May 17, 2017

Alberta oilsands' energy return on investment steadily improving, says new study

Haskayne research tracks dozens of projects to understand how efficient oilsands projects really are


Stephane Massinon, Haskayne School of Business

"Technology is what is improving performance of the oilsands and is expected to continue to do so," says Harrie Vredenburg, a researcher in the University of Calgary's Haskayne School of Business.

Harrie Vredenburg, a researcher in the University of Calgary's Haskayne School of Business.

University of Calgary

Alberta’s oilsands operations are getting increasingly more efficient in producing energy, though they still lag behind conventional oil, according to a new study published by researchers at the Haskayne School of Business and China University of Petroleum (Beijing).

The authors examined dozens of projects in Alberta’s oilsands using — for the first time — the most up-to-date detailed publicly available data from the Alberta Energy Regulator, Statistics Canada, the National Energy Board of Canada and the Canadian Association of Petroleum Producers. The study examined both mining and in situ operations between 2009 and 2015.

Their article Energy Return on Investment of Canadian Oil Sands Extraction from 2009 to 2015 has just been published in the international journal Energies.

To conduct the study, the authors used a tool called “energy return on investment,” essentially calculating the energy return to society divided by the energy required to get the energy. For mining operations, they found a range between 3.9 to 8 to 1. That means that you produce 3.9 to 8.0 units of energy for every unit of energy expended. In situ oilsands projects ranged between 3.2 to 5.4 to 1.

The lower ratio of in situ is due to the fact that these oilsands are found deeper underground and require more energy to extract. Notably, both mining and in situ production efficiencies improved over the 2009–2015 period.

Canada is the world’s fourth-largest oil producer and at the end of 2015 the proven reserves of oilsands were 165.4 billion barrels. Co-author Harrie Vredenburg, the Suncor Chair in Strategy and Sustainability and Academic Director of the Global Energy Executive MBA, says this research should help to better inform the ongoing public discussion about the oilsands.

“Energy return on investment is an increasingly used method to quantify, compare and evaluate different energy resources and extraction technologies,” says Vredenburg. “However, when comparing ratios, I would caution that one needs to be careful of the source of data used, whether it is raw data or imputed data, whether the system boundaries — how far down the value chain you are looking — are analogously defined and input/output timelines.”

Vredenburg says for this reason, it is best to use EROI to compare "like" resources such as oilsands and conventional oil, and not to venture comparisons too far beyond. It is also best to rely only on EROIs reported in serious peer-reviewed journals by credible researchers. 

“Technology is what is improving performance of the oilsands and is expected to continue to do so. All the major oilsands companies are seriously pushing technology to reduce emissions and costs, and have been doing so extremely seriously the past couple years since the price crash of late 2014 and the Paris Agreement,” says Vredenburg, who also led a team of researchers that studied open innovation among energy companies.

Compared to conventional oil production, the oilsands’ efficiency ratios in this study are low. According to a 2009 study published in Energies journal, the EROI of global oil extraction has been declining from 26 to 1 in 1992 to 18 to 1 in 2006. The reason efficiency is declining is due to decline in oil reservoir quality the world over as the best reserves of this finite resource were produced first and more recent production is more energy-intensive using enhanced oil recovery techniques. 

According to recent studies by researchers at Stanford, shale oil production using fracturing technologies are quite efficient; Bakken oil has EROI ratios above 25 to 1 but, like conventional oil, will be subject to declines as the best wells are depleted and lower-quality resource is encountered.

Vredenburg says if these trends continue, Canadian oilsands operations could be competitive with respect to efficiency as measured by EROI. A simple linear extrapolation of their data suggests that by 2027 the trend in technological improvement in the oilsands will catch up to the declining efficiency of conventional oil production.

“We speculate in our paper that it is possible that this crossing of the lines on the EROI graph may happen earlier than our straight-line extrapolation would suggest. A step-change technology advance could happen as the consequence of international and Canadian government pressure to reduce greenhouse gas emissions,” says Vredenburg.

“In the past decade we saw just such a disruptive step-change technology innovation in fracturing technology in shale oil. That innovation was stimulated by high oil prices rather than by regulatory pressure.

“Of course if oil prices remain low for longer, conventional oil will take longer to migrate to lower-quality reservoirs, thereby delaying that crossing of the efficiency lines due to oilsands technological advances and declining quality of conventional oil reservoirs.”