trapping and salt mining. Since the energy crisis of the 1970s, Fort McMurray has been transformed into a boomtown of 80,000 people struggling to provide services and housing for migrant workers, many of them from Eastern Canada, especially Newfoundland.

Estimated reserves

Alberta Government calculates that about 28 billion cubic metres (174 billion barrels) of crude bitumen are economically recoverable from the three Alberta oil sands areas at current prices using current technology. This is equivalent to about 10% of the estimated 1,700 and 2,500 billion barrels of bitumen in place. Alberta estimates that the Athabasca deposits alone contain 5.6 billion cubic metres (35 billion barrels) of surface mineable bitumen and 15.6 billion cubic metres (98 billion barrels) of bitumen recoverable by in-situ methods. These estimates of Canada's oil reserves caused some astonishment when they were first published but are now largely accepted by the international community. This volume places Canadian proven oil reserves second in the world behind those of Saudi Arabia.

The method of calculating economically recoverable reserves that produced these estimates was adopted because conventional methods of accounting for reserves gave increasingly meaningless numbers. They made it appear that Alberta was running out of oil at a time when rapid increases in oil sands production were more than offsetting declines in conventional oil, and in fact most of Alberta's oil production is now non-conventional oil. Conventional estimates of oil reserves are really calculations of the geological risk of drilling for oil, but in the oil sands there is very little geological risk because they outcrop on the surface and are extremely easy to find. One risk is economic risk of low oil prices and with the oil price increases of 2004-2006, this economic risk evaporated.

The Alberta estimates in some ways are extremely conservative, since they assume a recovery rate of around 20% of bitumen in place, whereas oil companies using the new steam assisted gravity drainage (SAGD) method of extracting bitumen report that they can recover over 60% with little effort. These much higher recovery rates probably mean that the ultimate production could be several times as high as the already very large government estimates.

At rate of production projected for 2015, the Athabasca oil sands reserves would last over 400 years. However, production cannot increase to those levels without a huge influx of workers into northern Alberta, which by 2006 was already occurring. This need created a severe labor shortage in Alberta, which by 2007 drove unemployment rates in Alberta and adjacent British Columbia to the lowest levels in history. Even as far away as Atlantic Canada, where workers were leaving to work in Alberta, unemployment rates fell to levels not seen for over 100 years.

Demand

Oil sands are inherently more expensive to exploit than crude oil, since separating the oil from the sand requires extra energy, and extra fresh water.

A consequence of this higher cost is that when the world price for oil drops too low then petroleum products from the oil sands costs more to produce than its price on the open market.

Attribution

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