DOB MAGAZINE: Oilsands Gasification Will Help Unleash Energy Riches

HEAVY OIL AND OILSANDS
March, 2007
By Mike Byfield

Ben Anthony is a connoisseur of Canadian coals, intimately familiar with their individual characteristics. “Every coal is unique. After a quarter century of research, I’ve become quite fond of them,” the federal researcher acknowledges with a smile. He expresses less affection for coke and asphaltenes, the black gunk left over after bitumen is upgraded, but the stuff is abundant and cheaper than dirt. According to the British-educated chemist, Canada is on the brink of transforming its lower-grade hydrocarbons into useful energy on a very large scale thanks to projects now under way in Alberta’s oilsands.

As a senior scientist at the CANMET Energy Technology Centre in Ottawa, Anthony specializes in gasification. This industrial process uses heat and pressure to draw synthetic gas – including hydrogen, the cleanest of all fuels – from low-value coal and upgrading residues. Compared to just burning the stuff directly, gasification can be energy efficient, and it’s also relatively easy to capture waste byproducts like carbon dioxide and ash.

CANMET estimates that in excess of $4 billion dollars worth of gasification equipment will be installed in Alberta over the next five years. “We’re entering a period of extraordinary development,” Anthony comments. “Gasification of petroleum coke and asphaltenes is a highly significant energy development in itself. In addition, the operation of large gasifiers for the oilsands will probably enable us to develop economic technologies for coal gasification in the near future.”

Among fossil fuels, coal is the motherlode. Proven world reserves are estimated at 1,000 billion tonnes, conveniently spread across more than 70 countries. Canada alone holds close to 10 billion tonnes, more energy than its conventional oil, natural gas and oilsands bitumen combined. So gasification of coal and bitumen waste holds out the tantalizing prospect of turning a supremely available resource into a cleaner, more useful form of energy.
 
Gasification was developed in the 1800s to provide fuel for energy and cooking. Petroleum and electricity later drove this manufactured gas from the market. When crude oil prices quadrupled during the 1970s, researchers renewed their interest in man-made synthetic gas (known as syngas) derived from coal and crude oil waste. Anthony, who earned his doctorate in flame chemistry from the University of Wales, gasified his first petroleum coke as long ago as 1980.

“We came very close to building a $200 million gasification facility at that time,” the CANMET scientist recalls. The initiative died because natural gas prices plummeted through the 1980s and early ’90s. In part due to pollution concerns, the United States Department of Energy launched its $4.8 billion “clean coal” program in 1986. The most efficient generating plants use combined cycle technology. (See illustration above.) Syngas derived from the coal drives high efficiency gas turbines. The exhaust heat from those turbines is tapped as steam, which in turn drives steam turbines. In the oilsands, the steam can also be injected underground for SAGD (steam-assisted gravity drainage) projects.

The U.S. Environmental Protection Agency says 117 gasification plants are in operation around the world, with 35 more facilities under development. Of those 117, about 36% produce synfuels, 19% electricity, and 42% chemical feedstocks. Installed electricity generating capacity totals 24,000 megawatts, with an annual growth rate of about 10%.
“Gasification technology is dominated by global players with very deep pockets,” Anthony explains. Among the leaders are Chevron Corporation, with its Texaco Gasification Process, and the Royal Dutch/Shell Group. The first uses a coal liquid feeding system to supply the gasifier, the latter a dry pulverized coal. An especially eager player in this field is China, which is long on domestic coal reserves but drastically short of its own crude oil.

CANMET has constructed this country’s most sophisticated gasification research and development facility, capable of handling both dry and slurry feedstock. Its goal is to help apply global technology cost-effectively to Canadian projects, with a particular emphasis on efficiently recapturing carbon dioxide. “Oilsands operators will be the first users of large-scale gasification with CO2 recovery,” notes Anthony, who works on the Ottawa-based R&D team.

Besides operating costs, reliability is a key factor for power utilities. Anthony says gasifiers fed with coal have experienced downtime difficulties due to molten ash, and only a few have been constructed to date. In contrast, gasification facilities which transform refinery sludge and other crude oil waste into electricity and useful chemicals have achieved utility-calibre reliability standards in the range of 90-95%. Alberta’s oilsands gasification plants will draw on petroleum coke and asphaltenes, a feedstock which will generate less ash than coal.

Five technology companies are aggressively promoting their gasification technologies to oilsands operators, according to Zeus Development Corporation. The Texas-based consulting firm estimates that oilsands projects will generate US$1-2 billion in licensing fees and other revenues for the technology winners. On the other hand, despite the inclusion of gasification in their engineering plans, oilsands players may not actually install those modules from the outset of their operations unless natural gas prices appear to justify the heavy capital expenses involved. (The illustration below outlines the gasification process.)

Definitely committed to gasification from its first launch is the $4.6 billion Long Lake project, located 40 kilometres southeast of Fort McMurray. The SAGD operation is jointly owned by OPTI Canada Inc. (a subsidiary of Israel’s Ormat Industries) and Calgary-headquartered Nexen Inc. Asphaltene feedstock from OPTI’s patented thermal cracking process will be gasified to produce hydrogen for the upgrading process as well as fuel gases for steam generation and the upgrader. Synthetic oil production, expected to begin this year, is scheduled to reach 58,500 barrels per day in the first phase.

North West Upgrading Inc., an independent company from Calgary, plans to construct a bitumen upgrader north of Edmonton near Redwater. The $2.4 billion first phase, with a capacity of 50,000 barrels per day, is scheduled to come on stream in 2010. Residual bottoms from its hydrocracker will be gasified into syngas and hydrogen.
 
Peace River Oil Inc., an independent firm from Red Deer, has slated phase one completion for its Bluesky project in 2010. Asphaltenes will be converted into hydrogen, power, and steam, which should also push sulphur emission recovery above 99%.

At its third upgrader near Fort McMurray, Suncor Energy Inc. of Calgary plans to draw hydrogen and fuel gas from petroleum coke. The gasification unit, a component within Suncor’s Voyageur Two expansion, would substantially reduce the operation’s need for natural gas. Voyageur Two is scheduled to come on stream in 2012.

Synenco Canada Ltd. plans to construct its $3.6 billion Northern Lights upgrader north of Edmonton with a daily capacity of 100,000 barrels. The Calgary-based company has formed a partnership with Sinopec, China’s largest oil refiner, to undertake the Northern Lights project, which includes a $4.4 billion mining operation located 100 kilometres northeast of Fort McMurray. Sinopec already runs four gasification units within its own operations.

Other oilsands companies may well opt to install gasification capability in future. Even more encouraging, Anthony enthuses, was an announcement last month by Sherritt International Corp. that it would like to build Canada’s first coal-fed gasification plant. The Dodds-Roundhill project, budgeted at $1.5 billion, would process coal from a pit 80 kilometres southeast of Edmonton into syngas.

Sherritt, backed financially by the Ontario Teachers’ Pension Plan Board, says the synthetic gas could be used as a petrochemical feedstock, or provide pure hydrogen, or simply be used as fuel. Also important could be carbon dioxide for use in enhanced oil recovery. A high operating reliability factor is less important for a fuel plant than for a generating station tied into the electrical grid as a baseload producer. The mining company won’t decide whether to proceed with its proposed synfuel project until at least early summer after preliminary engineering has been completed.

While there is still a hefty “maybe” factor in many of Alberta’s gasification plans, CANMET is confident that considerable investments will in fact be made. In part, that optimism stems from the growing federal commitment to contain emissions of greenhouse gases wherever economically feasible. “In terms of straight economics, gasification appears to have reached economic viability,” Anthony comments. “And the more concerned people get about global warming, the more sense it makes to develop this technology.”

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