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How Alberta’s energy minister plans to maintain and sustain

Building a Sustainable Future
#2 in a 10-part series on practising sustainability in business

All eyes will be on how Alberta can sustain its oil industry
by Shannon Sutherland

Greg Melchin isn’t buying the idea that oil and gas is a sunset industry. In a world where video has most certainly not killed the radio star, where one still flips, rather than clicks, through a good book, and where roller rinks are actually making a resurgence, it seems the possibilities for sustainability of the once dissed and dismissed are boundless. Well, maybe not boundless, but let’s just say the prospects for the energy industry are bountiful to say the least, despite the fact that doomsayers have been predicting the inevitable demise of the industry for decades. While the Alberta energy minister may arguably bring a slightly biased perspective to the issue, he says the proof is the past, present and future.

“I think people need to remember that there’s still one very important element that has been aiding sustainability in all kinds of sectors for years – technology and innovation. Technology and advancements can change a lot,” says Melchin. “If you look at a resource like the oilsands, for example, it was by far one of the highest–cost resources to recover. But the good news is that technology has made it successful and viable. When they started out, the (recovery) costs were at about $30 per barrel and now they’re at between $10 and $15 per barrel. Efficiencies and technologies made all the difference.”

The Alberta Oil Sands Technology and Research Authority was created about 30 years ago, and at the time, the task of unlocking the secrets of oilsands extraction looked daunting to say the least. Today almost 50% of Alberta’s oil comes from oilsands. Alberta sits atop the biggest petroleum deposit outside the Arabian peninsula with as many as 300 billion recoverable barrels. “Three years ago, it was estimated that there were 175 billion barrels of recoverable oil in the oilsands – about 10% of a 1.7-trillion-barrel deposit,” says Melchin. “Technology was the answer to take us from 10% to 20% to 30%. And I believe technology will continue to provide the answers throughout the industry, not just in the oilsands.” There’s definitely still work to be done to foster both commercial and environmental sustainability in the oilsands, he adds. Sustainable oilsands production requires reducing the amount of energy and water it takes to mine, produce and upgrade bitumen, as well as developing more effective methods for water and tailings management.

It does, however, provide inspiration for those who say the energy industry is simply not sustainable over the long term. He says all kinds of other energy-related opportunities in Alberta could be developed as well. They may not have quite the impact of the oilsands, but they could all play a role in promoting sustainability. Examples of such opportunities include the further development of coalbed methane and the use of carbon dioxide to increase recovery rates in conventional plays. “There’s no arguing that the light, easy-to-reach resources are declining,” says Melchin. “And even with higher prices it will be a challenge to manage costs, but that is something the industry has gotten very good at. I think the industry has shown again and again that it is both adaptable and innovative.”

He points to the development of natural gas as an example. Many oil companies have been well-positioned to take advantage of the market for natural gas, because organization leaders saw the signs of what was to come and adapted accordingly. “A decade ago natural gas was at $1 to $2, and look at what has happened since then,” says Melchin. Analysts are estimating that natural gas prices will average about $7 through 2008. Increased demand and flat production has tripled prices over the last four years.

Advancements in stewardship are also promoting sustainability both economically and environmentally, says Melchin. Recovery procedures are virtually unrecognizable when compared with several decades ago. “If people outside the industry were ever to watch them drill for conventional sources of oil, most people would be amazed at the improvements,” says Melchin. “In the shallow wells, they can drill well, get at the oil and get out of there without hardly disturbing the surface of the ground, all in a single day. I think all of us want to leave this place better than we found it, and the oil industry has proved that with its increased efficiencies and better practices. We have to ask: How can we employ the best available technology to make sure our processes are efficient with as little impact on the environment as possible? A great example of this is capturing carbon dioxide for enhanced oil recovery piping it into mature oilfields to recover an additional 10% to 20% of that reserve.” Current oil production technology only recovers about 30% of the oil in the ground. This means there are billions of barrels of oil that aren’t being recovered.

Melchin says he recently visited a couple of petrochemical complexes near Red Deer that are making much headway in this area. Carbon dioxide emissions at the two complexes will be cut by 220,000 tonnes a year, eliminating the equivalent of exhaust from about 50,000 cars. An 80-kilometre pipeline network will inject the gas in purified, liquefied form into area wells with the greenhouse gas staying safely underground permanently after it drives up premium refinery-ready light crude turning an environmental liability into an asset. This process could increase recovery of oil deposits to as much as 40% from the current range of 10% to 25% with conventional pumping.

Melchin also says there needs to be more research and technology development not only in managing CO2 and other emissions by developing technology to capture, transport, and use it to increase oil and gas recovery, but also to inject into coal beds to release methane. “Methane gas was considered a nuisance, and wasn’t considered recoverable in commercial quantities until a couple of years ago, simply because of economics – low natural gas prices – and the lack of efficient extraction techniques,” says Melchin.

The Alberta Geological Survey, however, recently reported that Alberta’s coalbed resource could contain about 500 Trillion cubic feet (Tcf) of natural gas. Unconventional natural gas sources, such as coalbed methane could help supplement Alberta’s recoverable conventional natural gas reserves of 39 Tcf. The Alberta Research Council is working on an enhanced recovery process that in years to come, could pump carbon dioxide into coal beds and push out more natural gas. “Coalbed methane is going to be a valuable product for Alberta, and we’re just starting to see this explored,” says Melchin.

In 2000, there were about 50 natural gas wells drilled in Alberta, but by the end of 2004, there were more than 3,500 coalbed methane wells drilled.

“If we can balance increased production with a decreased environmental impact, we will have truly sustainable development,” says Melchin. He says the current economic environment will bring benefits thanks to burgeoning corporate budgets.

“As energy companies have greater cash flows, there are additional discretionary dollars for research,” says Melchin. “More research means there will be more sophisticated science bringing solutions to improve extraction efficiencies and reduce cost and environmental impact – all those elements play a significant role in sustainability.”

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