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Battle for the oil sands Add to ...

Inside a small garage-like laboratory in a north-east Calgary industrial park, there sits a box.

It's small, less than a metre to a side, with 72 wires attached to its top in a dense snarl. Two exposed stove elements are stuck vertically to the outside of one of its side walls, which are made of metal. The elements are on, and hot. On the opposite side, a thin metal pipe descends to the floor and into a small vessel that looks like a steel bowling pin.

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But if the exterior of the box has all the elements of a high school science project gone madly awry, what it contains makes this a serious experiment, with potentially enormous consequences for the economic future of Canada's oil sands and its environmental impact. This box is designed to find a new way to lift the oil out of the thick, crude-filled sand that surrounds Fort McMurray.

Across Alberta, tiny upstarts and major energy companies have spent years developing a number of promising new technologies to tap the oil sands. In recent months, several have taken a major step, moving from the lab to the field in small pilot tests that will, finally, prove whether they work or not. Companies are spending millions to prove out a variety of new approaches that could substantially cut the cost of producing oil sands - now among the highest for crude production anywhere - while also greatly cutting back on greenhouse gas emissions and, in some cases, opening access to hundreds of billions of barrels currently considered unrecoverable.

The field tests are critically important, both to the companies racing to win the technological battle for oil sands supremacy, and for Canada's oil patch as a whole. What's at stake is no less than a radical reshaping of the industry and, potentially, a type of Oil Sands 2.0 that no longer bears the shame of being dirty.

Getting there may require heeding lessons from the past. It may also require leadership not currently on display - either among politicians or industry titans. The search for improved oil sands technology is made all the more urgent by increasing political pressure, highlighted at the Copenhagen climate summit, to reduce global carbon emissions.

The road ahead remains fraught with risk. Oil sands projects under engineering and construction today aren't employing these innovations. That means it will be years before any large-scale change in oil sands technology could possibly take root.

Though new methods have great promise, they remain some distance from proving they work well enough to merit billions in investment; some will likely be discarded.

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To get a sense of what's possible, consider that box in Calgary. Packed into its small confines are a few kilograms of oil sands - a blend of sand, water and crude that is churned together in a nearby cement mixer. If you could peek inside, you would see a wall of fire moving slowly through the oil sands, which are glowing bright red like a charcoal briquette.

For the scientists who oversee its operation, the most exciting part is the liquid that comes out of the box, and is then collected in several dozen jam jars. It is crude oil, but a better kind of crude than what's initially extracted using current methods from the 1.7-trillion barrels that lie beneath northern Alberta.

Only about 10 per cent of the oil in the box burns. The rest is melted out of the sand at temperatures of 600 degrees Celsius, hot enough that it changes the composition of the oil, making it lighter and cleaner.

In its large-scale application in the field, that means oil produced through this process is cheaper to extract. That's because it doesn't require huge volumes of natural gas to boil water, which is used to melt bitumen from the oil sands. It's also more climate-friendly, since it requires less refining. In total, Petrobank Energy and Resources Ltd., which is developing it, believes that what it calls Toe-to-Heel Air Injection, or THAI (so-named because it pumps air into the ground to generate the combustion) could cut oil sands greenhouse gas emissions in half.

"The fact that we have, from day one, produced a higher-quality oil in the ground is absolutely world-changing," says Petrobank chief operating office Chris Bloomer, whose company has begun operating the process at several demonstration sites. "Nobody has ever attempted this. Nobody has ever done this. And we're doing this day in and day out."

The box was built by Conrad Ayasse, a chemist who runs the Calgary lab and consults for Petrobank. Surrounded by blue-coated lab technicians from around the world and glass jars labelled "Toluene" and "Standard Silver Nitrate," he engages in a moment of blue-sky dreaming: This technology, he hopes, could be worth billions.

But Mr. Ayasse, a man who has been called "Merlin" for his technical wizardry, knows as well as anyone that building a new technology - particularly one with the potential to unseat other technologies that have already seen tens of billions in development dollars - won't be easy.

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