08-01-09 A third of Shell's oil reserves are in Alberta's oil sands, but extracting them will be highly controversial.
An awe-struck James Smith, chairman of Shell UK, reflects as he surveys the huge Muskeg River Mine in Canada's Albertan oil sands.
"It's big," he says.

Certainly, standing 25 metres down in a 15 km squared oil sands quarry puts the scale of the operation in perspective. Here the world's largest trucks transport 400 tons of tar sands in each haul -- just four grabs of the even larger excavator's claw. The truck tyres are twice the height of an ordinary human being.
"I've worked in the world's largest goldmine [in Indonesia] and this is much bigger," observes Todd Dahlman, Shell Canada's mining operations manager. Muskeg River Mine has a design capacity of 155,000 bpd of bitumen, a heavy crude oil that, once mined, is separated from the sand using warm water. It is run by Albian Sands Energy, a joint venture between Shell Canada (60 %), Marathon Oil Canada (20 %) and Chevron Canada (20 %).

Canada's oil sands, located in the north of the province of Alberta, are a controversial energy source. Exploiting them requires large amounts of water and will massively increase Canada's growing greenhouse gas emissions.
Canada's Conservative government anticipates the country's GHG emissions will be almost 35 % above 1990 levels by 2012. Its Kyoto target was to cut emissions by 6 % from 1990 levels by the same date. Canada's current GHG emissions are almost one-third above the Kyoto targets that Prime Minister Stephen Harper abandoned in his parliamentary throne speech last year.

GHG emissions from oil sands production are significant. Matthew Bramley, climate change director for environmental think-tank and NGO the Pembina Institute, says the oil sands account for almost 40 % of Canada's growth in emissions since 2001. The oil sands currently produce almost 1.4 mm bpd. Albertan oil sands deposits lie under 140,000 sq km of boreal forest.
Oil Sands Developers Group president Don Thompson says Canada accounts for just 2 % of global emissions with the oil sands comprising only 5 % of Canada's total. Yet, with oil sands production projected to grow to between 3.5 mm and 5 mm bpd by 2020, oil sands GHG emissions could grow a further 140 megatons or more per year, compared to Canada's total 1990 emissions of 599 megatons, Bramley says.

Environmental vs. social
Offsetting the environmental costs against the social and economic benefits of exploiting the oil sands is key, explains Janet Annesley, Shell's oil sands communications manager. She outlines the similarity between Alberta's thinking and the logic of linking energy security, economic development and climate change into one language, as the neighbouring US government's council for environmental quality does.
Shell's attempts to apply the language of sustainability to its Albertan operations have backfired. In the UK, the Advertising Standards Authority, ruled in August that Shell was wrong to describe its oil sands operations as "sustainable". The watchdog said there was no evidence to show that the company was effectively managing carbon emissions from its oil sands projects to limit climate change.

Around 80 % of oil sands production is done using in situ techniques: steam is injected to heat the oil sand, forcing the bitumen to the surface and leaving the sand in place. The remaining 20 % is mined in open pits up to a depth of around 25 metres. Oil sands mining represents 2.5 % of the oil sands total surface area, according to the Canadian Association of Petroleum Producers' vice-president, Greg Stringham.
After its separation from the sand, bitumen is upgraded -- or sweetened -- through the addition of hydrogen to convert it into synthetic crude oil that can be sent to refineries.

Shell, Syncrude and Suncor are the main mine operators for Alberta's 173bn barrels of bitumen crude that places Canada second behind Saudi Arabia as the world's largest oil reserves country, ahead of Iraq's estimated 115 bnbarrels. A third of Shell's global oil reserves now reside in Alberta.
Currently, Shell has 90,000 bpd onstream in Alberta's oil sands, with a further 60,000 bpd in construction. Expansion potential is estimated at 300,000 bpd. Shell CEO Jeroen van der Veer said in July that the company's oil-sands production was only 15 % more carbon intensive than conventional crude oil production from well to wheel -- or from the wellhead to the petrol-tank. This figure takes into account that as oil production peaks, conventional crude oil resources are becoming heavier -- and so more energy intensive to produce. It also factors in the emissions generated by exporting crude from the Middle East, Nigeria or other parts of the world.

Pembina's Simon Dyer says that when van der Veer made his statement, oil sands production averaged three to five times more GHG emissions than conventional crude; Shell's average was much lower, but still two-and-a-half to three times higher than conventional emissions. Shell plans to further lower its emissions through Carbon Capture and Storage (CCS).
On October 16, Shell Canada announced C$ 20 mm ($ 17 mm) plans to drill three test wells by its Scottford refinery, which, once given the project go-ahead by the Albertan government, would allow it to store 40 % of the refinery's emissions. The Albertan government is investing C$ 6 mm ($ 5 mm) in the project. It has committed C$ 2 bn ($ 1.7 bn) to invest in CCS technology in the province, which it hopes could store five megatons of CO2 from oil sands and coal-fired power stations by 2015.

Water use
Shell and other oil companies draw heavily on Alberta's water resources. According to the Alberta government's Water for Life report on 2007 usage, the petroleum industry takes 68 % of the industry-wide quota from the Athabasca river -- an average daily consumption of 1.5 bn litres. More than 80 % of this is used by the oil-sands mining companies. The report says that as new mines come onstream, water use by oil firms will double by 2010.
Annesley says Shell's water use is only 0.17 % of the river's flow, or about 8 % of total water from the Athabasca used by industry. It is a figure Water for Life says comprises 55 bn litres of surface water per year plus a further 7 bn litres of groundwater and almost 5 bn litres of other surface and run-off water.

Shell's mining operations recycle more than 90 % of the water placed in their tailing ponds, otherwise their Athabasca consumption would be far higher, Dyer suggests. Reclaiming the mines requires these tailing pits to stand for several years for the silt, clay and water to settle and allow any toxicity to degrade, such as naphthenic acid, a natural consequence of the bituminous soil, concentrations of which are found in the Athabasca due to the oil seeping through the soil in natural conditions.
Syncrude has successfully reclaimed land at its former mine, the Gateway Hill site, which is now home to 300 grazing wood bison. The company is hoping to undertake its first large-scale wetlands reclamation. In 25 years' time Shell will seek to reclaim its Muskeg river operation.

Dyer indicates that the end-pit lakes might prove more difficult to rehabilitate. These are a portion of the tailing ponds which cannot easily be reclaimed and are piped into the deepest mining pit and covered with 65 to 100 metres of water "and the company walks away", he says. He indicates that tailing ponds do in fact seep.
"This is at a rate of litres per second adding up to large cumulative numbers," he says. Only one tailings pond has been studied closely and research indicates that it leaks 5.7 mm litres a day. This contaminates the soil and possibly Alberta's rich system of underground aquifers.

"Ultimately there are no leading oil sands performers. The system is out of control," says Dyer, pointing to a lack of transparency and accountability at government level in environmental reporting.
"Things are not getting better, but getting worse and we need to proceed with caution," says Dyer. "Anything else would be irresponsible."

Alberta oil sands -- facts
-- Most of Canada's oil sands are located in northern Alberta, a province in the mid-west of the country.
-- Deposits at Athabasca-Wabiskaw, Cold Lake and Peace River lie under boreal forest covering 140,000 sq km -- an area larger than England.
-- Albertan oil sands hold proven reserves of 1.75 tn barrels, with 173 bn barrels thought to be recoverable using current technology, the Albertan government says.
-- In 2006, bitumen production averaged 1.25 mm bpd through 81 oil sands projects, representing 47 % of total Canadian petroleum production.

Shell Canada
Aside from testing carbon capture and storage, Shell is introducing new technology to produce oil sands more efficiently, and so save energy. Shell Canada expects its special "froth treatment processing technology" will use up to 10 % less water and up to 10 % less energy per barrel of bitumen than current technology. This should shave 40,000 tons of greenhouse gas emissions associated with oil sands production a year.
Shell Canada's oil sands operations remain more carbon-intensive than conventional oil production.