The Business Aspects in Oil Sands Production in the USA

Transcription

1 The Business Aspects in Oil Sands Production in the USA Presented by Jim Runquist Founder, CEO and Chairman of the Board Western U.S. Oil Sands Conference Utah Heavy Oil Center University of Utah September 21 st, 2006

2 There are multiple business aspects that must be considered to efficiently and profitably produce oil sands leases in the USA

3 The World Economic Challenge: What is the most important economic resource known? Energy production Oil, natural gas and electricity are the biggest players China and India economic development (2/3rds of world) Huge unexpected demands for these resources (now and future) Especially oil Fuels, asphalt, chemicals, plastics, pharmaceuticals, etc. High oil prices are here to stay Easily found light crude oil is being depleted rapidly Major sources require more and more difficult exploration Other oil sources are marginal fields, heavy oil fields and oil sands

4 Perceptions from the past about oil sand production: Can t be done efficiently and profitably Rube Goldberg syndrome (Kluged together) Many have failed before Fluctuating price of oil will drive companies out Mining and oil production do not mix

5 Canadian Success and Failure Success: High volume production now High oil prices Costs have been dropping Failure: Very high capital cost overruns Very high energy usage and costs Environmental and reclamation costs

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7 ROI and Reserves: The saturation, size, depth of oil sands USA has much smaller reserves than the massive Canadian Alberta reserves ROI: Since capital equipment is the largest cost driver, can the individual leases warrant this size of expenditures? What else must be considered? Multiple products/markets Mineability Processing Energy usage Transportation, sales, refining Environmental and Reclamation

8 Multiple product line potential of the leases What other products can be produced? Asphalt road stock Resins Aggregate Sand Cement Sand products Other minerals and precious metals

9 Surface mineable or in-situ production Is the property surface mineable? Surface mineability is very economical and efficient if strip ratio is favorable Over burden is an up front cost In-situ technologies very energy intensive Canadian USA

10 Canadian in-situ technologies: SAGD: Encana

11 USA in-situ technologies: Subsurface Drilling Platforms Electric heating such as proposed in oil shale

12 Oil Sands Processing Systems (cost per ton or barrel produced must be reduced) Processing must be modular Processing ore must be energy efficient in these smaller reserves to be profitable Most systems require large amounts of energy to heat and process the oil sands (removing oil from the sands) The cost of bringing this energy requirement to the processing site and the actual energy costs to process can be prohibitive to startup Costs to produce a barrel of bitumen oil must be in the $10 to $20 per barrel range to be economical ($40 BO price)

13 Energy Requirements Heat Requirement? Natural gas Electricity Diesel Fuel Water

14 Transportation, sales, and refining Transportation costs to get to market: Trucking- pipelines rail Sales: To whom and what are they willing to pay or even take? Refining: Local versus national market Does the product meet their needs? What must be done to meet their needs? What are they willing to pay and how much can they take? Need for more transportation and refining capacity!

15 Local infrastructure and Labor pool Infrastructure What is available locally? Roads pipelines- railroads Earth moving equipment Oil Services Water supply Chemical supply People Expertise needed Availability

16 Major Subcontracting, Partnering, etc. Today - to attain the previous slide s resources, this may become more necessary Are they available locally, in state or nationally? Can reasonable business deals be made today?

17 Local, State and National Politics Local Politics Favorable but limited resources to help grow State Politics Favorable to develop this resource for state and local benefits National Politics Favorable in Washington DC Provides additional alternative to foreign oil

18 Research and Development New Technologies that provide or enhance: Energy efficient processes Modular designed systems Technology enabled mining equipment Soil Remediation based systems

19 University involvement New technology development Lessons learned from the past Focused understanding and solving specific problems Government research funding Future expert and employee development

20 Environmental and Reclamation Concerns Environmental and Reclamation concerns must be addressed day one Costs can become astronomical if not addressed Design of total mining, processing, storage and transportation systems can be: PS-3 Fluids Modeled and Implemented up front Based on environmental and reclamation systems Cost effective in a business model. Clean sand

21 Mine visualization and layout 3D Fault block generation; Tunnel Cutting; Advanced Texture mapping; Mine Pit modeling; Interactive Geologic Hierarchy building; Visualizing and computing Overburden; PS-3 Fluids Clean sand

22 Modeling Streamlines of groundwater flow around a mining pit Calculates & displays vector data as streamlines, stream-ribbons, scaled arrows or glyphs PS-3 Fluids Clean sand

23 Finally: Oil Sands Production as a Business Endeavor: Can it be done? Will it take time? PS-3 Fluids How important is it to all of us? Clean sand