Oilsands companies eye ways to adapt to a post-Paris, low-carbon world: Paul Haavardsrud

The world seems poised for a lower-carbon future. Can Canada's oil industry find a way to adapt?

Canada's oil industry knows it must adapt to the lower-carbon world that's on the way

People protest against climate change during a demonstration in Quebec City earlier this year. Canada's oil sands industry knows new rules and costs are on the way. (Mathieu Belanger/Reuters)

Not long ago the worst-case scenario for Canada's oil industry was easy to dismiss. The idea that fossil fuel reserves would be left in the ground, untouched due to nebulous worries about climate change, seems like a fairy tale when oil is over $100 a barrel and the world has a seemingly insatiable appetite for it.

Skip ahead to today and such fringe thinking is now much closer to the mainstream.

The Paris climate change conference, which starts at the end of the month, promises to ratchet up the international commitment to lowering carbon emissions.

In rejecting Keystone XL, meanwhile, the U.S. State department just called Alberta's oilsands "one of the dirtiest sources of fuel on the planet." Added to which, a movement to divest from energy stocks is gaining steam among investors. 

Is Canada's oilsands sector, which knows any serious steps to cut greenhouse gas emissions will hit it first, now beset by forces beyond its control, or will it have a say in what happens next? It's a trillion-dollar question that's not just looming over the energy industry, but the future shape of Canada's economy as well. 

A greener world 

The potential of the oilsands was evident as early as 1789, when Alexander Mackenzie first explored the region. Since then, the trick for the oil sands, which has a spotty commercial history, has been figuring out how to turn the oilsands into something more than a curiosity. 

Researchers figured out early on that heat would separate the oil from the sand. How to get the heat, though, was another matter. 

The granddaddy of big ideas to unlock the resource dates back to the 1950s. For a brief yet extraordinary moment, governments gave serious consideration to the underground detonation of a nine-kiloton nuclear warhead. Theoretically, the blast would loosen up the oil enough to allow it to be pumped to the surface. Originally known as Project Cauldron, the plan was eventually shelved due to a prevailing uneasiness with nuclear technology.

By the 1980s, the industry had figured out better ways to tap the parts of the oilsands too deep to mine, an amount that makes up 80 per cent of the resource.

Still in use today, the predominant method involves pulling the thick, tar-like bitumen out of the ground by first heating up an underground reservoir to more than 200 C. 

Canada's new Environment and Climate Change Minister Catherine McKenna, left, is congratulated by Prime Minister Justin Trudeau at Rideau Hall in Ottawa. (Chris Wattie/Reuters)
Applying enough steam to heat an underground formation to that temperature takes massive amounts of water and natural gas. Whether extracting the resource this way will still make sense in a greener world of lower oil prices and higher carbon taxes is now an industry-wide preoccupation.

The prospect of a lower-carbon future is also giving new currency to former Saudi oil minister Sheik Ahmed Zaki Yamani's famous warning to his OPEC brethren in the 1970s: The Stone Age didn't end because the world ran out of stones.

It's the profound implications of those cautionary words that is compelling Canada's largest oilsands player, Suncor Energy, to blast AM radio waves deep into the earth beneath a boreal forest in northern Alberta.

Where the rubber hits the road for greenhouse gas emissions is in the quantity of natural gas that's burned to turn water into steam. By replacing steam with the electromagnetic energy of radio waves, a technology originally developed for long-distance communication between submarines, Suncor thinks it can cut the energy and emissions associated with a barrel of oil by up to 75 per cent.

The new technique, which also uses solvents to dilute the bitumen, means a formation will only need to be heated to around 60 C, about the equivalent of the hot water that comes out of a kitchen tap.

"The world's changing, we have new governments in place, we have expectations of different climate change regulations coming out, and different expectations around environmental performance," said Mark Bohm, a manager in Suncor's technology development division. "We see technology as being a real key enabler that will allow us to meet what's expected of us now and in the future."

A pilot project is now far enough along that Suncor expects to know whether radio waves will be a winner inside of two years. If all goes according to plan, the company believes GHG emissions from its production will measure up against the cleanest conventional oil wells in the world.

World still runs on oil

Suncor's radio-wave ambitions are not the only attempt to adapt the oilsands to a post-Paris reality. Others are experimenting with solvents made from orange and lemon peels. A new oilsands-backed XPrize is also offering $20 million to global researchers who can repurpose carbon dioxide emissions.

For reasons related to both optics and economics, shedding the dirty oil label would clearly be a blessing for Canada's beleaguered oilsands industry.

Whether that happens, however, is still a big if.
Polar bears are not as resilient to climate change and disappearing sea ice as once thought, and naturalists are among those calling for greater measures to curb carbon emissions. (Jonathan Hayward/Canadian Press)

"There have been so many problems and challenges with the oilsands over the decades that I'm always cautious when someone says, 'Well, I've got this technology that's going to work,'" said Paul Chastko, an oilsands historian and professor at the University of Calgary.

For every strikeout, however, there's also been considerable success. Oilsands production doesn't reach more than 2 million barrels a day without more than a few run-scoring hits.

Despite a shift towards greener energy, the world also still runs on oil. As it stands, two-thirds of every barrel of oil produced is used in transportation. Climate change and low oil prices may have the sector on the ropes, but until the world figures out a better way to move around the industry won't be close to hitting the canvas.

History, for what it's worth, suggests that no one should be surprised at the oilsands emerging from its current slump with a plan to fit into a greener planet.

"The one thing that I'm certain of after studying the industry for as long as I have is that if there's a profit to be made, businesses will find it," Chastko said. "Mark Twain has a saying, 'history never repeats itself, but it does rhyme.' If we take a look at what happened in the past, I think we're a long ways away from writing an obituary for the oilsands."


Paul Haavardsrud writes for CBC's western business desk in Calgary. He is also a producer on CBC Radio’s national business desk where he talks about business on Radio One in the afternoons. Prior to that he worked for newspapers. On Twitter, he’s @paulhaavardsrud.