ENERGY: POWERING THE OIL PATCH
Shell eyes nuclear power for oil sands
New technology that extracts bitumen from limestone demands huge quantities of electricity
The Globe and Mail
May 22, 2007
CALGARY -- Royal Dutch Shell PLC is looking at nuclear power to support its experimental oil sands ambitions, on which it has already placed a bet of more than half a billion dollars.
The company, through a secretive Calgary-based subsidiary called Sure Northern Energy Ltd., is working to unlock an estimated 60 billion barrels of raw bitumen - more than 100 kilometres west of the oil sands epicentre around Fort McMurray in northeastern Alberta.
The prize Royal Dutch is chasing is bitumen trapped in hard-rock limestone, rather than the conventional oil sands around Fort McMurray where bitumen is mixed with dirt and sandstone.
The Anglo-Dutch energy giant is the likeliest customer for a nuclear power plant proposed by Energy Alberta Corp., a private company working with Atomic Energy of Canada Ltd.Unlocking the multibillion-barrel bonanza encased in limestone requires an astounding amount of electricity.
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The resource has been known for decades but efforts to recover it have failed.
Royal Dutch is working on electric heaters below ground to loosen up the gooey bitumen to draw it to the surface through wells.
The firm is trying to commercialize what it calls a "novel thermal recovery process" invented by Shell's technology arm.
Last year, Royal Dutch, through Sure Northern, paid the Alberta government $571-million to acquire exploration rights west of Fort McMurray - by far the biggest outlay to stake a claim in the oil sands.
Husky Energy Inc., which has publicly expressed an interest in harnessing nuclear power, is the other major player in the area, and has said it wants to partner with Royal Dutch, which is leading the new technology.
Energy Alberta, backed by oil patch veteran Hank Swartout, has a deal with government-controlled AECL to develop a nuclear reactor for the oil sands.
Technology to recover bitumen from limestone is "moving very rapidly," Mr. Swartout said.
"As it goes forward, the demand for electricity, without going any further, will be hugely increased," said Mr. Swartout, who is retiring from his post as chairman of Precision Drilling Trust, a firm he founded two decades ago.
Royal Dutch's Sure Northern unit didn't return several calls seeking comment. It is the only company actively working on bitumen in limestone. Other firms in the conventional oil sands, such as Total SA of France, have expressed interest in nuclear power.
One unnamed company is looking to take 70 per cent of the output from Energy Alberta's proposed $6.2-billion twin nuclear reactor that would start producing 2,200 megawatts in 2016. The reactor design exists only on a drawing board and the amount of power is equal to about a fifth of Alberta's electricity supply.
For comparison, Suncor Energy Inc., the second-largest oil sands producer, uses roughly 400 megawatts of electricity at its operations.
Neither Mr. Swartout nor his partner Wayne Henuset, president of Energy Alberta, would comment directly about a possible connection with Royal Dutch. "I'm not going to say anything officially," Mr. Swartout said. "Officially, we're not chatting with anybody other than there's a huge amount of interest that we facilitate this and obviously I don't spend my money foolishly."
Energy Alberta plans to submit a preliminary application to the Canadian Nuclear Safety Commission by mid-June to start the regulatory process. It is looking at building its facility in either of the small towns of Whitecourt or Peace River in northwestern Alberta.
Industry players have wondered about those locations, given their distance from Fort McMurray, but both sites are relatively close to Royal Dutch's limestone ambitions.
Last week, Energy Alberta held a public meeting on the proposed plant in Whitecourt, drawing about 300 people, with less than five dissenters among the crowd, according to Mr. Henuset. A nuclear reactor promises construction jobs for about 2,000 people with as many as 1,000 permanent, high-tech jobs.
There has been some opposition in Alberta - a citizens group called Cause is opposed - but the provincial government has shown increasing interest and the federal Conservative government is supportive. Energy Alberta, at its Whitecourt meeting, had several speakers, including Patrick Moore, who was anti-nuclear as part of Greenpeace in the 1970s but has become a nuclear advocate.
A potential competitor for Energy Alberta/AECL is Areva SA, the state-owned French nuclear power company.
Armand Laferrère is president of Areva's Canadian arm, which is looking to sell its technology in Ontario and Alberta, and he has had top-level meetings in Alberta. "We haven't made announcements to huge drumbeats for projects that don't have a customer ... but Areva is definitely interested in presenting its solution," Mr. Laferrère said.