MUENCHHAUSEN

AN ELECTRONIC NEWSLETTER ABOUT ENVIRONMENT,
RENEWABLE RESOURCE TECHNOLOGY,
AND RELATED TOPICS

By BOOTSTRAP PRESS, INC.
BETHESDA, MD
mailto:JJGREENBARON@VERIZON.Net

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OCTOBER 25, 2005
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WELCOME!

Green Baron welcomes one and all who take the time to read Muenchhausen. He aims to “tell it like it is” as much as possible, and avoid advocacy and ideological positions. There are enough of those to go around in other publications.

[ADJECTIVE DELETED]

“One day, if we work at it, we can tell those [adjective deleted] [Middle East oil exporting countries] to go DRINK their [adjective deleted] oil!” So exclaimed Green Baron’s long-time friend, Steve, who, among other things is a survivor of the Nazis, the Communists, and the Hungarian anti-Soviet uprising of 1956—1957. In all candor, this is exactly what Green Baron would dearly love to tell these same countries. To his great chagrin, this will not be feasible very soon, barring a miraculous technological breakthrough which Green Baron cannot begin to imagine.

TAR SANDS/OIL SANDS IN ALBERTA

Hope for the future, however, is not absent. On October 17, Green Baron had occasion to learn more about the oil Tar Sands of the Province of Alberta, Canada. At a seminar for graduate students at the School of Advanced International Studies (SAIS), of The Johns Hopkins University (Washington, DC), Greg Melchin, Minister of Energy of Alberta, and Murray Smith, former Minister of Energy, said that potentially, there may be as much as 1.7 trillion barrels of oil equivalent in the bitumen of the Alberta Tar Sands. Yes, you read that number correctly: 1.7 trillion barrels. Currently, Melchin added, 175 billion barrels are “proven.”

The Tar Sands, said Melchin, “cover an area approximately equal to that of the State of Florida”—“660,000 square kilometers, or about 20% of the size of France”, according to Smith. He explained that in years past, it was uneconomical to extract and process the bitumen into petroleum products. The cost would have been $40 per barrel, as compared with the current $4 to $6 cost of pumping oil in the Kingdom of Saudi Arabia. Advances in extractive technology, however, have brought the $40 cost down to about $15 per barrel; given the current world price of petroleum, the effort to extract and process the Alberta bitumen to petroleum products and petrochemicals now appears to make good economic sense.















L to R: Smith and Melchin: "175 billion barrels
proven in reserve." [Photo by Green Baron]


Three principal Tar Sands horizons plus several smaller ones make up the Tar Sands deposits. The main three are the Athabasca Oil Sands, the Cold Lake Oil Sands, and the Peace River Oil Sands. In addition, there is the Lloydminster Heavy Oil deposit. All of these deposits are located from about latitude 53° N, or about the latitude of Alberta’s capital, Edmonton, to nearly 58° N, which is north of the northern city of Fort McMurray (please see Map 1). The total proven reserves, compared with those of the rest of North America, are shown on Map 2 (makes reserves in most of North America look meager by comparison, doesn’t it). The term PADD on Map 2 stands for Petroleum Administration Defense District (United States). Reserves shown on Map 2 are as of Dec. 31, 2003.





















Map 1: Locations of Alberta
oil horizons
Map2: Oil reserves North America


One method of extracting the bitumen from the Tar Sands (the characterization Oil Sands may be used interchangeably) is to mine it. This operation scars the land, to be sure, but as Smith explained, “All [land] must be returned to equal to or better than before [operations began].”

Much of that land consists of muskeg (moist, spongy land with stunted trees growing on it). During the autumn, winter, and early spring months, the climate is quite inhospitable, with temperatures as cold as -40 C/F (the two temperature scales read the same at -40) frequently occurring. Summers can be quite warm, with temperatures going into the upper 20s C (about 80 F), and in muskeg territory, clouds of black biting flies and mosquitoes may be encountered. (Green Baron can speak with personal knowledge about black flies and mosquitoes, having suffered from their bites during one summer in northern Newfoundland and in Labrador!)

Many of the inhabitants of central and northern Alberta are Native Americans. Smith told the seminar that the tribal elders often requested that when the mined Tar Sand land was to be restored, that it would be made into pasture for their bison herds.

Generally, the next step in the process of treating the bitumen is to heat it sufficiently for it to liquefy. Then, the process of cracking the heated bitumen—now softened into viscous oil—can be undertaken, to produce gasoline, heating oil, and other petroleum products and petrochemicals.

“Wait a minute, Green Baron! Doesn’t liquefying the bitumen through heating require so much energy that the ultimate returns are meager?” In the past, this would have indeed been true. New extraction and beneficiation techniques and the current world oil price structure, however, have wrought changes, and made the extraction of oil values from the Tar Sands profitable.

For example, there is enough natural gas nearby to provide the necessary energy to heat the bitumen and make it suitable to crack. Moreover, new techniques have been developed to increase the efficiency of the heating/liquefying process substantially.

Who owns all of this Tar Sand land, or at least, its mineral values? The government of Alberta owns it, unlike in the United States, where such land or mineral deposits would be privately owned, by landowners, or “freeholders,” as Melchin put it. Those who wish to run an oil venture in the Tar Sands country take out a lease from the provincial government. Up front, the leaseholding company must pay Alberta 1% of gross royalties. When production is under way, the leaseholder will pay 25% of net profits.

VENTURE CAPITAL EXCEEDED EXPECTATIONS

“Green Baron! Doesn’t this type of enterprise require enormous amounts of risk capital?” “Indeed it does,” answers Green Baron, after hearing what Melchin and Smith had to say that Monday evening in October. It would appear, however, that energy companies are willing to risk such capital, and expect very handsome returns in the future. Smith explained that during the mid 1990s, Alberta had hoped to attract $25 billion in risk capital over the next 25 years—for example, between 1995 and 2020. But here’s what did happen: More than $35 billion was invested over 10 years, some very recently. Even the People’s Republic of China contributed some capital.

There will be opportunities for environmental science and engineering firms to profit from the Tar Sands industry. One task would be to manage waste. Another would be to restore the local topography after the lease has been worked. This environmental work would be a long-term project: “There are centuries, not decades of [oil] supply,” said Smith. “Canadian [energy] resources could light one of seven houses in the United States.”

Because bitumen has too much carbon and not enough hydrogen, Alberta has organized a Hydrocarbon Upgrading Task Force to work on even more efficient, economical, and environmentally sustainable ways of upgrading bitumen. Also, Smith foresees the building of refineries for value-added product manufacture on site. Investment for such refineries would come from private sources.

As Melchin put it, “The Sands are a world-class resource.” Smith reminded the seminar that unlike countries and regions in the Middle East and the former Soviet Union, Canada remains a secure source. He added, “The rules and regulations for working the Sands are transparent, as are the financial figures.” Also, this resource is in North America, and need not be shipped on tankers across great seas. That is an important consideration in our current world, given, deplorably, the possibility for terrorist attack, and environmental calamities, such as huge oil spills, even without a terrorist attack—just from human error or adverse acts of Nature. This is a fortunate exception to the wry statement that one Shell executive made: “Oil is seldom found where needed and seldom needed where found.”

Perhaps the thought of advising certain countries in the Middle East to “drink their [adjective deleted] oil might not be quite so far-fetched as we think!

WHAT IS BOOTSTRAP PRESS?

Bootstrap Press is a nonprofit organization founded in Bethesda, Maryland, U.S.A., to promote the development and management of technology and businesses based on renewable resources. We also encourage the preservation of our Earth's natural habitats and its plant and animal species. So do a lot of other organizations, and more power to them for doing so!

Bootstrap Press is different because its members believe that the development of renewable resources and the preservation of habitats and species are receiving far more lip service than the financial and technical support needed to achieve these goals. We also think they will continue to be subjects of more talk than action until someone can show how renewable resources and the diversity of biological species can be the basis for potentially profitable businesses as well as a matter of ethics. Bootstrap Press intends to provide a forum for the discussion of how to build up such business, and of related topics.

There's one more thing we should mention about Muenchhausen and Bootstrap Press. We try to present only the scientific and technical facts that are correct to the best of our knowledge, belief, and good faith. It is up to Muenchhausen's readers to draw their own conclusions and make their own judgments.

NOTE: The mention of a product or service in Muenchhausen is in no way to be regarded as an endorsement of that product or service by Muenchhausen, Bootstrap Press, the Green Baron, or any other contributor to Muenchhausen.