This week is expected to mark the beginning of four to five decades of bitumen extraction at Canada’s newest – and one of the largest – open-pit mining operations. Imperial Oil Ltd. has promised its Kearl oil sands project is just days away from producing its first crude.
“We continue to work towards first oil by the end of the first quarter, which is March 31,” Imperial spokesman Pius Rolheiser confirmed last week.
The first phase of the project will hit its target of 110,000 barrels a day some time in 2013, Mr. Rolheiser said. Production is scheduled to ramp up to 345,000 barrels of bitumen a day by 2020, when the Kearl mine – which Imperial owns jointly with ExxonMobil Canada – is running full capacity.
The project has been a long time in coming, and the first phase alone has cost $12.9-billion – significantly more than the original budget. Kearl faced numerous delays and cost escalations due to the complications of trucking enormous, South Korean-made modules across the U.S. – and the opposition to the oversized loads from residents in Idaho and Montana – as well as the harsh Alberta winter.
Lack of pipeline capacity and getting crude to the best markets continues to be a concern for all of Canada’s heavy oil producers. While the differential – or the discounts paid for Alberta bitumen compared with global benchmark oil prices – continues to be an issue, the price chasm has narrowed in recent weeks.
But Mr. Rolheiser insists Kearl remains an attractive project. It has low costs relative to other forms of oil-sands production. And without going into shipping details he described as proprietary, Mr. Rolheiser said initial production volumes can be accommodated in the existing pipeline system. But in late 2015, when the next expansion phase is scheduled , Imperial will need access to greater pipeline capacity to keep the project growing.
But Mr. Rolheiser added, “the Kearl expansion isn’t directly dependent on any single piece of infrastructure. It isn’t dependent on Keystone XL or Northern Gateway or something else.”
Unions have also lamented that the Kearl project lacks an upgrader, which could provide additional on-site jobs. But Imperial says it will instead use a paraffinic froth treatment that will remove fine clay particles and water from the bitumen in order to produce a product ready for pipeline transport and sale – but using less energy and producing fewer greenhouse gas emissions a barrel than an upgrader would. Mr. Rolheiser said a “state-of-the-art” electronic bird deterrent system is already up and running beside the pit of water that will soon become a refuse for mining waste.
Mr. Rolheiser said the mine will raise the environmental bar for the bitumen mining industry, and includes storage so the project doesn’t have to withdraw water during winter’s low-river flow periods. But all oil sands mining operations in northeastern Alberta require massive amounts of water. Jennifer Grant of the Pembina Institute, an environmental think tank, said the Alberta government has so far failed to implement a long-promised policy that would see hard and fast bans placed on industrial water withdrawals during periods when the river is dangerously low.