CERI: Oil sands costs up 6.3-13.2% in year

The estimated cost of producing bitumen in Canada has increased by 6.3-13.2% in the past year, depending on the production method, according to the Canadian Energy Research Institute.

Supply costs at the plant gate, CERI says in an annual report, are $30.32(Can.)/bbl for primary recovery, $47.57/bbl for steam-assisted gravity drainage, $99.02/bbl for integrated mining and upgrading, and $68.30/bbl for mining alone.

Compared with CERI’s estimates last year, the costs are up 6.3% for SAGD, 10.9% for integrated mining, and 13.2% for stand-alone mining.

CERI defines “supply cost” as the constant-dollar price needed to recover all capital expenditures, operating costs, royalties, and taxes and to earn an annual return on investment of 12.5% assuming inflation of 2.5%/year.

With adjustment for blending and transportation, the West Texas Intermediate-equivalent supply cost at Cushing, Okla., is $58.61/bbl for primary recovery, $77.85/bbl for SAGD, $103.16/bbl for integrating mining and upgrading, and $99.49/bbl for stand-alone mining.

In 2012, total production from Canadian oil sands areas is estimated to have increased by 13% from the prior year to 1.9 million b/d.

In a reference-case scenario, CERA projects production from mining and in situ thermal and solvent extraction, which totaled 1.5 million b/d in 2011, will reach 3.1 million b/d by 2020 and 5.6 million b/d by 2046.

A high-case scenario sees production via those methods of 4.1 million b/d by 2020 and 6.7 million by 2046. Under low-case assumptions, production doesn’t reach 4.1 million b/d until 2030 and gets no higher than 4.7 million b/d by 2046.

Total initial capital investments required during 2012-46 for oil sands work, according to CERI, total $229.7 billion in the reference case, $270.4 billion in the high case, and $176.7 billion in the low case. These estimates exclude spending for primary and enhanced oil recovery oil sands projects.

Ongoing investment, or sustaining capital, reaches $10.2 billion/year in 2046 and averages $8.7 billion/year in the reference case. In the high case, sustaining costs reach $12.1 billion in 2046, averaging $10.6 billion/year over the forecast period. Low-case sustaining costs are $8.4 billion/year in 2046 with a $7.1 billion/year average.

CERI expects natural gas requirements to rise from 1.259 bcfd in 2011 to a 2046 average of 3.183 bcfd in the reference case, 3.753 bcfd in the high case, or 2.693 bcfd in the low case.

In the absence of sequestering equipment, emissions of greenhouse gases will increase in proportion to production, CERI says.

GHG emissions increase from 47 million tonnes/year (tpy) of carbon dioxide-equivalent in 2011 to 2046 levels of 156 million tpy in CERI’s reference case, 137 million tpy in the low case, and 190 million tpy in the high case.