Q&A: Subir Bhattacharjee on the Geopolitics of Oil and Alberta’s Tar Sands

Subir Bhattacharjee: When you produce petroleum you basically produce a lot of water along with it. In conventional petroleum processing, the water is essentially either re-injected back underground or you use it for another kind of an industrial use. In Alberta, we use water to produce petroleum. In some of those applications, you are injecting water underground or you are injecting steam underground. You take the oil and water back up above ground. This oil and water are mixed together. Separating the water and recycling it to recover more oil becomes a very expensive process — we work on trying to clean up this water, which we call “produced water.”

Subir Bhattacharjee: The enhanced oil recovery processes that we have in Alberta use water in the form of steam to inject underground. It reduces the viscosity — which is the flow-ability of the oil — and makes it more easily extractable from the underground formations. When that oil and water come out of the ground, you need to separate the oil. That’s the value stream. You convert that oil to whatever you can sell, but you take the water back. This water is contaminated with all the organic molecules and the solutes and the salt that was underground.

You need to clean it up, so it can be fed into a boiler that will make it steam. This is a very energy-intensive process, especially when you have water-treatment technologies that are conventional and require you to bring the temperature of the water down to very low values, to make it amenable to treatment by these technologies. Then you have to heat this water back to steam. That also involves a lot of energy. This a very interesting facet of the global challenge when you are producing energy: how much water you are consuming. And how much energy you have to spend to clean that water back up.

In the context of oil sands production, this is a very challenging issue. You are using a very clean-burning hydrocarbon like natural gas to produce oil. There should be some questions asked about the use of one type of fuel to produce another type of fuel. Now again, I think one of the rationales is that the fuel that we produce is a transportation fuel, and its value should be differently assessed compared to natural gas, which is not traditionally a transportation fuel.

Subir Bhattacharjee: Oil sands production has two different flavors of technology that’s used. One is mining. The other is steam flooding or steam-assisted gravity.

Mining uses surface water, and it is quite water intensive. The total water requirement to produce a barrel of bitumen would be approximately 17 to 19 barrels, according to most estimates. A lot of this water is held in tailings ponds and is recycled back to the process. So, what you have is the net water intake. The net freshwater intake for these plants is about 1.8 to 2.4 barrels for each barrel of bitumen produced. If you start out a new bitumen operation, a lot of water is needed. As a plant gets normalized and starts operating in its regular cycle. it uses less and less fresh water. But that number, according to most companies, is not less than 1.8 to approximately two barrels of water per barrel of bitumen.

The steam-assisted gravity drainage is a slightly different story. To produce a barrel of bitumen, you need a total of three barrels of water to be boiled to produce steam. The process will not make economic sense, if the steam-to-oil ratio goes anywhere above five barrels of water per barrel of oil. Given that steam oil ratio of three-to-one, with a 90 percent recycle regimen, the amount of water required inside the operations is never more than .3 to .4 barrels per barrel of bitumen — so, this is a much lower water footprint than the mining. There is also less water to dispose of.

In mining bitumen, you do not dispose any water: you store all the water, because the policy is zero liquid discharge. That’s the reason we have about 750 million cubic meters (198 billion gallons) of tailings ponds, which is growing in Alberta. It’s a legacy that we have, because we always had a policy that there was no need to treat the water.

Subir Bhattacharjee: That’s a very interesting point. What’s the choke point? Is it that we will not be able to drive our vehicles? Do we choke ourselves with the carbon dioxide produced by burning the fuel? Or is it that we won’t have enough water to produce the fuel in the first place?

My short answer is that I don’t have a very clear idea. Globally, we have a fixed amount of total water in various geographical regions. In certain places you may have sufficient water to produce oil, but the water is coming from a very saline groundwater formation. To clean it up — to reduce the salt content to a level where it is more amenable to processing oil — is a huge energy consumer. Or you are in a water-stressed region that has enough water for producing oil, but does not have enough to grow crops: so how would you allocate that water? Would you transport it to first produce the crop and send it back to produce oil? Or can someone use water that has been contaminated by oil, treat it, and actually use it for agriculture?

These questions will be big driving issues in terms of water being the choke point, the decisive factor that will decide the price of oil. It’s not yet there, but, most likely, the price of water will dictate what the price of oil is.

Water consumption and oil production do not get that much attention, except in Alberta. The issue is twofold. The cost of production decides what technology will be able to recover a certain type of oil. Until oil went to about $US 36 a barrel, there was very little interest in Alberta’s oil sands. Recovery of a new type of oil only becomes feasible economically at a certain price point for oil.

So, if you take that argument the other way, you basically say that the cost of water and the cost of energy to produce a barrel of oil has a strong correlation with the current price of oil. So, what you are seeing is that the price of oil reflects the price of the other commodities that have been used to produce that oil. By the way, I don’t see hydrocarbon resources depleted anytime soon. We’ll find new types of hydrocarbon resources.

Subir Bhattacharjee: So much has been developed in terms of technology. Water treatment as a field is very mature, with extremely advanced technologies — we have an amazing array of technologies that can treat water. The best future for water technologies is when the proponents of these technologies can come up with a way of optimizing the use of these technologies. I hope they tailor a set of technologies, where one plus one doesn’t add up to just two, but one plus one is chosen in such a way that the benefit becomes more than two. There are quite a few ideas around that have immediate effects, in terms of reducing the cost of treatment or dramatically improving water quality with a lower energy footprint.

There will be small paradigm shifts over the next decade, which relate to getting distributed water sources for people who are in different locations. [For example,] coastal communities around the world will have to start looking at saline water to get their drinking water, [since] the cost of transporting water from inland over a long distance to coastal communities is starting to make less and less sense.