The advantages of synthetic crudes to refiners
- Suncor, Inc., Fort McMurray, Alberta (Canada). Oil Sands Group
Suncor Inc.'s Oil Sands Group (OSG) is in the business of converting oil sands into synthetic crude and other high quality petroleum products. The company holds a number of leases on the Athabasca Oil Sands deposit, which is one of four in northern Alberta. The Athabasca deposit contains more recoverable oil than Saudi Arabia, the US and Western Europe combined. With existing technology, it is economically feasible to process approximately 15--20% of this reserve, which represents 240 billion barrels of light, sweet synthetic crude. This huge reserve is an extremely important asset, especially given the ongoing decline of light, sweet crude production in both Canada and the US. The limited current development of the resource is due primarily to high production costs. Making synthetic crude involves a complex process which includes mining, bitumen extraction and upgrading. It currently costs OSG $US 18/bbl (capital and expense) to produce a product which sells for slightly under Par. This leaves a narrow profit margin which can be squeezed or eliminated by oil price swings. This type of exposure is considered unacceptable at OSG, and the company has recently committed to invest over $US 300 million in new technologies and process modifications which will reduce its cost of production by $US 5.50/barrel. This will bring per barrel production costs into line with conventional crudes without exploration risk or threat of depletion. OSG has such a high level of confidence in its abilities to significantly cut costs that it recently acquired two new leases--a commitment to continue operations for at least 50 years. The authors also believe that, once the company demonstrates to the petroleum industry that synthetics can be produced as economically as conventional crudes, interest in developing Alberta's oil sands reserve will grow significantly.
- OSTI ID:
- 7275828
- Resource Relation:
- Other Information: Paper AM-93-72
- Country of Publication:
- United States
- Language:
- English
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