Canada's Tar Sands Are the Future of Oil Production: Oil Exec.
MONTREAL - The era of oil gushing from ground wells is over and can only be replaced by costly and complex refining of deposits such as Canada's oil sands to satisfy rising global energy needs, said a senior oil executive.
Pressed about the high cost of oil sands extraction and attacks by environmentalists worried about its contribution to global warming, Jean-Michel Gires, president of French-based Total's Canadian subsidiary, told AFP he is optimistic specifically about the future of Canada's oil sands development.
"These are ambitious projects, very big projects, and thus very expensive," he said in a telephone interview from Calgary, Alberta -- Canada's oil capital.
"It's clear that cost is a problem," he conceded. "But it's also an important deposit -- several billion barrels of oil in the ground -- while more conventional sources of oil that would be relatively easier to extract are either drying up or are inaccessible to international firms such as Total."
"The price of energy is not going to collapse," despite downward pressure from a spiralling global economy, Gires predicts.
"To justify our massive investments in the oil sands, we're looking at what the world will look like in 2020, 2025 or 2030," he said.
"In the long run, despite all of the efforts to boost energy efficiency and develop alternative energy sources, the planet's appetite for energy ... will mean additional oil production will be welcomed and we'll find buyers for our output."
It is this long-term outlook that preoccupies Total Canada, as it develops its Joslyn mine in Western Canada's Athabasca Valley, hoping to start producing its first 100,000 barrels of oil per day by 2017-2018.
Its Northern Lights project to the north, however, "will not be ready to start producing until after 2020," Gires noted.
Total has also partnered with Conoco Phillips on the Surmont mine using a new technology to extract oil from the bitumen by injecting steam into the ground to heat the oil and reduce its viscosity, causing it to drain into a drilled well from which it is pumped out.
It is called steam assisted gravity drainage, and requires a much smaller initial investment than mining the oil sands and carting it away in huge trucks to processing facilities.
Such mines must produce at least 100,000 barrels of oil per day to be profitable as start-up costs are enormous, rising up to 10 billion Canadian dollars (9.5 billion US).
But the SAGD method can be applied for less than 30,000 barrels of oil per day and requires a mere two billion dollars (1.9 billion US) to set up.
For now, the Surmont mine is producing only 20,000 barrels of oil per day, but Total hopes to boost it to 100,000 barrels per day by 2015.
"We must choose the best technology for all of these projects. We need to be mindful of the environment, CO2 emissions, water, rehabilitation of sites afterwards, and make it work within our budget," Gires said.
"There are federal and provincial regulations that we must follow," he noted. "All of that causes a certain delay in getting projects off the ground."
The company is also constructing an oil "upgrader" on the outskirts of Edmonton, the capital of Alberta province.
And a vast source of energy to make it all work in Canada's desolate prairies is still required. Some had proposed building a nuclear plant, but Gires dismissed this for "technical and economic reasons."
More likely, he said, the industry would continue tapping into the province's abundant and cheap natural gas to fuel oil sands development.