Canadian Oil Sands Rush Sparks Innovations

Several challenges have put the commercialization of Canadian oil sands at risk. The size of "the prize"-an estimated 174 billions of economically recoverable reserves-has created an urgency to find creative solutions to these challenges that could mean the difference between commercial success and failure. Three innovations are emerging:

* Strategic partnerships-unlocking doors and forging new economic relationships. Independent producers are seeking new alliances with downstream partners and will need to follow the example of national oil companies that have invested in US refineries to secure market access. New partnerships that bring together oil sands lease holders with upgrading technology providers can create hybrid companies that originate new processes and shift the economics of unconventional oil exploitation.
* New markets-going beyond traditional routes and creating new options. As traditional downstream markets in the US Midwest become saturated, refineries in eastern Canada will be upgraded to process the evolving composition of Canadian oil production. With expansions at these refinery centers, Canadian petroleum products such as ultralow-sulfur diesel or even excess synthetic crude oil could be exported to European markets.
* Technologies-applying manufacturing concepts to oil sands production. Companies are investing in new processes to recover and upgrade heavy oil. Future advances will be based on manufacturing technologies and are likely to come from standardization of smaller-scale modular units (matching staged oil field development) that offer the benefits of mass production, lower execution risks, faster implementation, and greater operational flexibility.

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