Web Exclusive: Development of oil sands in Alberta and beyond

SERGIO CAMPI, JOHN FAIRS and TISHA GREYLING, Golder Associates

Technical, economic and environmental issues have meant that much of the world’s oil sands reserves have stayed in the ground. Now, depletion of conventional oil reserves, coupled with technology improvements through experience in Canada’s oil sands operations, have kindled renewed interest in this resource around the world.

In addition to those in Canada, oil sands deposits are found in places as diverse as the USA, Russia, Italy, Germany, Switzerland, Angola, Congo-Brazzaville, Madagascar and Nigeria.

Particularly in Africa, much of the global oil sands potential is found in remote locations without much infrastructure such as roads and oilfield services. Usually these locations are not widely explored for resource purposes, have limited geological data, and may carry significant health and safety risks.

For companies accustomed to the well-ordered working environment of northern Alberta, oil sands operations in the developing world call for a whole new set of skills. Fortunately, the global oil and gas industry has been developing its abilities to get results in these sometimes-challenging parts of the world, and doing it in a way that respects the environment as well as meets the social and economic needs of stakeholders including nearby residents.

Resources poorly delineated

Having not been considered as an economically viable resource, there is generally little data on oil sands deposits in less developed countries, even when compared to the data available on conventional oil and gas resources in such countries. This scarcity applies not just to the size and extent of the deposit, but its quality and ease of extraction. There may also be little information about topography, watercourses and factors important to building roads and other facilities to support exploration, evaluation and eventual extraction.

Fortunately, new technologies in remote sensing from both satellites and aircraft can support data gathering. Geographic Information Systems (GIS) can help to combine new and existing data to build a more accurate picture of the resource and its environs. 

Remote locations with limited infrastructure

Developers of oil sands deposits in developing countries must often contend with remote locations, with difficult roads if any, and little in the way of vendor and subcontractor support. This is particularly important in oil sands work because of the sheer volume of large equipment needed for extraction, processing and transportation operations – having more in common with mining than with conventional oil and gas.

Oil sands extraction and processing require considerable energy to separate the sands and extract the resource. The easy access that Alberta’s operations have to a mature gas supply network is not likely to be found in most developing countries’ oil sands locations.

As well as a thirst for equipment and energy, oil sands operations have a strong thirst for water. Oil sands work in Alberta has shown that this can be a major issue with regards to water taking and the treatment of wastewater that may contain metals and other contaminants, and disposal. As is the case in Alberta, the issue of fines in the water has been difficult to solve.

In many developing countries, water is also a serious issue – many people depend on subsistence agriculture for a living, and any changes in the local water supply can have significant detrimental impact on them. Non-governmental organizations (NGOs) in these countries are often very effective if they see negative impacts as a result of water-taking and other impacts of resource extraction.

This indicates that oil sands resource extraction will depend partly on the ability to minimize the use of water, and to manage the downstream impacts of water released from the process, including the problem of fines in the process water.

Health and safety issues

As many members of the oil and gas sector know, health and safety issues loom large in work performed in many developing countries. One issue with oil sands operations is that much of the work depends on skilled employees, who may come from the developed world, with high expectations around health and safety.

Exploration activities that involve fieldwork such as geological sampling including test drilling and baseline environmental studies, may require travel through difficult and hazardous terrain and exposure to a bewildering array of tropical diseases.

Having good local contacts, who are able to provide advice about back-country travel including the potential for human-related risks such as military conflicts, can help make sure expatriate and local employees are able to stay safe.

NGO oversight

In many developing countries, central and regional governments may be weak, with few resources with which to improve the lives of their citizens. This means that NGOs have stepped into the gap as best they can, providing education, health care and advocacy. Given the controversy that has dogged oil sand operations in Alberta, many NGOs will be watching closely to be sure that extraction of the resource is helpful rather than detrimental to the country’s people.

Accordingly, it is important for resource companies to develop good working relationships with NGOs that are active in the areas of potential oil sands activities, to get the benefit of their experience and understanding to avoid problems and also to become an agent of positive change in terms of economic activity and social development.

NGOs can support the resource company’s work reaching out directly to local leaders and residents, to understand their issues and concerns. This can help the company work with stakeholders to set priorities for development, so as to carry out social spending in a way that provides concrete benefits.

Meaningful stakeholder engagement

Direct work with local communities can help the company understand how it can avoid causing difficulties for stakeholders affected by a project, and act as an agent for positive change in the community.

Oil sands operations tend to be long-term in nature. While the initial employment needs may focus on skilled expatriates, the duration of the project means good opportunity to up-skill and train local people to maximize the local work force. While it may take many years of advanced study to develop a qualified biologist able to conduct environmental analysis, for example, it may take just a few weeks to train a local person as a biologist’s assistant, able to carry out sampling and analysis work.

Long timelines in oil sands projects also make it practical to build capacity of local entrepreneurs and helping small local companies to meet the resource company’s needs and also later the needs of other clients.

Many resource companies are able to use the training programs they offer their own employees, to help build the skills of local residents so that they are able to contribute meaningfully to the project.

Oil sands deposits around the world

While oil sands resources are found in many parts of the world, there seems to be only limited interest in extraction. Some of the sparse information available on these resources, from a variety of sources, is below.

United States
The US Bureau of Land Management indicates that most oil sands in that country are in Utah, in the Unita Basin and south of it.  These deposits are mostly on public lands. BLM estimates that in-place oil sands resources are 12 to 19 billion barrels. There is currently no significant production from these resources. Given the amount of opposition in some US political circles to the importing of oil sands-originated petroleum from Canada, production from the Utah deposits may face similar challenges.

Utah Oil Sands Estimated In-Place Resources

Nigeria
Oil sands deposits are found in Edo, Ogun and Lagos states, with the largest being in Ondo. In the 2011 national elections, one of the unsuccessful presidential candidates, Gen. Muhammadu Buhari (Retired), said that the development of the Irele/Agbabu bitumen project in Ondo State would be his priority if elected president. However, recent reports in the Nigerian media indicate that this project is of low priority for the current Nigerian government. This project involves an area containing over 42 billion barrels of bitumen.

Madagascar
The Bemolanga accumulation is one of the largest undeveloped bitumen reserves in the world, with more than 16 billion barrels of oil in place, according to an independent appraisal by DeGolyer & MacNaughton. In 2008, Total bought a 60 percent stake in a project to develop Bemolanga, with Houston-based Madagascar Oil retaining a 40 percent interest in the Bemolanga licence. If successful, the mining project will develop 2.5 billion barrels of recoverable resources and have the capability to produce 180,000 barrels of oil per day for more than 30 years.

Trinidad and Tobago
In 2009, the government awarded a concession to Petrotrin to study the oil sands of the Parrylands-Guapo fields, to determine the size of bitumen reserves, currently thought to contain up to two billion barrels, and estimate recovery percentages.

Russia
The most explored deposits of oil sands are in Tatarstan, in the Volga area in south-western Russia. In 2007, Shell signed a deal with the Russian company OAO Tatneft to develop this resource, with a reported projected daily output of 40,000 barrels per day. Most of Russia’s estimated 246 billion barrels of bitumen in place are located in the Tunguska Basin in central Siberia.

Congo (Brazzaville)
In 2008, Eni SpA signed an agreement for exploration and development of oil sand fields in the Republic of Congo, which Eni said at the time is the first such venture in Africa.  The two areas cover a combined 1,790 sq km of oil sands with recoverable reserves of between 500 million barrels and 2.5 billion barrels estimated on a 100-square-km section.

New data gathering and analysis tools for oil sands exploration

Oil sands related work in many less developed countries is often hampered by a lack of information about the resource and the area of interest.  On a recent resource exploration project in Africa, for example, the most recent geological data dated back to the 1960s. In many cases, the highest-resolution maps available are of the 1:1,000,000 scale.

This means that companies considering oil sands operations in these areas must assemble data from many sources and often, create their own proprietary database.

The good news is that the ability to gather useful information, and process it into a form that is useful for decision-making, has made tremendous strides in recent years.

Satellite imagery and remote-sensing data

High-resolution, current satellite imagery is available at a cost-effective price for much of the globe’s surface, and is a good place to start. Airborne remote-sensing technology can complement spaceborne sensors and help gather further information on specific areas of interest, through infrared imagery, radar and other sensors.

Remote-sensing data can help a resource company isolate places characteristic of oil sands deposits. This can then be verified through ground based surveys. Ground-truthing can also help verify the presence of sensitive areas such as historic sites, rare-species habitat, biodiversity hotspots and locations that are sacred or otherwise important to local inhabitants.

GIS software

Once gathered, the imagery and other data can be processed through Geographic Information Systems (GIS) software to produce images that are a powerful aid for project planning. This can include the delineation of the resource, possible site access routes, infrastructure planning (electrical transmission corridors and pipelines for water), and planning the best location for processing facilities and other infrastructure.

One of the key strengths of current GIS technology is its ability to manipulate spatial data of many types and sources so that it can then be layered. For example, basic topographic data can be supplemented with the location of rare-species habitat and animal migration routes. As a result, early planning can be done to avoid sensitive ecological areas.

Another advance in GIS technology is the ability to prepare three-dimensional images that are a great aid for decisions makes– such as being able to “see” the extent and shape of the underground resource, for better extraction planning.

Improving economies, communities and the environment

Oil sands operators in less developed countries have the potential to bring about significant benefits to the local economies and communities, and even to degraded environments, but doing so requires sound planning right from the start of the project cycle.

Oil sands projects are distinguished by their large area, their multi-decade time horizon and especially their potential for negative impact on water supplies. But in addition to potential for harm, there is large potential for leaving a positive legacy.

Developing a plan for community impact

Resource projects tend to have negative impacts at the start – such as through construction, overburden removal, water use, large numbers of foreign workers in the community and other factors. This means that the overall environmental, social, and economic impact of the project is usually immediately negative on the local area.  At this early stage, benefits via taxes and royalties paid to central government do not yet accrue at local levels. 

Coupled with this, in the urgency of getting a project constructed, resource companies often postpone attention to the ‘softer’ issues – information distribution, consultation, engaging with stakeholders. However, not dealing effectively with these issues can result in an angry local community that gives voice to their frustration through protests, work stoppages and vandalism to company property, as well as international negative publicity.

Some companies think that mitigation of negative impacts – the balancing of any harm they might do, with steps they take to improve the situation – is the same as sustainable development. While oil sands mining cannot be sustainable itself, because the resource will eventually be depleted, it can contribute to development that is sustainable in that its benefits continue past the end of the project’s life.

Some companies may say that they contribute to development through paying taxes and royalties to the country’s central government. One problem with this is that the benefits seldom find their way to local levels, or may do so only slowly.

Focusing on taxes and royalties means that the company misses out on other opportunities to support the Millennium Development Goals regarding poverty reduction. When a resource company is present in a poor community or country, it can make a huge difference through community investment that is only a small fraction of the total project budget.

However, building a “showcase” such as a school will do little good if it does not meet a local need or is not planned with local realities in mind. An outcome that is genuinely better can only come about with early and effective consultation with stakeholders, the local community as well as government, development NGOs and others. In this way, a resource company might find out that while there already is a school in the community, for example, the need is for training and salary support for the school’s teaching staff.

Community relations

Developing good relations with a respected non-governmental organization (NGO), with roots in the communities in the area, is a big success factor in community betterment. Such an NGO needs to have the trust of community leaders and other stakeholders, and to have the staying power to be able to continue support of the community after the project is complete.

Experience has found that many resource companies do not budget sufficiently for managing the people side of their projects – early consultation, social impact assessment, resettlement planning and implementation, ongoing stakeholder engagement, community development programs, etc. Oil and gas companies in developing countries have found that playing catch-up on the people side of their projects cost them double than if they had done it well from the start.

Starting early with relationship building and mitigating social impacts build support for the project and help the company meet its business goals. 

In much of Africa, low-income people cultivate the land by hoe.  Working through a local NGO, a resource company might make a pair of oxen available to the community, and for a very small outlay by the company, the community’s people can more than double the land they cultivate. Image by Carl Friesen.

Resource companies can build good relations with stakeholders who may be affected by their projects, through supporting education for local families. This also provides the level of skills that will allow local people to gain meaningful employment, both directly on the project and in providing services to it.  Image by Carl Friesen

Resource companies can support local economies and businesses by building relations with potential local suppliers, helping them build capacity so that they can meet the resource company’s needs, creating local economic activity.  Image by Carl Friesen