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Oil Sands May Get Cleaner as Shell, Exxon Bubble Tar to Froth

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By Joe Carroll

Aug. 21 (Bloomberg) — Royal Dutch Shell Plc and Exxon Mobil Corp., the world’s biggest energy companies, are rolling out technology intended to eliminate the environmental disadvantage of Canadian oil sands.

A new process known as high-temperature froth treatment cuts carbon emissions from extracting crude from sand and mud by 10 to 15 percent, said Brad Komishke, a Shell chemist who leads 50 scientists developing new oil-sands techniques in Calgary.

“This means less production of the heaviest, dirtiest part of the crude stream and less pollution,” Komishke said in an interview at the company’s laboratories at the University of Calgary. “It’s about a more efficient use of energy.”

Shell and Exxon say their advances will make tar sands no more polluting than conventional wells in such locales as Texas and the North Sea. Whether that proves true may affect the marketability of crude from Western Canada’s tar-soaked bogs, home of crude worth more than $10 trillion at current market prices, the largest oil deposits outside Saudi Arabia.

About 60 percent of crude from the tar sands is exported to the U.S., where environmental groups including the Natural Resources Defense Council have pressed lawmakers to enact fuel standards forcing producers to either cut the emissions impact of their products or buy carbon credits. Oil from Canada’s tar sands generates as much as 40 percent more carbon-dioxide emissions than conventional wells, the council says. The Alberta Energy Research Institute estimates the gap at 10 percent.

More Steps Needed

A 15 percent emissions cut wouldn’t make the new oil-sands projects as clean as conventional crude, and it would do nothing to address the dirtier oil from existing mines, said Simon Mui, a scientist with the Natural Resources Defense Council in San Francisco. He said the oil industry needs to do more, such as developing ways to capture and store carbon emissions, to reduce the environmental impact of mines new and old.

“Right now, Alberta is trying to just get back to where the conventional crude oils are,” Mui said. “The challenge is, how much further can you go when we need much further reductions from a climate standpoint from the status quo? The baseline is moving.”

The technology developed by The Hague-based Shell and Irving, Texas-based Exxon involves bubbling tar-like bitumen into a froth in a pressurized tank at temperatures hot enough to set off fire sprinklers. Shell and Exxon declined to give cost figures for their new oil-sands technology.

Scooping Up Oil

At the Shell-operated Athabasca Oil Sands Project near Fort McMurray, Alberta, electric-powered shovels scoop black earth into 25-foot-tall Caterpillar Inc. dump trucks for transport to a plant that sifts sand, mud and rocks from oil.

The current practice is to repeatedly heat the soil to 40 degrees Celsius (104 degrees Fahrenheit) in 60-meter-wide tanks until the crude and sand are separated. As part of a $13.7 billion expansion of Athabasca, Shell this week was erecting two 20-meter tanks that will heat the oily sand to 80 degrees Celsius under pressure, creating a petroleum-rich froth in a single step.

“If we can treat that froth at higher temperatures we can get that separation quicker, which means less large vessels and less energy used in the process,” Tim Wiwchar, bitumen manager at the Athabasca mine, said in an interview.

Shell, Exxon and other producers, including Chevron Corp., Marathon Oil Corp., ConocoPhillips and Suncor Energy Inc., are counting on the U.S. market to absorb a near doubling of output from oil sands in the next six years, said Greg Stringham, a vice president at the Canadian Association of Oil Producers.

‘We Can Match’

“I think we can match what the American refiners are already bringing in from other sources,” said Stringham, whose organization represents 130 oil companies, including London- based BP Plc and Canadian Natural Resources Ltd. of Calgary.

Shell, which took over as operator of Athabasca in January and owns 60 percent, expects to begin producing crude from two high-temperature froth treatment units next year. Chevron of San Ramon, California, and Houston-based Marathon each own 20 percent of the project.

Athabasca produces an average of 155,000 barrels of oil a day. The expansion will boost that by 100,000 barrels a day.

Exxon, the world’s largest maker of gasoline and diesel, has developed its own high-temperature froth treatment that it plans to use in the C$8 billion ($7.3 billion) Kearl oil-sands development, Senior Vice President Mark Albers told investors at a March presentation in New York.

The Kearl project is expected to pump 110,000 barrels of oil a day when the first phase of construction is completed in 2012. Exxon plans to eventually boost output to more than 300,000 barrels a day.

Shell rose 26.5 pence to 1,614.5 pence yesterday in London. The stock has dropped 11 percent this year. Exxon climbed 59 cents to $68.59 on the New York Stock Exchange, leaving it down 14 percent year to date.

To contact the reporter on this story: Joe Carroll in Fort McMurray, Alberta, at [email protected].

Last Updated: August 21, 2009 06:00 EDT

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