IHS MarkIt study finds oil sands crude oil carbon-intensity will drop between 15% and 20%, but innovation could cause even bigger drop

Remember “dirty oil” and “carbon bomb”? According to a new study, those terms may soon no longer apply as oil sands producers aggressively lower the carbon-intensity of their heavy crudes, in many cases below that of lighter grades of oil. But the most interesting part of the study is what was left out: the impact of transformational technologies and new Alberta policies.

Kevin Birn, director of Oil Sands Dialogue for IHS MarkIt and author of the study, told Energi News that over the last eight years oil sands greenhouse gas emissions fell 21 per cent, mostly due to improvements on the mining side of the industry. That trend will flip from now until 2030, when steam-assisted gravity drainage (SAGD) improvements are expected to generate most of the 15 to 20 per cent reduction for the sector as a whole.

Kevin Birn, IHS MarkIt.

“SAGD is still a relatively new process and has yet to undergo any of the transformational changes that occurred in mining,” Birn said.

“The majority of emissions intensity reductions to date have come from incremental improvements and learning by doing. However, the analysis here shows that even a modest set of advancing individual improvements working together could result in more dramatic reductions.”

Emissions are high for the oil sands because natural gas is burned to create steam, which is used to thin the peanut-butter like bitumen to make it flow. Producers are focused on improvements to their processes and new technologies to reduce gas consumption.

One of the most promising approaches is to substitute light hydrocarbons like butane  (which dissolves the bitumen) for steam.

A 2017 study by the Canadian Energy Research Institute found that SAGD emissions could drop between 34 per cent and 40 per cent with solvent substitution.

Cenvous has been testing solvents for years and has found that some are more effective than others.

“We tested butane, we were only seeing a 30% to 40% improvement in steam-oil ratios. It’s early on days on our tests with propane, but I’m seeing up to 90% improvement when I’m putting in 80% solvent,” Harbir Chinna, the company’s VP of technology, said in an interview. 

“Time will tell, that test is still in its early stages, but I think the future is definitely going to be solvent.”

Birn says the the most surprising finding of the study was the range of emissions between facilities. GHG intensity in 2017 ranged from 39 kilograms of carbon dioxide equivalent (CO2e) per barrel (1% below the carbon-intensity of the average US crude) to 127 kgCO2e per barrel (16% above the carbon-intensity of the average US crude).

When we looked at prior studies, we always looked at averages and we considered outliers, but we never fully chased that down like we did with this study,” said Birn.

Focusing on bitumen deposits with the lowest carbon-intensity is one of the most important choices producers can make to lower emissions, according to Birn, who thinks new policies provide some confidence that the industry won’t go into lower-quality regions of the oil sands.

“Going forward, given there’s a penalty on carbon emissions, (Alberta government’s Carbon Competitiveness Incentives Regulation) we are going to only be developing the best reservoirs, which is the right thing to do because the oil sands is a trillion-barrel oil field and you shouldn’t be developing it all simultaneously,” says Chinna, adding that this approach will make Cenovus more efficient.

There’s a lot that can be done with efficiency, says Birn: “The data shows that the industry has become more efficient over time, it’s a big factor affecting historical performance. What we found was that it’s a modest set of individual improvements across the board that drive material results.”

Birn says his study ignored the effect new technologies not already in commercial use – as well as new provincial and federal policies – will play in GHG emissions.

“We think our outlook is conservative because we did not allow the full potential of technology. Deployment is not universal, it’s usually lumpy, takes time, and is complicated. It’s hard to say exactly how these things will unfold,” he said.

Canada’s largest oil sands producer recently unveiled a final demonstration project for what it hopes will be game-changing technology for oil sands mining.

The In-Pit Extraction Process (IPEP) is located at the mine face and can be moved as extraction advances. The company estimates IPEP will shave $2/b off existing $20 operating costs, eliminate the need for new tailings ponds, and lower emissions by as much as 40 per cent.

“This is absolutely a game-changer on all fronts – environmental, cost, competitiveness, productivity. All of those points get hit by this technology,” VP of Technology Joy Romero told Energi News, noting that IPEP will be licensed by COSIA (Canadian Oil Sands Innovation Alliance) for use by other oil sands miners.

Dinara Millington, CERI VP of research, says that the goal for all oil sands producers is to lower the carbon-intensity of their crude oil to at least that of the US average crude. The US crudes below that benchmark tend to be light sweet crude from American shale basins like the Eagle Ford in Texas.

That objective seems to be within reach. Progress made to date is impressive, but appears likely to be dwarfed by the combination of new technologies and new policies arriving in a year or two.

The day may be within sight when oil sands heavy crude is just another oil and not “dirty.”