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Innovation Spells Boom for Canada

by Drew L. Wilson

Edmonton, Alberta — The attitude in Alberta Canada is reminiscent of the turn of the century gold rush in Alaska. An oil boom has caused the commotion and the only problem seems to be that it takes more than a pickaxe and shovel to seek ones fortune. It is estimated that the province has five times more oil than Saudi Arabia. Until recently it has been too expensive to harvest much of this oil because of the difficulty of extraction. The oil deposits lie in the Athabasca Oil Sands and traditional drilling techniques don't work. The oil has to be mined and processed to remove sand from a molasses like substance called bitumen.

Syncrude Sweet Blend is the name tagged to this oil and the boom is a result of new mining technology and help from the government. About 25 years ago the first oil sands plant was built in Fort McMurray, Alberta. Suncor built the mining facility too extract the oil from the sand and refine it into fuel. Early technology employed the use of large draglines and conveyor belts to transport the oily sand to the plant. Cost per barrel in those days was approximately $24 (Canadian).

Syncrude a second and larger operation came on the scene shortly after Suncor. This was a consortium of multi-national oil companies and it employed similar extraction and transportation techniques as Suncor. The processing of the oil was considered to expensive until new technology and the lowering of tax rates by the government made the mining more profitable. And profitable it is. Latest numbers show that in the year 2000, an average of 203,000 barrels a day were harvested and during the first quarter of 2001 the average had increased to 223,000 barrels each day.

This has been a tremendous opportunity for us

Ian Powell

The owners of Syncrude just approved a $4 billion expansion that will increase production by over 100,000 barrels a day and is the third in a four-stage expansion that will total $8 billion. The future expansion at Syncrude will allow production of 360,000 barrels of oil per day within the next two years.

Part of the mining technology that has made these plants more profitable is the use of mobile bucket hoes and trucks with load capacities of up to 360 tons. Extraction has become much more affordable. Today a barrel of oil costs approximately $11 (Canadian) to produce. The hopes are that as even better techniques and efficiencies are employed, this will be reduced to $9 (Canadian) per barrel.

Several years ago the Provincial Government and the oil companies operating the Oil Sands Plants started an initiative. A promise of lower royalties paid to the Provincial and Federal Governments brought a guarantee from the companies to invest huge sums of money to expand the mining and refining of other locations. Other oil companies also began to build plants, some still in the process, and some planned for the future. Some of the technologies for extraction have moved from a mining operation to extraction by steam injection.

By the time these plants are all completed we can expect production to be in the order of 2 million barrels per day. The total availability of oil could supply the world for 100 years at the current rate of consumption.

"It's an enormous economic and employment boost for the entire country," said Eric Newell, Syncrude Chairman and Chief Executive Officer. "With more than 360,000 barrels per day of production by 2005, we will be supplying over 20 per cent of Canada's crude oil needs. The expansion will generate public sector revenues into the billions of dollars over its lifespan, and this will help fund healthcare, education and other social needs of Canadians. The new technology being incorporated in the project will also deliver a large improvement in environmental performance; in 2005, Syncrude Sweet Blend will be a higher quality crude oil with cleaner burning properties that will be used to make more environmentally friendly fuels."

All of this production is good for the economy of Alberta and almost everyone is benefiting. Even at the laborer level, oil production pay rates of $30 (Canadian) an hour have spurred spending and reports in the media of the exchange rate gap with the U.S. growing smaller has caused an excitement throughout the Province.

"This has been a tremendous opportunity for us," said Ian Powell, part owner and operator of A.H. McElroy in Edmonton, a distributorship that sells McElroy fusion equipment. Like many of the smaller construction companies and equipment suppliers in the region, Powell's business has prospered from the explosion of construction in the area. "We have been able to offer Syncrude the collective benefits of having the best fusion equipment available, training and qualifying their people in the use of McElroy fusion equipment, and performing quality control tests of the fusion joints. It shows the owners that polyethylene works very well and that their employees are making leak free fusion joints."

One project that Powell has been a part of is the training of fusion operators for the installation of the expansive polyethylene fire protection system for the recent Syncrude expansion.

Another technology used in this cutting edge mining operation is a slurry reclaiming operation. Tailings ponds are being mined to extract oil from the sludge that rests on the bottom of the lakes. Barges suck the sludge off the bottom and send it back through the refinery. A polyethylene pipe is connected to the barge and is the only material available that has the flexibility to travel with the barge as it moves around the lake. The pipe is used to transport the silt back to the plant where it is reprocessed and the oil is extracted. This also helps in Syncrude's land reclamation process.

Another vital function of PE is in the dewatering role of the mining operation. Water that lies underground has to be siphoned out before the sand deposits can be removed and refined. PE has the flexibility to snake its way through to the bottom of these caverns to reach the pockets of water.

Polyethylene pipe continues to play a vital role in technologies that are environmentally safe and more efficient. Canada has tremendous untapped reserves of not only oil, but also natural gas. The boom in Alberta may be the spark that inspires even brighter technologies and larger investing that could make North America energy self-sufficient.

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Contact Information:
McElroy PR and Marketing Department
E-mail: marketing@mcelroy.com

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