From pages 19 & 20 of Royal Dutch Shell and its sustainability troubles Background report to the Erratum of Shells Annual Report 2010
The report is made on behalf of Milieudefensie (Friends of the Earth Netherlands)
Author: Albert ten Kate: May 2011.
Shell’s largest unconventional oil resource
Due to easy oil getting scarce, oil companies are investing in unconventional oil resources. In general, unconventional oil production has greater environmental impacts than conventional oil production. The Canadian oil sands (often called tar sands) are Shell’s largest unconventional oil reserve. As of 31 December 2010, Canadian oil sands amounted to 26% of Shell’s proven oil reserves. Oil reserves refer to the oil production Shell has secured to exploit in the future.
The oil sands are found in the Canadian province of Alberta. In December 2010, the government of Alberta listed 47 oil sands projects that are planned, underway, or recently completed. The total investment costs for these projects amounted to USD 85 billion.
The extraction of oil from tar sands has many features that are typical to industrial mining: dig up the earth; use lots of energy and water; sell the product; create a huge lake with toxic waste. At Shell’s main oil sands operations, an oily tar mixed with sand, clay and water is dug up in open- pit mines. Enormous trucks deliver these goods to a place where warm water is added to separate sand from the bitumen. After this process, the bitumen goes to an upgrader. In this upgrader (that usually runs on natural gas) the large heavy hydrocarbon molecules are cracked into lighter molecules. The synthetic crude oil is then sold to refineries to make gasoline; the remainder of the process is dumped in a tailings lake.
Some oil sands in Alberta are buried too deep below the surface for open-pit mining. In these cases, the oil will be recovered by in-situ techniques. Mostly steam needs to be injected into the deposit (thermal method), causing hot bitumen to migrate towards producing wells.
Shell’s Athabasca Oil Sands Project (AOSP, Shell share 60%) presently comprises two open-pit mines (the Muskeg River mine and the Jackpine mine) and the Scotford Upgrader. The present capacity was developed for a total cost of USD 19 billion. The total resource base is estimated at 3.4 billion barrels, so at the same pace this project could last for almost 40 years. AOSP has many more mining leases along the Athabasca river that may be utilised for oil production in the future.
By mid 2011, oil production is expected to be 255,000 barrels per day.98 Due to efficiency and de-bottlenecking operations the AOSP-production is assumed to increase by another 85,000 barrels to 340,000 barrels a day within the coming 7-10 years.
Shell has several 100% positions in in-situ mining. Production in 2010 is estimated at 18,000 barrels a day, from its Peace River and Cold Lake Orion assets. Shell is proposing to increase thermal bitumen production from its Peace River leases by 80,000 barrels of bitumen per day, through the Carmon Creek project. Investments of USD 3.5 billion are proposed for this project during the period 2011 2016. Shell estimates that the project has a 1.5 billion barrels resources potential. The company is also assessing its Grosmont and Woodenhouse in-situ assets including vast landholdings in west Athabasca.
Greenhouse gas emissions of fuels from oil sands
In a study at the request of the European Commission, released February 2011, typical tar sand well-to-wheel greenhouse gas (GHG) emissions were found to be most likely 23% worse than GHG emissions of typical conventional oil sources. For this study, many earlier studies on this subject were reviewed. Shell usually states that fuels derived from oil sands mining have 5 to 15% higher well-to-wheel (GHG) emissions, compared to fuels derived from conventional oil and dependant on crude type & source.
It should be noted that the recent study at the request of the European Commission refers to well-to-wheel GHG emissions. Well-to-wheel emissions include the emissions produced during crude oil extraction, processing, distribution, and combustion in an engine. For all sources of crude oil, 70 to 80 percent of GHG emissions occur at the combustion phase. Combustion emissions do not vary for a given fuel among sources of crude oil. Oil companies can influence well-to-tank emissions only, which account for 20 to 30 percent of total life-cycle GHG emissions.
In the study at the request of the European Commission, the most likely well-to-tank emissions from tar sands fuel were put at 33.9 grams of CO2 per megajoule. These are the emissions that can be influenced by Shell. The most likely well-to-tank emissions for conventional oil were put at 13.7 grams of CO2 per megajoule. So, the well-to-tank emissions of oil sands are almost 2.5 times higher than the emissions for average fuel used in the European Union.
A further extract from this section of the report will be published in the coming days.