The Status of Canadian Oil Production

This is a guest post by Roger Blanchard, Assistant Professor of Chemistry, Lake Superior State University, Sault Ste. Marie, MI, and the author of “The Future of Global Oil Production”, McFarland & Company, 2005.

A recent article concerning the upcoming impact of Mexico’s declining oil production, “With Mexico Poised to Deliver World's Greatest Oil Shock Since 1970s, U.S. Seeks Canada's Help” stated the following:

"U.S. industry and government officials have been talking with Canada about a sharp increase in production from the Alberta oil sands region since at least early 2006, according to Canadian press reports. In response, Canadian oil output, nearly all of it from Alberta's oil sands, is forecast to be up 9% this year." (Actually only about half of Canada’s oil production comes from oil sands)

Often, when articles are written about oil supply issues, it appears that the author hadn't actually looked carefully at the data he or she is writing about.

If one actually looks at Canadian oil production data, one could attribute about half of Canada's increase this year, through May(preliminary data), to Atlantic Canada. Through May, Atlantic Canada's production increase was 81,055 b/d (From the Canada-Newfoundland and Labrador Offshore Petroleum Board) while that of Canada's oil production (crude + condensate) was up 165,000 b/d (U.S. DOE/EIA). The U.S. DOE/EIA frequently revises their preliminary numbers so it wouldn’t be surprising if they revise their number for Canada, quite possibly downward.

The increase in Atlantic Canada’s oil production this year has been due to a significant increase in White Rose field production (~60,000 b/d through May) and an increase due to the Terra Nova field being out of commission for much of last year with production turning down starting in April and a complete shutdown during June-October.

In the case of Atlantic Canada, I would be shocked if oil production didn't peak this year. The White Rose field is producing at a much higher rate than the projected peak. Hibernia's production has dropped steadily from ~204,000 b/d in 2004 to ~133,000 b/d this year (through May). Because Terra Nova was out of commission for much of last year, the field is producing at a much higher rate than it would have if it hadn't been down last year. I'm expecting Terra Nova and White Rose fields to experience production declines next year while Hibernia continues
to decline.

What that means for Canadian oil production is that any increase in oil sands production in coming years will be partially or completely negated by declining Atlantic Canada production, as well as declining conventional production in most of the rest of Canada. It will be harder to repeat the production increase of this year in the years ahead.

Professor Goose,

There's a huge difference in the amount of capital investment required.With the capital investment at $100,000 per barrel per day of level production, this resource costs at least 5 times as much as the most expensive conventional oil production My back of the envelope calculations have yeilded the result that its going to take about $13 Trillion just to get the tar sands to 5,000,000 barrels per day of production, and that's not counting the production costs of syncrude, which are currently about $40 to $50 per barrel.

I'm a landman, not an economist, engineer or accountant. I would welcome any refinement to my figures. But I think thats what we need to look at.

There are other monster problems that need to be addressed too. Water and gas shortages, the probability that the Canadian governments will increase their royalties and taxes, and the huge environmental disaster that is being made by just dumping the used water and mine tailings in slush pits.
Bob Ebersole

I understand a new method of producing Canadian tar sands is being tested - "Toe to Heel Air Injection". If it can be scaled up, the supporters believe it could bring costs and environmental damage down. I don't know aqbout speeding up production. Here a some links.

Its difficult not to be impressed by the audacity of some of these technologies. Yet I can't help but wonder how much of this is just hype to snare the investors. As near as I can tell from these links some professor in the UK got "80% recovery", whatever that means, in some lab test of the THAI process. Now the PPT presentations are saying they will get that in a field test in 2006. However I couldn't find any indication that such a test had been completed. My question is "80% of what?"

If the technologies work at all in the field, however, they will certainly mitigate any concerns that have been expressed about use of water and natural gas in Alberta.

I was told by the person who sent me the links that this is a one year test. According to him, the test is underway and going well. These are some more recent items:

Gail, the figures I've read say they are producing 6 bbls a day of water for each barrel of syncrude, so the volume of waste has to be at least twice that of the volume of syncrude produced, as the water is mainly used to make a slurry for transportation.

IMHO, 80% doesn't cut it. We stopped using open pits for disposal in Texas about 40 years ago, but not before the seepage trashed huge amounts of shallow sands and surface water. The tar in the tar sands is a coating on the grains of sand and clay, so the amount of waste starts with the volume of waste at least equal to the volume of sand that is processed. It sure would be nice if they handled an environmental disaster before it became the biggest environmental disaster on the North American Continent. The Exxon Valdez is insignificant compared to this.
Bob Ebersole

In the press release they stated a more than 50% oil cut from their first two well pairs, they injected very little water in the process.

Exactly rain song, from the reports gail posted very little water is needed in the new process AND they are getting a higher amount of oil and a higher grade out. Here here for technology.

Where's the beef?!

new process ? air injection, fireflood, insitu combustion, call it what you like (one guy i know called it farflood...... far = texan for fire). this has been tried since at least the 1950's.

some of the problems( as related to insitu combustion in an "oil" reservoir)

1) the combustion process tends to sweep only the upper portion of the oil zone.

2)much of the heat generated is wasted. everything is heated including the rock above and below the oil zone.

3) mobility. the combustion gases have a much lower viscosity than the "displaced" oil.

4) capital requirements although this is most likely a fraction of the capital requirments for tar pit mining.
but much greater than "conventional" oil production (of course the capital requirments for drilling for oil at the north pole are much greater than for "conventional" oil production also.
5) operational problems corrosion, scale deposition, polution, sand production, carbon and wax or tar deposits
hazardous gases (such as carbon dioxide, carbon monoxide and hydrogen sulphide) and tubing and casing failure due to excessive temperatures.

maybe these problems can be overcome but not in time to save us from peak oil. go ahead and park the suv.

Gail, I just bulled ahead inmy answer to you without looking at your links. You have my profound and sincere appology. I sometimes go off a little half-cocked, as i'm sure people on this website have noticed on occassion.

I'm not an expert on this type of recovery-in situ combustion-but I think it has a lot of promise. there are at least two serious questions that this type of production are going to have to answer, besides the cost;

What about the combustion products besides crude, CO2 and carbon monoxide? I know some of the CO2 is going to remain as a miscible solution, but surely some of its going to bubble off. And combustion yeilds othergases that will have to be captured and recycled or sequestered, carbon monoxide being one. Aren't there a bunch of poisonous metals in that stuff, things like arsenic and vandium? God, I wish I'd taken a course or two in chemistry instead of the short stories in Nathaniel Hawthorne in college.

Also, these processes are going to take a whole lot of hydrogen, commonly made from natural gas in chemical plants. How much methane is it going to take per barrel and where do the operators plan to get it?

I know the US Department of Energy did at least one study on in situ combustion of oil to produce some 17 or a
18 gravity oil at Saratoga in Hardin County, Texas on the supra-cap sands, but Mobil Producing of Texas and New Mexico shut it down as uneconomic in the early 1990's. Does anybody know where to find that study online?
Humbled, I remain your most obediant servant,
Bob Ebersole

They used a little natural gas and steam to get the thing started. They did have an energy draw in running the blowers non-stop, thus there were some operating costs not associated with steam injection. I remember gas is compressible, thus you need a pneumatic push to cause the oil to migrate towards the "toe". Forced air combustion has been done before with mixed results, many people abandoned it for steam and VAPEX type solutions.

I have talked to the person who sent me the links about doing a guest post. Maybe we will be able to ask some questions.

That sounds great, I'd be very interested. Frankly , this sounds a little too good to be true.

Where's the hydrogen coming from to decrease th gravity of the crude? How many cubic ft a barrel? How do you make tar unto syncrude that will flow during the cold season. How about some photos and some photos of competing process aolutions ? Can you quote any Keats or Blake so I know you are an estheticially aware person? You know, just the usual Oil Drum Grilling. (sarcanol alert)

Petrobank presented at the CAPP 19th Annual Oil and Gas Investment Symposium June 19 and June 20, 2007 with an update on the Whitsands THAI™ pilot and I recommend listening/viewing that presentation at . They present an in-depth report on the progress in commercializing THAI™. I've been monitoring the work at Whitesands for 2+ years and the pilot facility performance seems to be exceeding all expectations. The produced bitumin is exhibiting a 4 to 5+ degree API improvement over virgin bitumin. Sand production has been a problem and they are currently installing surface sand removal equipment to address this situation. I understand the next three pilot wells will incorporate CAPRI™ with the goal of producing a pipeline shipable product with no diluent. Petrobank recently awarded a grant to the University of Bath for additional downhole process optimization research on CAPRI™, the catalytic cracking enhancement to THAI™. The UofBath abstract can be viewed at . I understand Petrobank plans to submit an application to the EUB for the first 10,000BPD commercial production module before the end of this year with construction to be completed 12 months after permit approval. The permit approval should proceed since the facility uses essentially no NG after pre-ignition steaming, produces a quality industrial water, requires a minimum surface footprint and releases half the amount of CO2 compared to SAGD. I believe we will be hearing a lot more about THAI/CAPRI™ in the months and years ahead.

Seems a little like alchemy to me. I thought you had to add hydrogen to get the tar to the syncrude level-that the whole problem with bitumen is a lot more carbon than crude oils, so the gunk won't flow, like a chunk of unmelted roofing tar. Bob Ebersole


You are right that you need to change the chemistry of the butumen to make it flow. The option to adding hydrogen to the bitumen is to remove carbon from the bitumen. This is what happens in the Cokers at Syncrude and Suncor and what is happening in the Reservoir in the THAI process.

Hydrogen will be added to further refine the bitumen at a Refinery down the pipeline.

In the three pilot THAI™ wells currently in operation, the temperature and pressure are so high as to cause extensive thermal have, in effect, a down hole coker, in the mobile oil zone, which not only heats the oil, reducing the viscosity to water, but thermally cracks the asphaltenes which are not oxidized in the combustion zone. So, effectively, you are oxidizing part of the asphaltenes to provide the heat for the process and thermally cracking the remaining asphaltenes. Analysis of the exhaust gases confirms the presence of free hydrogen, a byproduct of the thermal cracking. By adding catalyst down hole, you can accomplish catalytic cracking. This ppt presentation at the Alberta Research Council on 10/12/05 presents the science and some of the original laboratory work.

The field full scale pilot tests are complete with three producing THAI™ wells on line (first well in operation for over a year). Work has begun on the three THAI/CAPRI™ wells. In essence, this process enables production of a syncrude with the upgrading taking place in the reservoir with no use of NG and water and half the greenhouse gas emissions. Capex is half of SAGD currently being permitted/constructed in the province and opex is also greatly reduced, not to mention bypassing the need for an upgrader. This technology is now onstream and in continuous operation at Christina Lake. This is a very exciting development for Alberta Province and Canada from both an energy independence and Kyoto compliance perspective.

Thanks Dave. Technology rocks!

Here's a recent article on the guys who are bringing this technology into production...

Athabasca is facing severe community infrastructure problems. There is no strategic plan to aleviate the problems.

Just a trailer is going for $425,000. Workers are "hot bunking" in resident's basements and parking on their lawns. The Alberta government is being asked to release land for housing but the government wants market rate. A catch-22 exists as a release of cheap housing would destroy the property value of people who bought dearly.

Most of the elderly original residents of Athabasca cashed in on the housing boom and moved to more pleasant and quiet surroundings.

Sometimes the fumes coming off the slurry ponds is so bad the schools have to shut down.

Labor remains a severe problem. Not just at the oil sands, but in town. Many stores shut down for several hours during the day because they can't get employees.

Most workers in Athabasca travel there for months at a time without their families. It is a very inhospitable place for women. My spouse only escaped overly aggressive amorous advances from oil workers because she was accompanied on her trip by several members of the RCMP, who chased themm off.

Athabasca is, for most people, a hardship post. During the summer there is only a couple of hours of darkness and the mosquitos have to land at the airport. During the winter there is only a few hours of daylight and touching metal with bare skin will "burn" you.

There are not enough schools, police, or firemen. There is a severe drug problem and the streets should be considered dangerous. It is truly a wild west "gold rush" town. Another Klondike.

John McFadden,
Do you live there? Bob Ebersole


Did you get a chance to talk to your wife about by rail upgrade Edmonton - Ft. McMurray concept ?


Alan eMail in profile

John, I wrote a whole treatise, a whole manifesto and it was erased by a malfunctioning internet connection. It's the man, I'll tell ya! However folks, I can support from third hand knowledge that what he is saying is true. It's been going on for quite some time. Here's some tidbits;

When I started with a national company trouble shooting and maintaining high level electrical systems in Canada's "Chemical Valley" (Sarnia) some 25 years ago , my reconstituted co-worker started in Ft. McMurray after Syncrude had a melt down of their hydrogen production facility. That is, he was recruited from England as an electrician and was tasked to rebuild the hydrogen house. As he put it to me, "We had every resource available. The corporate jet was parked and waiting. "If we needed conduit, the jet would fly down to Edmonton and get it." Conduit? How desperate is that? Is this a clue!

And then another engineer co-worker told me about spending a summer life guarding in Ft. Mac since he couldn't procure a position in the famed Waterloo co-op program. "A guy I was working with walked in on his wife doing guy on the rec room floor and just went to the fridge and took out his beer. 'You can have my wife, but don't touch my beer'." Well, that's about right for a Canuck I guess.

The larger point is the amount of activity and money going on there. We're talking figures of the billions and even trillions of dollars. We've all been around the block enough to know that kind of money never does any good. This is a true confession. Spending a certain amount of money in capital projects as an engineer is tough. That's right for all you recently graduated "gear heads". To spend money responsibly is not easy. I've had push back from a company CEO because our engineering department didn't spend all the money alloted, and I agreed. As a personal note, it was our department head that had a very perverted view about money and what was corporate and what was personal - enough said.

As Engineers, we stand as a profession in times of trouble and opportunity. I would hope that we find the larger cause of our profession to be more relevant than the monetary reward...

We are the Sons of Martha. Ask a Canadian engineer why they wear an iron ring on their working hand. It is a reminder of the obligation to public duty. Iron bridges have collapsed before Minneapolis, and it is for this we wear the ring. When we get it wrong, sometimes people die. And in the energy spectrum, there is plenty of strife to go around. So this is my challenge to all engineers around the world, do your duty. Many have done it and you are to be congratulated, but we must keep up the sense of higher purpose. Ethics tell us that our first duty is to the client, but that is false. Our first duty is to the public, and they may contain your family and friends. Our first duty is beyond ourselves and not the self serving interests.

Names are to be recognized for their courage in the face of professional repudiation. You are not lost. We will remember those names such as Simmons, Campbell, Heinberg, and I apologize for those I have failed to mention. Yes, Kuntsler, and Savinar get mention too, because acknowledgment of the truth is more important than one's point of view.

The IEA is showing a significant drop in Canada's production (~500 kbpd) from March to June:

However, it does not show (yet) on the EIA's and the NEB numbers:

A decrease of 500 kbpd, if confirmed, would wiped out the last two years of production increase from tar sands

IMHO the NEB lives in a drug induced dream world. Just look at their NG projections.

It would also wipe out the increase in net oil exports (total liquids).

In any case, over the 2000 to 2006 time frame, the increase in Canadian net exports only averaged about 60,000 bpd per year. To put this in perspective, Saudi Arabia's one year increase in domestic consumption from 2005 to 2006 was 114,000 bpd (all EIA numbers).

To date some tar sands production has been reduced due to infrastructure alterations. I know Suncor has had an upgrader down for a couple of months due the intricacies of the re-jiggering the new tie in. Net that has cost them between 50-100,000 bpd during that time (its still in process) Thier forecast is that their new ouput nums will be in the 300,000bpd range up from 225,000bpd. I think they will be good to go with the new capacity by October

Suncor shut down much of its production in June and part of July for a tie in. There was a fire at an Imperial refinery. There were problems at the Whiting refinery in June and they were unable to process Canadian oil.

EROEI doesn't seem like it will ever make it.

Huh? Oil sands already has a positve EROEI

Maybe he's counting the energy future generations will expend in repairing an Alberta that looks like a moonscape interspersed with abandoned McMansions battled over by gangs of redneck carpetbaggers. Living in Houston, I can tell you the mess from a boomtown can take decades to fix, and we haven't even touched the Superfund sites yet.

Thanks for this update. I should pay more attention to Canada.

Just posted a 'letter from the front' on Roundup...Airdale in the Kentucky heat. Then noticed a lot of old Lags here. Sooo..

Link to letter:

That Airedale is a fountain of misinformation. Bill Monroe was from Texas in the Big Thicket. I like his music, but don't try to graft himinto the state of Kentucy.
Bob Ebersole

Bob I posted last night about you and your comment here and it seems to have been removed. It was a bit raw and likely just as well it has been removed. I will restate it:

Monroe was born in Rosine, Kentucky. His father, James Buchanan Monroe, was a well-to-do farmer while his mother, Melissa Ann Van Diver,[1] was from lower down the social scale. Melissa and her brother, Pendleton "Pen" Vandiver, were both musically inclined, and Bill Monroe learned old-time music from his uncle who was an itinerant fiddler. Thirty years later, Monroe wrote a song ("Uncle Pen") in honor of him and the music.

On reading the above, I would expect that a decent human being would rush to pen a heartfelt apology to Airdale realizing the error of his position.

Or I guess I could repost my previous message? This time on the US TOD where it really belongs.