Should Alberta Upgrade Oil Sands Bitumen?: An Integrated Life Cycle - - PowerPoint PPT Presentation

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Should Alberta Upgrade Oil Sands Bitumen?: An Integrated Life Cycle - - PowerPoint PPT Presentation

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Should Alberta Upgrade Oil Sands Bitumen?: An Integrated Life Cycle Framework to Evaluate Energy System Investment Tradeoffs Nicolas Choquette-Levy Dr. Heather MacLean Dr. Joule Bergerson 31 st USAEE Conference November 6, 2012 1 Case Study:

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Should Alberta Upgrade Oil Sands Bitumen?: An Integrated Life Cycle Framework to Evaluate Energy System Investment Tradeoffs

Nicolas Choquette-Levy

  • Dr. Heather MacLean
  • Dr. Joule Bergerson

31st USAEE Conference November 6, 2012

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Case Study: Should Alberta Upgrade Oil Sands Bitumen?

  • Motivation for study:

Oil sands = 3rd largest proven oil reserves in the world 60% of bitumen upgraded (2009) Alberta’s target: 72% of bitumen upgraded (2016)

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  • Key Tradeoffs:

High upstream GHG emissions vs. low downstream emissions High capital expenses vs. higher expected profit margins

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Bitumen Production Bitumen Production

Heavy Crude Refineries Heavy Crude Refineries Medium Crude Refineries Medium Crude Refineries Light Crude Refineries Light Crude Refineries

Upgrading Upgrading

Light Sweet SCO Heavy Sour SCO

Diluent Diluent

Medium Sweet SCO Dilbit

Source: Adapted from Gary R. Brierley et al, 2006

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Technical Overview

Synbit Coke

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  • Previous Studies:

– Consultancy reports (Jacobs, TIAX, CERI, CERA) – Academic studies (McCann and Magee 1999, Furimsky 2003) – Government models (GREET, GHGenius)

  • Academic Contributions:
  • 1. Build integrated well-to-tank model
  • 2. Develop ranges of GHG emissions
  • 3. Integrate LCA results with cost-benefit model
  • Policy Contributions:
  • 1. Aid stakeholders in exploring the tradeoffs of upgrading investments
  • 2. Develop recommendations for environmental and Alberta policymakers

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Existing literature does not explore GHG and economic tradeoffs

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Private and Public Stakeholder Perspectives

Stakeholder Objective Unit of Analysis Discount Rate

Industry Maximize the profit of investment 1 bbl bitumen 15% (high risk) Alberta Public Maximize the aggregate wealth

  • f Alberta

1 bbl bitumen 5% (low risk) Climate- Concerned Alberta Citizen Minimize life cycle GHGs; maximize the wealth of Alberta 1 GJ transportation fuel 5% (low risk)

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Base Case Scenario

150,000 bpd bitumen 214,000 bpd dilbit 128,000 bpd SCO Dilution Upgrading 64,000 bpd naphtha

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150,000 bpd bitumen 27 kg coke

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Industry Perspective

Costs Benefits

Bitumen Production Costs Upgrading/Dilution Facility Costs Royalties Income Taxes Upstream GHG Taxes Diluent Expenses SCO/Dilbit Revenues SCO/Dilbit Revenues - Adjusted Discount Rate = 15%*

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* Sensitivity Analysis conducted

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Alberta Public Perspective

Costs Benefits

Bitumen Production Costs Upgrading/Dilution Facility Costs Royalties Income Taxes Upstream GHG Taxes Diluent Expenses SCO/Dilbit Revenues - Adjusted Upstream GHG Social Costs Discount Rate =5%

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Industry prefers Dilution to Upgrading under any CO2 price < $200/tonne (Base Case) – 15% discount rate

Dilbit - Industry SCO - Industry

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However, AB public prefers upgrading at CO2 prices > $80/tonne – 5% discount rate

SCO AB public Dilbit AB public

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Dilbit - Industry SCO - Industry

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Risk perception is key leverage point: 10% Industry discount rate

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SCO - Industry Dilbit - Industry SCO AB public Dilbit AB public

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Risk perception is key leverage point: 5% Industry discount rate

SCO AB public Dilbit AB public Dilbit - Industry SCO - Industry

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Industry results robust for economic variability

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SCO-Dilbit Differential ($/bbl) Base Case

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Industry results dependent on technical variability

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Base Case Bitumen:SC O Ratio

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Should Alberta Upgrade Oil Sands Bitumen?

Stakeholder Position Industry No: If GHG emissions are near base case results Maybe: If SCO can be refined at hydroskimming refinery or if risk

  • f investment is reduced

Alberta Public No: If carbon tax/social cost of GHGs are low Yes: If carbon tax/social costs are above $80/tonne CO2e

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Research Themes Revisited

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Future Work

  • Improve LCA model

1. Link parameters (e.g. electricity consumption and SOR) for more plausible GHG ranges 2. Track other indicators of crude quality (e.g. aromaticity) that affect refinery emissions

  • Develop alternate scenarios (e.g. partial upgrading)
  • Explore other research questions/approaches

1. Real Options Analysis 2. Consequential LCA

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Acknowledgements

  • Dr. Joule Bergerson and Dr. Heather MacLean
  • LCAOST research group members
  • Institute for Sustainable Energy, Environment, and Economy
  • Natural Sciences and Engineering Research Council of Canada
  • Carbon Management Canada
  • Canada School of Energy and the Environment
  • Oil sands industry reviewers

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Questions

Nicolas Choquette-Levy nicolas.choquette.levy@gmail.com (403) 531-6739 Joule Bergerson jbergers@ucalgary.ca (403) 220-7794

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Alternate Slides

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Context

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From Brandt and Farrell (2007), Climatic Change

  • High initial expenses vs. future expected profits
  • Investment in capital vs. degree of reversibility

Energy systems investment tradeoffs…

  • Energy consumption vs. GHG costs

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…Involve industry and public stakeholders

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Policy Case Study: Low Carbon Fuel Standard

  • Implemented in B.C. and California
  • LCA used to assign each fuel a “carbon

intensity”

  • Fuels must reduce carbon intensity by 10%
  • ver 10 years
  • Low-carbon fuels gain credits, high-carbon

petroleum fuels must buy credits

  • In CA, oil sands crude assigned higher carbon

intensity than conventional crude

  • “Upstream” processes (up until refinery) are

more heavily emphasized than “downstream”

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Recommendations for cost- and GHG-effective energy investments

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Methods

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Integrated Model Steps

GHOST Model Pipeline Model

PRELIM Model

Bitumen Life Cycle Stages: Corresponding Models:

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Recovery

&

Extraction Recovery

&

Extraction Refining Refining End Use End Use

Diluted Bitumen SCO Transp Fuel

Upgrading Upgrading

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Integrated Model Steps

GHOST Model Pipeline Model

PRELIM Model

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SOR Electricity H2 Consumption Bitumen-Crude ratio Crude Densit y Crude Viscosity Pipeline Diameter Distance Elevation Change Sulphur Content H Content MCR Refinery Config.

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Upgrading image from Suncor Energy Inc. image library

Bitumen Recovery SAGD, 2.1 – 3.3 SOR Upgrading Delayed Coking, Hydrocracking End use of fuel Dilution Naphtha, SCO diluents Pipeline Transport 2,000 – 4,500 km 24 – 46 in. diameter Refining SCO - Hydroskimming and medium conversion Dilbit – Deep conversion API 20 API 27 - 32

What are the ranges of well-to-tank emissions of upgrading and dilution pathways from SAGD extraction?

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Climate-Concerned POV

Costs Benefits

Bitumen Production Costs Upgrading/Dilution Facility Costs Diluent Expenses SCO/Dilbit Revenues - Adjusted Life Cycle GHG Social Costs Discount Rate =5% Royalties Income Taxes Upstream GHG Social Costs

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Results

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Base case upgrading pathway has lower GHG emissions per barrel bitumen

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Upgrading Pathway Dilution Pathways

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Base Case upgrading pathway has higher GHG emissions than dilution pathways

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Dilution Pathways Upgrading Pathway

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Base Case upgrading pathway has higher GHG emissions than dilution pathways

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Upgrading Pathway Dilution Pathways

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However, ranges of plausible emissions

  • verlap

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Dilution Pathways Upgrading Pathway

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Some upgrading pathways can be lower in GHG emissions than some dilbit pathways

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= modified pathway Upgrading Pathway Dilution Pathways

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The California LCFS does not account for this possibility

WTR Emissions WTR Emissions WTR Emissions

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LCFS Threshold

Dilution Pathways Upgrading Pathway

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Under Base Case assumptions, dilution is more profitable than upgrading

Dilbit profit = $5.40/bbl bit

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Full Base Case Results

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Dilbit AB public SCO AB public Dilbit - Industry SCO - Industry Dilbit Climate Concerned SCO Climate Concerned

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Sensitivity Analyses

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Sensitivity to Discount Rate – Company POV

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Dilbit SCO

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Industry Sensitivities

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Industry results robust for economic variability

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Industry results dependent on technical variability

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Economic Sensitivity

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Economic Assumptions

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Fuel Price Forecasts – Base Case

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Naphtha

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Climate Policy Options

  • Economy-wide Carbon Tax:
  • LCFS-like Policy:

Direct Taxes Adjusted dilbit price

projected implemented Costs CIi,j – CIbase * MJ/year

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Comparison with Other Studies

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Ranges developed via Low- and High-Impact Values for Parameters

Parameter Base Case Low-Impact High-Impact

Steam-to-oil ratio 2.6 2.1 3.3 SCO/bitumen ratio (upgrading) 0.85 0.9 0.78 API 27 (upgrading) 20 (dilbit/synbit) 32 (upgrading) 20 (dilbit/synbit) 27 (upgrading) 20 (dilbit/synbit) Transportation Distance (km) 3,000 2,000 4,500 Pipeline Diameter (in.) 34 46 24 Refining Emissions (kg CO2e/bbl crude) 69 (SCO) 81 (dilbit) 23 (SCO) 73 (dilbit) 69 (SCO) 105 (dilbit)

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Comparison of SCO Range with Previous Studies

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Comparison of Dilbit Range with Previous Studies

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Existing literature does not explore GHG and economic tradeoffs

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Feature Government Models (GREET & GHGenius) Consultancy Reports (TIAX & Jacobs) McCann & Magee CERI Report Linking of Parameters ✖   ✖ Range of Emissions ✖ ✖ ✖ ✖ Data Quality ✖ ✔  ✔ Effect of CO2 policies ✖ ✖ ✖ ✔ Thesis ✔ ✔ ✔ ✔

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Additional Material

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Technological Overview – Upgrading

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Source: Scotford Upgrader, NRCan

Raw Bitumen Hydrogen, Electricity, Natural Gas Coke SCO Fuel Gas

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Technological Overview – Refinery Configurations

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Abella and Bergerson (2011)

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Whether to upgrade involves GHG and economic tradeoffs

Upgrade Dilute

Produce higher quality crude (SCO) ✔ Produce lower quality crude (dilbit) Higher “upstream” GHGs Lower “upstream” GHGs ✔ Lower “downstream” GHGs ✔ Higher “downstream” GHGs High CapEx ($1 – 10 billion) Low CapEx ✔ Self-sufficient ✔ Dependent on diluent (uncertainty)

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