By Mark Brooks
Commercial Pilot and Flight Instructor
My first look at the Oil sands was in 1976 when I was still in high school. I was lucky enough to be part of a tour of the then experimental and heavily subsidized Sycrude operation near Fort McMurry, Alberta. Like most Canadians I have been cheering for years for the oil sands to be successful. Over the years I returned to Alberta intermittently, first proud, then amazed and finally worried by the pace of economic growth and its environmental impact. Fort McMurray has grown tenfold since my first visit and is now ground zero in Canada’s oil boom. Here bitumen is extracted from oil sands, upgraded to refinery-ready feedstock and then piped south to be refined into gasoline. It’s a multibillion dollar industry employing hundreds of thousands and producing 1.5 million barrels of synthetic crude each day. For those unfamiliar with the Canadian oil sands I would recommend reading the Oil Sands fact book.
In recent years high oil prices caused by high demand have allowed Alberta’s oil sands to become truly profitable, breaking the need for billions in government subsidies and tax breaks. With starry eyed dreams of $200-plus a barrel oil prices, rapid expansion is underway with hundreds of billions of private capital being invested in new, mostly in situ projects.
After 40 years of careful nurturing by government and private industry the future finally looks bright for Canada’s oil sands.
Oil sands crude is used for everything from plastics to aviation fuel, but the vast majority of it is consumed powering transportation for average North American drivers commuting in the family sedan. No steadier customer could be imagined. The fact that oil sands crude is already the most expensive to produce in the world, and climbing with each new project, is of no matter. Since there is no substitute for gasoline, soaring production costs are easily passed onto the consumer. As long as the global price of oil continues to rise faster than the cost of new synthetic crude production, the Canadian oil sands are golden.
Then 18 months ago a challenger arrived to provide the daily commuter with an electric escape hatch to the spiraling costs of crude production. This escape artist was spawned not by nagging environmental concerns, but by the relentless forces of technical innovation and the laws of economic efficiency. Enter the new electric fueled transportation paradigm, the unassuming Chevy Volt.
The arrival of the no compromise Chevy Volt and other new technology electric drive cars such as the Tesla model S, created a super storm in the American media. The Volt, a compact family sedan from General Motors, can be fueled by either electricity or gasoline. Buried under a blizzard of misinformation from special interests groups, hype from GM and outright paid political attacks against the car and GM, is a startling fact that strikes at the heart of the value of the oil sands:
The Chevy Volt can go further on the energy sunk into producing a gallon of oil sands based gasoline than it can on the gasoline!
Another way of looking at this is that the Volt uses LESS electrical energy to drive a mile in EV mode than goes into covering the same mile with its gasoline engine.
How can this be? It turns out that the oil sands, just like ethanol and other forms of synthetic crude production, in addition to being capital and labor intensive, also consumes a large amount of other types of energy. Currently a minimum of 13 kwh of electrical energy could be created from the energy sources used “Well to Wheel”, to mine bitumen, transform it into synthetic crude, transport and refine it into a single gallon of gasoline.
The dirty secret of synthetic crude oil, whatever its source, is that it is more of an energy carrier than a fuel source. The two biggest synthetic crude sources, Oil Sands and corn ethanol, both have EROI ( Energy Return On Investment) ratios of 3 to 1 or less. The threat posed by battery powered electric cars is due to the fact that an electric drive train is dramatically more efficient than the best gasoline engine. It is simply more efficient to feed energy directly into an electric car’s battery bypassing the costly steps involved in turning this energy into gasoline.
According to the EPA rating the 2013 Chevy Volt’s battery will use 10.8 kwh of its 16.5 kwh capacity to go 38 miles in pure electric drive before the charge sustaining gasoline engine kicks in. When it does, the Volt then gets 37 mpg combined city/highway. It is therefore more efficient to apply the 13 kwh to directly charge the Volt’s battery rather than into the creation of a gallon of gasoline. Not only do you short circuit the expense and environmentally unfriendly steps involved in creating gasoline but you can go further as well!
The savings per mile driven are dramatic. By cutting out the oil sands middle man, labor costs and his billion dollar capital investment, the Volt costs only 3 cents per electric mile to run versus 9 cents per gas mile (based on U.S. national average of $3.60 a gallon gas and 0.12 cents per kwh).
To see this efficiency challenge in action, let’s follow the energy path a barrel of oil sands bitumen takes to your gas tank.
Step A: Using the latest and most cost efficient in situ technique, burn 1000 cubic feet of natural gas to extract and process the bitumen into a barrel of crude feedstock. The amount of natural gas input energy can depend on location and can come from a number of sources so this is an average from the Canadian National Energy Board.
Step B: Transport Synthetic Crude 1,600 miles from Canada through six U.S. states using a new $7 billion Keystone XL pipeline. This pipeline will use 30 grid-fed electrically driven pumping stations to move crude before it finally ends up at a refinery hub in Port Arthur, TX. According to the state of Montana, each station is expected to draw 82.3 million kwh per year. That’s 6.7 million kwh per day in total to move 830,000 barrels, or only about 8 kwh per barrel. See Keystone XL pipeline info here.
Step C: Refine the crude into gasoline. Each refinery is different and this is a topic that electric vehicle enthusiasts have been discussing for years (sometimes without realizing that the majority of energy is consumed in steps A and B above). A good discussion can be found here and a good minimum number for energy consumed is considered to be about 6 to 8kwh per gallon of thermal energy or 240-280 kwh of thermal energy per barrel. We will be conservative and take the lower number and assume that, on average, 66 percent of the energy needed will come from the oil itself (reducing the end product from a 42 gallon barrel to 36 gallon), 22 percent from more natural gas and 12 percent from the local electrical grid to produce an end product. That would be 40 kwh of electricity (either produced on site or sucked from the local grid) and 200 cubic feet of natural gas per barrel.
Step D: transport it again to your local gas station and then pump it into your tank using electricity. Lets just say its free as this figure is all over the map, pun intended, depending on where it is going.
In Total: that’s a minimum of 48 kwh of grid electricity and 1,200 cubic feet of natural gas per barrel. According to the EIA, burning 1,200 cubic feet of natural gas in a new 50-percent efficient natural gas generator (some are up to 60 percent efficient) gives you about 600 kwh of electricity. Assuming that you lose 30 percent of that energy in transmission over the grid and you still get a total energy of 48 + 600 x 0.7 = 468 kwhs per barrel. See the U.S. Energy Information Administration Web site for help with the math.
Now we need to take into account that a 42-gallon barrel of crude can produces 44 gallons of product using 100-percent external energy input. But most refineries produce 36 gallons of refined product on average by burning part of the barrel for the energy required during the refining. Of the 36 only 19.6 gallons is usually motor grade gasoline. Lets use the 36 gallons figure to be generous. That’s 468 kwh / 36 = 13 kwh per gallon.
That’s 13 kwh of grid electricity that could have been delivered to your wall socket from the energy used to produce each gallon of oil sands-based gasoline. This doesn’t take into account the energy used in finding, developing and finally repairing the environmental damage of the oil sands operation.
It appears that using natural gas and grid electricity to produce oil instead of applying it directly to our transportation needs is like feeding bread to a cow instead of grain. Yes it works, but it is an unnecessary and costly waste that only the baker benefits from.
The good news for Alberta’s oil industry (aka the Baker) is that its nemesis is still in its infancy. Like all new technology, electric drive and its high density battery technology is expensive, and needs to prove itself. Only a tiny fraction of new vehicles being purchased today can plug into a wall socket for some or all of its fuel needs.
Although Volt sales tripled last year currently only 40,000 are on the road so it will be some time before any impact on crude demand is felt. Intense lobbying efforts by a vast array of vested interests also appear to be dampening the quick adoption of EV technology. This will ensure that the tipping point for the mass adoption of this technology is still years away.
The bad news is that the genie has escaped the lamp and no amount of lobbying or nay saying has ever buried American technological innovations of this magnitude in the past (e.g., Ford Model T, Wright brothers airplane, personal computer etc). The new technology represented by the Chevy Volt appears to be idiot proof, easily mass produced and it’s only going to get cheaper and better.
The long-term implications for Canada’s economy and North America’s fossil-fuel dependent society is massive. The cost to drive a mile into the future just dropped dramatically and as a side benefit, electric drive enables the removal of a key source of the CO2 emissions creating global warming. Already more than a dozen other automakers are planning to roll out Volt like imitations to test the technology and consumer demand. Unless oil sands crude producers refocus on energy efficiency and rein in production costs, they could find their customers opting, in whole or part, for an electric future.
This entry was posted on Tuesday, February 12th, 2013 at 5:55 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.