The oil sands of Alberta

Alan Knight at Calgary, Alberta, CanadaI found out through my work with Virgin that it is impossible for an airline to boycott fuel made from oil sands. This is because sources are mixed and different airports have different suppliers. This means that the ambition of a leading environmental group to boycott Canadian oil sands by the major airlines could not be realised. However, having now visited the sites and spent considerable time with those involved, I can see that there is a long list of issues with the oil sands but I do not believe supporting a boycott is fair.

The allegations against oil sands is harsh: high carbon footprint, huge mines, lakes of toxic waste, declining caribou, dead ducks and what sounded like a hole the size of Florida opening up in nature’s wilderness. Not fair, maybe, but it was disturbing to see the huge efforts of my client Virgin to reduce its carbon footprint being potentially offset by the increased impact of oil’s extraction and upgrading in Canada. Oil sands is not just a local issue, but one that affects the carbon ambitions of companies around the world.

Hats off to Calgary Economy Development and John Hankins, its VP Investment and Trade Development. Keen to engage Virgin and other companies in its ambitions for Calgary to become a global energy centre, it contacted my office. I relayed my small but negative exposure to the oil sands debate and a few months later I found myself in the freezing cold of the Suncor mine and the ConocoPhillips’ insitu operation at Surmont.

I came under my own steam. As an advisor to Virgin, it was prudent for me to get a sense of the reality behind the stories, and as someone who is driven by the complexity of achieving sustainable development in our growing global economy, nothing beats conversations with the real experts. These are my own thoughts, not Virgin’s.

The allegations against the oil sands industry might be biased, but they are the natural consequence of a lack of ambition.

Calgary, Alberta, CanadaI was informed of Calgary’s determination to be a global energy centre. As the multinationals arrived, the finance houses came and others followed and so an international status feels inevitable. Indeed, Alberta cannot have the second largest oil supply in the world and not be a global energy centre.

The world needs oil, but it needs a low carbon footprint just as much. This global resource arrives with worldwide problems and therefore responsibility. That responsibility needs to be embraced, not just for Alberta or Canada, but also for the global population. During my time in Calgary and at the oil sands sites, I saw one missed opportunity after another.

My first field visit was a steam assisted gravity drainage operation, situated in pristine forest. I am bemused: where are the big mines, the dirty tailings and all the environmental devastation? I am shown a schematic of the vertical pipes fanning out to the horizontal. Steam is injected into one pipe and the oil oozes into an underlying well. This operation reminds me of conventional oil extraction, the only difference being the need for steam. I am told that 80% of oil sands will be harvested this way.

I think that branding both the SAGD (steam assisted gravity drainage) styles and the mines jointly as oil sands was a stunning communication misjudgment that has diluted the different messages of both.

Water is a massive issue. There is a lot of steam needed for this operation. But steam under pressure has so many other uses. Why not use the hot water to generate electricity? Co-generation came across as an interesting, but slightly inconvenient afterthought. I saw it as a central strategic opportunity to create new sources of energy and to lead the way on low carbon global economy.

Virgin and other airlines are taking biofuel opportunities seriously. Algae is a logical bet, but what would industrial scale algae need? It needs CO2, large amounts of space and warm water. What will impair progress on bio-fuel? The scale of infrastructure required to move it into the markets. What I saw in Surmont were the key elements for industrial scale algae production. Algae might even sequester some of the carbon.

Mines are big, mines are dirty and in juxtaposition to the upgrading facilities, they are a sobering reminder of the sheer scale of the operations required to fuel the global economy. This is a frontier mine in a frontier town. That’s fine, but it is hard to relate that culture with the low carbon future the world economy needs and wants.

As a British citizen growing up during the North Sea boom, I am staggered to learn that Alberta is as much as 50 North Seas. But what makes me uncomfortable is the scale of the investment needed which could be higher than $300 billion, with $50 billion already committed despite the downturn. The oil sands, in the eyes of the critics, could be seen as absorbing the capital needed to make ultra low carbon energy a mainstream commodity. With that amount of investment comes a massive responsibility. It is a disservice to the world and the oil sands industry that the same capital invested in this necessary resource is not leveraged to develop and embrace the low carbon technology of the future.

My first visit to Alberta was in early 2009 and having sat through several slide shows from different oil sands groups, I felt that: “It’s all about you”. The recurring theme was defensiveness, followed by reassurance that the allegations of environmental devastation were exaggerated. I was reminded several times that the bulk of the carbon footprint was not the processing of the oil, but at the combustion stage. The implication was that carbon emissions are not an oil producer’s problem, but my problem as an airline passenger or that of the airline carrier. Is that fair? If the oil did not combust, we would not buy it. The oil sands’ customers can and are making that combustion more efficient, but as the carbon footprint of oil production rises, they have to work harder to maintain the status quo.

I saw the Alberta oil sands community as a loyal family. But as a family it is becoming uncomfortable. Having become so preoccupied in defending the industry, it had been distracted from ambition and creativity. No-one dared speak up because no one wants to start a big family bust up, but it is an internal battle which needs to be fought. It is a global energy centre with global problems and a global ambition. The potential narrative is perfect: using the technology and resources necessary to supply the world with its current need for fossil fuel, oil sands producers are accelerating the technology innovation in low carbon and renewable energy of the future.

In the future, carbon intensive choices will be made less competitive. It will be a slow transition, but even Alberta oil will not last forever. In missing today’s opportunity it is increasing tomorrow’s risk. Its resources are both high in carbon footprint and finite.

The industry can think bigger and act bolder. It needs to use the technology and investments available today to be a global player within low carbon technology. If it doesn’t, someone else will. And it will be where it started, a provincial town producing dirty oil. It has the most to win and the most to lose.

That however is all beginning to change. Since 2009 I have returned five times and I have seen at first hand how Calgary City and the some of the oil companies have taken a real lead. John Hankins led an initiative where nine of the 15 larger oil cities in the world signed a pledge to reduce their own carbon emissions and I have witnessed the creation of the Oil Sands Leadership Initiative. Here five oil companies have started to work to together to find technical solutions to the challenges and to open more creative and constructive dialogue with the rest of the world.