Athabasca Oil Sands Project, Alberta

The Athabasca Oil Sands Project is the latest fully integrated oil sands development in 25 years. Completed in early 2003, it now supplies over 10% of Canada’s oil needs. The project consists of two main components:

• The Muskeg River Mine, located 75km north of Fort McMurray, Alberta
• The Scotford Upgrader, next to Shell’s Scotford Refinery north of Fort Saskatchewan, Alberta

The Athabasca development is a joint venture between Shell Canada Limited (60%), Chevron Canada Limited (20%) and Western Oil Sands L.P. (20%). As the majority owner, Shell is the overall project administrator as well as operator of the Scotford Upgrader. Albian Sands Energy, a new company created by the joint venture, operates the Muskeg River Mine. Shell has a goal to obtain 15% of its production from sources such as oil sands by 2015. The Athabasca oil sands development controls leases over 1.7 million acres in the region.

Muskeg River Mine

Construction of the Muskeg River Mine began in late 1999. The Muskeg River Contractors (MRC), a joint venture between Fluor Daniel, AGRA Monenco Simons and three principal subcontractors (GKO Engineering, Colt Engineering Corporation and AGRA Earth & Environmental Services), worked on the mine on behalf of the joint venture owners.

Koln Crippen is the Albian Sands consultant for all geotechnical and tailings engineering for the mine.

The Muskeg River Mine, 75km north of Fort McMurray, extracts oil from the oil sands of Northern Alberta. In oil sands mining, a mix of oil and sand is removed from just below the surface using trucks and mechanical shovels.

The material is then mixed with warm water to separate the oil from the sand. The Muskeg River Mine produces 155,000bpd of heavy crude oil (bitumen) which, after upgrading, is ready for refining.

The mine resource contains more than five billion barrels (790,000,000m³) of mineable bitumen. This is about equal to twice the amount of conventional oil reserves remaining in Alberta.

The Muskeg River Mine, which employs 500 miners, will aim to recover 1.65 billion barrels (262,000,000m³) of bitumen over the 30-year lifetime of the project.

Canada’s oil sands industry as a whole currently produces more than 18% of the nation’s petroleum and has the potential to supply up to 50% of Canadian crude by 2007. By 2010 Canada will be a major player in the oil export market.

Jackpine Mine and Muskeg River Mine expansion

Shell received permission to expand the Muskeg River Mine in 2007. This has involved expanding the Muskeg River Mine from the west side of the 121km² lease 13 to the east side of lease 13 and lease 90 (phase one), which adds a further 3.2 billion barrels of bitumen resources to the project.

Further expansion again on to adjacent lease 88 and 89 have added a further resource base of 3.9 billion barrels (phase two). These new resources have become known as the Jackpine Mine. The Jackpine mine expansion was applied for in 2007, which will add a further 100,000bpd resource including development activities on leases 88, 89, 15, 631, 632.

The phase one expansion will add a further 100,000bpd of bitumen, while phase two could add a further 100,000bpd for upgrading. Phase one expansion was launched on 1st November 2007, phase two will be launched between 2010 and 2015, depending upon the economics of extracting diluted bitumen from the sands to produce synthetic crude oil. Phase one expansion contractors include AMEC-Colt (upstream) and Bantrel (downstream).

The proposed Jackpine Mine expansion will require an additional external tailings facility to be located on lease 88 which will feature reclaim water systems which will feed back to the Jackpine Mine extraction plant.

Pierre River Mine

Shell also has plans to expand on the west side of the river with mining and bitumen processing as part of the Pierre River Mine. This would see bitumen produced transported through a pipeline from the Athabasca area to the Edmonton area or to Canada or for the US markets.

In 2007 Shell made an application to develop the Pierre River Mine (a 200,000 barrel-a-day development on the west side of the Athabasca River), initially on leases 9 and 17 and progressing to leases 309, 310, 351, 352. A resource assessment of other Shell leases north of Pierre River Mine is still ongoing.

Scotford upgrader

The Scotford upgrader was constructed next to Shell Canada’s Scotford Refinery near Fort Saskatchewan, Alberta. It uses hydrogen-addition technology to upgrade the high-viscosity Muskeg River bitumen into a wide range of premium-quality low-sulphur and low-viscosity synthetic crude oils.

These synthetic crude oils are sold to Shell’s Scotford and Sarnia refineries and Chevron’s Salt Lake and Burnaby refineries. The balance is sold to other refiners.

In 2007 Shell made an application for permission to construct Scotford Upgrader 2, which is a proposed 400,000 barrel-a-day bitumen upgrading facility located adjacent to the existing Scotford Upgrader (financed 100% by Shell and delayed in October 2008 due to cooling world oil market). Shell has announced it will wait for the costs of construction to cool down and delay an investment decision until after 2009.

Shell applications

As part of its continued interest in oil sands Shell applied for increased production licences in 2007 to take bitumen production up to 770,000 barrels per day and bitumen upgrading to 690,000 barrels per day.

Shell anticipates decisions from Alberta and the Canadian regulators on Jackpine Mine Expansion, Pierre River Mine and Scotford upgrader 2 by the end of 2009.

Bitumen upgrading

Upgrading is the process of breaking large hydrocarbon molecules (such as bitumen) into smaller ones by increasing the hydrogen to carbon ratio. These upgraded crude oils are suitable feedstocks for refineries, which will process them into refined products like gasoline.

Scotford’s upgrading process adds hydrogen to the bitumen breaking up the large hydrocarbon molecules, a process called hydrogen addition or hydrogen conversion.

The phase one expansion will use Shell Enhance, which is a new high temperature froth treatment process. This will reduce energy usage by about 10% and avoid 40,000 tonnes of greenhouse gas emissions per year. The new process was developed by Shell Canada and Natural Resources Canada (CANMET Energy Technology Centre in Alberta). The new process uses high temperatures in the paraffinic froth treatment process to efficiently remove sand, fine clay particles and other impurities from oil sands froth to produce a better quality bitumen suitable for hydrogen addition (75% less space required for equipment).

Hydrogen manufacturing unit

A hydrogen manufacturing unit was built at the Scotford Upgrader, which will produce most of the hydrogen required for the hydrogen-addition process at the upgrader. The heavy pressure vessels used in the hydroconversion technology are 55m long and 4.4m in diameter.

• The upgrader has a significant cost advantage because it can use existing infrastructure at the Scotford Refinery site: land, utilities, process heat, etc
• It will make the best use of the very clean Muskeg River bitumen, with more than 100 barrels of upgraded crude produced for every 100 barrels of bitumen processed
• It produces dramatically lower levels of sulphur dioxide emissions
• High-carbon coke is not produced as a byproduct of production
• The synthetic crude oil produced enables refiners to produce clean, high-quality refined products, such as gasoline and diesel fuel, with low levels of aromatics, particulates and sulphur

Corridor Pipeline (owned by BC Gas) has built a 493km pipeline that transports the diluted bitumen (dilbit) from the mine to the upgrader as well as a return pipeline that carries the diluent back to the mine for re-use. The project contains enough pipeline to stretch from Calgary to Yellowknife, NWT – over 1,600km.

MRM Cogeneration Station

The MRM Cogeneration Station is a 170MW cogeneration facility, located at the Muskeg River Mine. The plant operates in a highly efficient cogeneration mode, which is the simultaneous production of electricity and steam from a single fuel source using combustion gas turbines and heat recovery steam generators.

The plant consists of two natural gas-fuelled combustion turbines and generators. The exhaust gas from each gas turbine is sent through a waste heat recover boiler to produce steam that is used in the mine’s bitumen extraction process.

The mine uses all the steam output from the cogeneration facility and about half of the power output, with the remainder being sold into the Alberta power grid. This design enables it to generate electricity with minimal effect on the environment.

Both of the gas turbines are equipped with low-NOx combustors to minimise the environmental impact of generating electricity.

The station turns approximately 84% of the natural gas’s energy into electricity and steam – compared to an average of 33% achieved by conventional power stations – while emissions of greenhouse gases are only about one-third of a similarly sized coal-fired power station.

There are two GE 7EA gas-fired turbine and generator sets with low-NOx burners and two heat recovery steam generators with supplemental heat injection along with two standby auxiliary gas-fired boilers. SaskPower International Inc owns 30% of the plant while ATCO Group owns 70%.