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Turning tar sands into oil

Thick as tar, loaded with sand, some of the world's future sources of oil are so heavy they can be more easily mined than pumped.

Huge, tarlike deposits in Canada and Venezuela will be critical over the next 50 years to the supply of liquid fuels as the world's production of easily pumped oil plummets. Yet, turning this nonconventional oil source into synthetic oil is not likely to be the solution to our energy crisis, as some claim. Canada is no Saudi Arabia.

Still, such synthetic oil, which also can be made from coal and natural gas, could provide a critical bridge to an era of new technologies, cleaner fuels and lower-energy lifestyles.

But it won't be easy.

Some energy analysts say we need to launch emergency programs to bring these nonconventional sources of oil to market before conventional oil peaks and then declines. When conventional production will peak is in dispute, but estimates generally range from as soon as this year to well into the 2030s.

How much the Alberta oil sands, as Canadians call their tar sands, can help in this transition is debatable, as industry estimates of economically recoverable oil reserves in Canada vary enormously.

Oil & Gas Journal estimates close to 180 billion barrels, second only to Saudi Arabia's approximately 260 billion, while BP Statistical Review of World Energy puts the figure at about 17 billion barrels, based on oil sands under active development. And the Canadian oil sands don't even turn up on the International Energy Agency's industry lists of the 10 countries with the largest proven oil reserves.

Even the higher industry estimate is only about a six-year world supply, as the planet now consumes close to 30 billion barrels of oil a year.

Eddy Isaacs, managing director of the Alberta Energy Research Institute, a provincial government agency, estimates that the oil sands and other nonconventional sources around the world will provide only 10 to 15 percent of the additional oil needed over the next 20 years.

"We need to go on many fronts," Isaacs said. "There is not one silver bullet out there that is going to do it all."

Tar sands production is now 1 million barrels a day and is projected to increase fivefold by 2030, still about half of Saudi Arabia's current output and less than 5 percent of world production in 2030.

Still, by 2030 the tar sands may meet 16 percent of North American demand, providing a secure and large source of oil for Canada and the United States, energy analysts say.

"The oil sands is well positioned to provide a sustainable bridge between nonrenewable fossil fuels and cleaner energy options for the future," says a report from the Alberta Chamber of Resources.

U.S. Secretary of Energy Samuel Bodman spoke recently of expanding refining capacity to handle heavier crude oil. President Bush offered to put refineries on military bases.

The tar sands are mostly mined, but they are pumped, too, after high-pressure steam is injected underground to separate the valuable oily bitumen from the sand, consuming huge amounts of water. Hydrogen is later added to turn it into a synthetic crude.

All this is energy intensive, as the equivalent of one barrel of oil is needed to process three barrels of synthetic crude. Production of conventional oil requires much less energy.

Developing the tar sands also raises serious environmental concerns. It takes two tons of mined sand to produce one barrel of synthetic crude, leaving lots of waste sand.

Because of the energy-intensive production, oil sands are large sources of greenhouse gas emissions, according to Isaacs from the Alberta Energy Research Institute. The need to reduce carbon dioxide emissions makes oil sand investments additionally risky,

This is an issue in Canada because it has signed the international Kyoto accords, pledging to reduce greenhouse gases.

"The tar sands are clearly the worst type of oil for the atmosphere," says Steven Hazell of the Sierra Club of Canada.

Venezuela's heavy-oil production has not kept pace with Canada's and is now about 500,000 barrels of synthetic crude a day, with plans to expand production by 1 million barrels a day by 2010 in the Orinoco tar belt.

And more nonconventional oil production is coming.

Production of liquid fuels from natural gas to make clean gasoline and diesel is expected to grow rapidly, perhaps to 2.4 million barrels a day worldwide by 2030, says the Paris-based International Energy Agency.

Among the leaders in this field is Royal Dutch/Shell Group, which built a gas-to-liquids plant in Malaysia and plans one 10 times larger in Qatar.

Liquid fuels are similarly being created from coal, most notably in South Africa. Shell is also helping Chinese coal companies produce the fuels.

The share of nonconventional production from biofuels, such as corn-based ethanol and biodiesel, is expected to remain small until 2030, the International Energy Agency says.

The agency also expects some growth from processing oil shale, a rock containing the oil precursor kerogen, which can be turned into synthetic oil.

Vast reserves are in the western United States, and Ohio has a lot of oil shale, too, says Larry Wickstrom of the Ohio Geological Survey.

Oil companies began trying in the 1970s to commercialize oil shale, but those efforts were largely abandoned by the 1980s as oil prices fell, concerns rose over environmental damage and technical problems persisted.

As it works on comprehensive energy legislation, Congress is looking for ways to spur development of oil shale and smaller U.S. tar sands deposits.

A recent Senate bill on oil shale highlights the growing importance of nonconventional production. The bill defines not only oil as a strategic hydrocarbon resource but also oil shale, tar sands and coal- and gas-derived liquids.

Whether nonconventional oil can provide a smoother passage to the future depends heavily on when world oil production starts its expected decline. The International Energy Agency forecasts production could peak between 2013 and 2037 and most likely about 2030. With the early scenario, nonconventional output would shoot to 37 million barrels a day by 2030, the agency says, as higher prices make more production practical.

This would be close to a third of all world oil production and would make up "for part of the sharp decline in conventional production," the agency says in its 2004 World Energy Outlook.

Using this projection, a study at Uppsala University in Sweden estimated that Canadian and Venezuelan heavy oil might supply 11 million barrels a day in additional nonconventional production.

But the Swedish study said questions remain about where else the nonconventional oil would come from. "Who will be the producers of the remaining 26 million barrels per day?" the study asks.

The energy agency does not specify what the sources would be for the additional substitute liquid fuels. But candidates would include other tar sand deposits, oil shales and coal.

Meanwhile, Robert Hirsch, a Department of Energy consultant, proposes launching crash programs to accelerate nonconventional oil output and taking other measures to try to delay peaking.

In a report commissioned by the federal agency, Hirsch and his co-authors argued that peaking could be mitigated through government-sponsored drives to improve fuel efficiency for motor vehicles, enhance recovery of oil in older fields and accelerate production of synthetic fuels from heavy oil and coal and gas liquids.

But the report warns: "We know of no comprehensive analysis of how fast the Canadian and Venezuelan heavy oil production might be accelerated in a world suddenly short of conventional oil."

Hirsch dismisses other energy options, saying that nuclear, wind and solar energy provide electricity, not liquid fuels, and that shale oil is not yet commercial, biofuels are not yet economical and hydrogen is neither ready nor economical.

"Prudent risk management dictates serious attention and massive action soon, which is difficult for most people and many decision-makers, who tend to wait until a problem is obvious before taking action," Hirsch wrote.

Plain Dealer news researcher Jo Ellen Corrigan contributed to this story.

To reach this Plain Dealer reporter:
tquinn@plaind.com, 216-999-4283

© 2005 The Plain Dealer
© 2005 cleveland.com All Rights Reserved.

Editorial Notes: This is the latest article in the Cleveland Plain Dealer's amazing series on Peak Oil, "Crude Awakening." The reader who submitted the article says: "Despite the title it is a well-rounded piece with some healthy skepticism on the prospect of tar sands to solve the problem of declining conventional oil..." Graphics for the article may be coming soon. Updated Aug 2, 2005: Graphics accompanying the tar sands story are available online. Updated Aug 24, 2005: The Cleveland Plain Dealer is doing an exemplary job of explaining energy issues to the public, and doing it with a local slant. (If there's one thing we know about a low-energy future, it's that it will be local.) Previous stories in their series "Crude Awakening" are available through the series archive. Many of these articles have been archived on Energy Bulletin. -BA

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