Page 142 - Synthetic Fuels Handbook

128 CHAPTER FOUR

Originally estimated at less than $1 billion, capital needs began to escalate rapidly in the
early 1970s. The cost was more than one of the four partners wanted to pay and the number
of participants dropped to three. Since the company dropping out held one of the largest
interests, the loss was keenly felt and for a while the project was in jeopardy. It was finally
kept alive through the participation of the Canadian government and the governments of
the Provinces of Ontario and Alberta. The Canadian government took a 15 percent interest
in the project while the Province of Alberta took a 10 percent interest and the Province of
Ontario a 5 percent interest. The balance remained with three of the original participants.
Imperial Oil Ltd., Gulf Oil Canada Ltd., and Canada-Cities Service Ltd. After that initial
setback, progress became rapid and the project (located a few miles north of the Suncor
plant) was brought to completion (onstream: 1978). The latest estimate of the cost of the
plant is in the neighborhood of $2.5 billion. At a design level of 120,000 to 130,000 bbl/day,
the capital cost is in excess of $20,000 per daily barrel.
For both the Suncor and Syncrude plants, the investment is broken down to four broad
areas: mining (28–34 percent), bitumen recovery (approximately 12 percent), bitumen
upgrading (28–30 percent), and offsites, including the power plant (16–24 percent).
In an economic treatment of, in this case, oil production, there are invariably attempts
made to derive the costs on the basis of mathematic formulas. The effects of inflation on the
capital outlay for the construction of an oil sands plant prohibit such mathematic optimism.
For this reason, there are no attempts made here to “standardize” plant construction costs
except to note that, say, the percentage of the outlay required for specific parts of a plant
must be anticipated to be approximately the same whether the plant costs $300 million or
$15 billion. The economics of an in situ project will be somewhat different because of the
ongoing nature of the project and the offset of costs by revenue.
In the United States, oil sand economics is still very much a matter for conjecture. The
estimates published for current and proposed Canadian operations are, in a sense, not appli-
cable to operations in the United States because of differences in the production techniques
that may be required. As an example, one estimate in particular showed a construction cost
of (in 1978) $145 million for a 10,000 bbl/day extraction plant and it was conjectured that
such an extraction plant would have to operate and be maintained between $2.00 and $5.00
per barrel.
Any degree of maximizing the production of liquid fuels will require the develop-
ment of heavy oil fields and oil sand deposits. Recent inflationary aspects of plant con-
struction costs have brought to a slowdown what was considered, for example, to be a
natural evolution of a succession of oil sands plants in Canada. The significantly higher
capital requirements ($10–$15 million) for the construction of large recovery/upgrading
plants will not decrease but the suggestion that commercial planning be directed toward
smaller scale nominal size (i.e., Suncor-type plant, 45,000–60,000 bbl/day) may be
seeing fruition. On the other hand, oil sand plants could be developed on the mini-
modular concept thereby relieving some of the high capital outlay required before the
production of 1 bbl of oil. Along these lines, there has also been a similar suggestion
that several mining and recovery units produce feedstock for a larger upgrading facility.
Either of these modular concepts could be developed throughout the life of the lease by
the sole owner or by a consortium.
Activities related to the development of the tar sand resources of the United States have
declined substantially since the early 1980s in line with the decline in the price of crude oil.
In 1981, when the price of crude oil was approximately $35 per barrel, some 35 tar sand
field projects in the United States were either operating or in the late planning stages. By
mid-1985, these numbers had declined seriously.
The projects in operation in the early 1980s included 34 in situ projects and 9 mining/
extraction projects, and production totaled in excess of 10,000 bbl/day. Almost all of this
production occurred in California by means of in situ steam operations but this was from