Monday, February 18, 2013

The Oil Sands’ Surprising New Nemesis: Plug-in Vehicles

The Oil Sands’ Surprising New Nemesis: Plug-in Vehicles:
My first look at the oil sands was in 1978 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+ a barrel oil prices, rapid expansion is underway with hundreds of billions of private capital being invested in new, mostly in situ projects. After forty years of careful nurturing by government and private industry the future finally looks bright for Canada’s oil sands.
Author is the cool-looking teenager second from the left in the back row. Photo taken in 1978 at the Syncrude Project site Fort McMurry Alberta.
Author is the cool-looking teenager second from the left in the back row. Photo taken in 1978 at the Syncrude Project site Fort McMurry Alberta. Today he is a commercial airline pilot and flight instructor; his car of choice is a 2012 Chevy Volt.
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 imaged. 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 first generation mass produced plug-in electric fueled family car.
The arrival of plug-in electrified vehicles such as the extended-range electric Chevy Volt, which can be fueled by either electricity or gasoline, and the all-electric Nissan Leaf created a media super storm, particularly in America. Buried under a blizzard of misinformation including various critical editorials and attacks, hype also from the manufacturers and a putdown by a U.S. presidential candidate against the Volt is a startling fact striking at the heart of the purported value offered by oil sands:

Plug-in vehicles use less energy per mile than gas-powered cars

Plug-in vehicles can go further on electricity generated from the energy sunk into producing one gallon of oil sands-based gasoline than an average car can on the gasoline. The Chevy Volt, able to utilize both electricity and gasoline as fuel, can actually go as far on the energy used to create a gallon of gasoline as it can on the gasoline!
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. Even under ideal conditions, 13 kwh of electrical energy could be created from the energy input added “well to wheel,” to mine bitumen, transport it, transform it into synthetic crude and then refine it into a single gallon of gasoline.

Synthetic crude oil’s dirty secret

Whether secret or not, the fact is this: Whatever its source, synthetic crude oil is more of an energy carrier than a fuel, and we’ll show you why we say so following.
The two biggest synthetic crude sources, oil sands and corn ethanol, both have questionable Energy Return On Investment (EROI) ratios. This doesn’t matter if your only method of delivering energy to a car is to convert it into gasoline. The threat posed by battery powered electric cars is that they are powered by electrical energy from a wall socket combined with an electric drivetrain that 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. Not only do you short circuit the need to line up at a gas station, and the environmentally unfriendly steps involved in creating and then burning gasoline, but you can save a lot of money doing it.
The savings per mile driven are dramatic. By cutting out the oil sands middleman, labor costs and his billion-dollar capital investment, the Chevy Volt costs only 4 cents per electric mile to run versus 10 cents per gas mile (based on U.S. national average of $3.80 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 from one of Canada’s newest, most efficient stream injected oil sands extraction sites now under development. Pengrowth Energy Corporation’s new Lindbergh thermal bitumen project is state of the art and well managed. It is also insulated from the labor and cost pressures facing most other Oil sands projects thanks to its easily accessible location. Lindbergh is a good example of the next generation of oil sands thermal extraction built with environmental waste water and energy efficiency in mind. It is also primed to take advantage of efficiencies created by the new Keystone XL and Northern Gateway pipeline infrastructure.
Step A, extraction: At Lindbergh Alberta, using the latest and most cost efficient in situ technique, burn 1,100 cubic feet of natural gas input energy per barrel to extract and process bitumen with a diluent into a barrel of crude feedstock called Dilbit. This process includes energy used recycling 90 percent of the waste water and chemicals used during the extraction and adds 1 part Diluent to every 3.3 parts of raw feed produced ( a best case 30-percent ratio). We will assume the most efficient diluent source, the proposed Northern Gateway Pipeline which is actually a twin pipeline. One Pipeline will export 525,000 barrels and the other will import 193,000 barrels of diluent back from the refinery’s processing the crude. For our calculations we will assume the diluent is shipped to the coast and piped to the site over the rocky mountains under ideal conditions adding only 4 kwh per barrel.
Step B, transport: Pipe the resulting Dilbit 1,600 miles from Canada through six U.S. states using the planned $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, Texas. 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, upgrade the dilbit into synthetic crude: This “pre-refinery” process transforms heavy oil into a lighter synthetic crude oil ( SCO) that can then be further refined into diesel and gasoline in step D. This is an upgrade process that needs to be done to crack the heavy oil into lighter synthetic crude. This use to be done first before transportation to a refinery but thanks to the proposed XL pipeline and economies of scale, it is more energy efficient if the upgrading is done after transportation to the Refinery. Estimated energy input is about 870 cu ft of natural gas per barrel or 15 percent of the feedstock itself (1.15 bbl. = 1 synthetic crude).
Step D, refine the synthetic 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 to C above). Even Elon Musk, CEO of Tesla Motors, has joined this debate. A good discussion can be found here and a good number for energy consumed is considered to be about 6 to 8 kwh per gallon of thermal energy (not electrical 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 gallons), 22 percent from more natural gas and 12 percent from the local electrical grid to produce an end product. That would be 29 kwh of electricity (either produced on site or sucked from the local grid) and 200 cubic feet of natural gas per barrel.
Step E, transport it to your local filling station: Using trucks, rail, ships and pipelines deliver gasoline to the consumer and then pump it into his tank using electricity. Lets just say it’s a pipeline level of efficiency of 8 kwh as this figure is all over the map, pun intended, depending on where the product is going.
In Total: That’s 49 kwh of grid electricity and 2,170 cubic feet of natural gas per barrel. What if this natural gas was burned by your local utility’s existing gas turbine generator instead? Using real world figures from the Energy Information Administration of 125 kwh per 1,000 cubic feet of natural gas and transmitted with average 93 percent efficiency to your wall socket you would have 252 kwh of Electricity. With new co-generation technology this could be 50-percent higher, but we will use the conservative 252 kwh number. So in total that’s a minimum of 252+49= 301 kwhs of electricity “invested” into each Oil sands barrel.
Now we need to take into account that a 42 gallon barrel of synthetic crude can produce up to 45 gallons of product using 100 percent external energy input. But as mentioned most refineries produce 36 gallons of refined product as they are built to consume part of the barrel for the energy required during the refining. Of the 36 gallons, (30 percent of 42) or 12.6 gallons of diluent (required in Step A to process the bitumen into dilbit) needs to be recycled back into the process. That leaves us with 23.4 Gallons of which at most only 19.6 gallons is motor grade gasoline.
Let’s use the 23.4 gallons figure to be generous. That’s 301 kwh / 23.4 gal = 12.86 kwh /gal.
That’s a 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 under ideal conditions. This doesn’t take into account the energy used in finding, developing and finally repairing the environmental damage of the oil sands operation.
Accounting for average battery charge efficiency (see EPA sticker for each car), how much above the 23 mpg average can the new technology cars go on 13 kwhs from your wall socket? That’s enough electricity for the Chevy Volt to go 37 miles, the same distance it can go burning the gasoline. The Nissan Leaf can go 38 miles, and the Tesla Model S 34 Miles. The Tesla family sedan also has the advantage of being able to spank many purpose-built sports cars such as the 10 mpg 500 hp Dodge Viper.
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.
Here's Mark Brooks still looking cool beside his 2012 Chevy Volt in classic 15 C Canadian weather.
Here is Mark Brooks still looking cool beside his 2012 Chevy Volt in classic 15 C Canadian weather.
The good news for Alberta’s oil industry (a.k.a. the Baker) is that its nemesis is still in its infancy and like all new car technology, it’s expensive. The average new car consumer is just beginning to struggle up the learning curve around understanding and trusting plug-in vehicles. Only a tiny fraction of new vehicles being purchased today can plug into a wall socket for some or all of its fuel needs. Intense lobbying efforts by a vast array of vested interests also appear to be dampening the quick adoption of the new technology. This will ensure that the tipping point for the mass adoption of plug-in vehicles 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 (i.e., Ford Model T, Wright brothers’ airplane, personal computer, etc). Advances in everything from battery storage densities and costs, to improved electrical grid energy generation are on the way. Sales of the new technology vehicles are already accelerating (Chevy Volt sales tripled last year) as consumers climb a wall of worry to discover that the cars are a robust and seamless replacement to gas-only models.
The long-term implication for Canada’s economy and North America’s fossil-fuel dependant 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 rolling out plug-in vehicles to test the technology and consumer demand.
But don’t cry for Alberta’s oil patch. Even a generation from now when it is no longer an affordable consumer fuel, oil sands crude will still be in high demand for everything from plastics to aviation and industrial fuel. The difference will be that burning oil sands gasoline in the family car will be considered an unnecessary luxury rather than a necessity.
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