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  • Inside the Process Loop: Decentralized Energy and the Oil Sands

    Inside the Process Loop: Decentralized Energy and the Oil Sands

    Canada: Decentralized energy (DE) generation for the oil sands development has several benefits. Producing on site generation at the point of consumption will help increase production efficiency, lower operating costs and reduce emission intensities. The utilization of DE in the Alberta oil sands is essential for creating a sustainable economy that is capable of keeping up with the rising global demand for oil while leaving minimal impact on the environment.

    Global demand for oil is steadily increasing. And although recent shifts in the market has curbed the intensity of this demand, the International Energy Agency (IEA) estimates that demand for oil will increase by 60% from 2000 to 2030. In his article Cogeneration and the Alberta oil sands Jeremy Moorhouse writes that "unconventional oil supplies such as heavy oil and bitumen resources" will play a major role in satisfying the global demand. According to the United States Geographical Survey (USGS), the province of Alberta holds approximately 80% of the world's bitumen deposits and in 2009 produced 1.5 million barrels per day. In order to bridge the global demand gap, oil sands production must be increased at a more efficient rate.

    Natural gas cogeneration, as DE, has already played a pivotal role in increasing production efficiency. Rapidly adopted in 1999 due to Alberta's deregulation of the power industry, producers were able to switch from centralized coal-fired thermal generation to natural gas fired cogeneration. Moorhouse refers to a 1996 report published by Natural Resources Canada (NRCan) which examined all energy resources and demands from 1996 through 2020. The report forecasted oil sands production growth at a modest rate. However, due to deregulation of the power industry and the rapid implementation of cogeneration, oil sands production increased by over 100% compared to the original NRCan estimates.

    Cogeneration is being used for many operations in the oil sands, however, electricity from the provincial power grid is still being purchased. Not only is coal generated power carbon intensive, the cost of purchasing this power can be extremely expensive for producers. In Pat Roche's article Get off the Grid, consulting engineers Marc Godin and Bruce Peachey believe it would be more cost effective to implement on site power generation where it's directly used. Godin and Peachey argue that a simple approach to on-site power generation would reduce power costs – which, as Roche writes, can "account for up to 40-50% of operating expenses for mature oil field operations." Several factors weigh in as to why this would reduce the overall cost. Mainly, the price of natural gas is relatively low. Also, when harnessed on site or at a nearby location, gas transportation and power transmission costs are significantly reduced. A further benefit of on-site gas energy systems is that the gas consumed for production is royalty free. In 2010, Calgary based producer Paramount Energy Trust, budgeted for two pilot projects that utilizes on site power generation that will help replace $20,000 a year in power purchases. Not only do these projects eliminate reliance on the power grid, both projects are designed to produce enough electricity for Paramount to sell, making the economics that much better. If all goes well, Paramount is prepared to introduce the concept to over 20 more sites.

    Decentralized Energy in the oil sands is also responsible for reducing emission intensities while increasing production and lowering costs. Moorhouse's research demonstrates that GHG emissions from oil sands production dropped by an "estimated 7 MtCO2e per year between 1996 and 2006" - based in comparison to what emissions were estimated at under a coal fired thermal generation power supply. And while GHG emissions were decreased, oil sands production within the same time frame increased by 100%. It is also estimated that 80% of the decreased GHG emissions "resulted from the conversion from carbon intensive coal generation electricity to natural gas electricity." The remaining 20% was a "direct result from increased efficiency through onsite cogeneration." Another example of DE in the oil sands illustrated by Roche's article, explains that "if conventional oil operations could be switched from the grid to gas fired power, thereby reducing coal-fired power requirements by 20-25%, it would delay the need for another coal fired plant." This would ultimately eliminate GHG emissions that would be produced by a new coal fired generation plant.

    Moorhouse, Roche, Godin and Peachey have outlined prime examples of why DE concepts such as cogeneration and on site power generation allow producers the opportunity to reduce their emission intensities while increasing production and reducing operating costs. Paramount Energy Trust also demonstrates the potential to actually generate revenue by producing on site power to sell to the provincial grid. Other emerging DE technologies should also be looked at in terms of oil sands development. Small modular reactors, geopower and electro-thermal extraction technology are only a few of the concepts that have the potential to reap additional benefits of DE in the oil sands. While barely skimming the surface of the overall benefits of DE, it is clear that more can be done to secure a cleaner and more efficient oilsands operation. The challenge remains however, to get producers and government to become more active in promoting DE in the oil sands.
     
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