2 Methods of Oil Production & the Costs of Producing Oil from Oil Sands

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The production of oil from oil sands is an intricate process. There are two ways by which these oil sands can be processed to produce oil that resembles light crude oil. These ways are in situ and surface mining.

In situ technology

In situ technology recovers oil sands deposits that are located deeper underground using techniques that can be likened to the production of conventional oil.

In situ also makes use of advanced drilling technology by injecting solvents or steam into reservoirs to catalize the bitumen so that it can be pumped through wells to get to the surface.

In situ also makes use of steam-assisted gravity drainage, which uses horizontal wells that are of parallel pairs, one that is drilled for steam injection, and one used for oil recovery.

Surface mining

Surface mining is utilized when bitumen deposits are found close to the surface. Shovel and truck technology is used for surface mining. The oil sands are taken to a processing facility in which hot water is used for separating the bitumen from the sands. This process may include optimized pipeline transfer.

There is, however, only 20% of oil sands that are close enough to be processed through surface mining.

Cost of oil sands production over the last 10 years

Although there are large oil sands reserves, the cost of processing the oil from the bitumen is high, making oil sands production unprofitable.

During mid-2006, the National Energy Board of Canada approximated the cost of an in situ operation in the Athabasca oil sands to be C$10 to C$14 per barrel, while the cost of a mining operation would be C$9 to C$12 per barrel.

The economics of oil sands have dramatically improved, though, because at its world price of US$50 per barrel, the National Energy Board approximated the returns of a mining operation to be between 16% and 23%, while the returns of an in situ operation would be between 16% and 27%.

In 2017, major provider Syncrude’s operating costs are expected to average $32 to $35 per barrel of upgraded synthetic crude.¬†Operating costs for the current year are expected to fall between $37 and $39 a barrel.

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