The Relative Economics of Recovering And Upgrading Alberta's Hydrocarbon Resources
Authors: Feick J.E. , McConaghy D.J. 
Published: March 2010

In an attempt to provide a current appreciation of the comparative economics of the various Alberta hydrocarbon feedstocks in the petrochemical, electric power generation and fuel conversion areas, a methodology for preparing process economics in a 1980 Alberta context has been developed. The 1980 prices for the five basic hydrocarbon feedstocks of Alberta (crude oil, natural gas, natural gas liquids, sub-bituminous coal and oil sands) were projected or estimated along with certain by-product materials. Basic published quotes of known industrial energy processes were adjusted to account for inflation, location and scale. A consistent method for determining both operating and capital charges was applied to the processes. The final results demonstrate the comparative economics for six primary energy conversion and petrochemical processes: synthetic crude oil, synthetic natural gas, electric power generation, ethylene, ammonia and methanol. Analysis and interpretation of these economics has also been provided.

Background

The Canadian Public and its elected representatives have, over the last two years, become acutely aware of the non-uniform distribution of proven hydrocarbon reserves among the ten provinces and two territories. This distribution is illustrated in Figure 1. For six basic hydrocarbon sources (conventional crude oil and pentanes plus, natural gas, butanes and propane, synthetic crude oil, thermal coal and metallurgical coal), the ratio of Alberta's proven remaining reserve to the total Canadian proven remaining reserve has been calculated and plotted in the bar diagram of Figure 1. One can see that Alberta's share of the conventional crude oil and pentanes plus reserve is ninety per cent. Eighty per cent of the proven natural gas and ninety-eight per c.ent of the sub-bituminous coal of Canada is located in Alberta. Also, Alberta holds a virtual monopoly on any possible synthetic crude oil producible from oil sand. If lignite and bituminous coals are included in the analysis, Alberta's share of the national proven hydrocarbon-based energy reserve is sixty-five per cent. These statistics have been essentially obvious since the early fifties, but not sufficient in themselves to cause national attention.

With the escalation of the international price of crude oil from 2.89$/bbl in January of 1973 to 11.25$/ bbl in December of 1973 (f.o.b., Persian Gulf) and the resulting pressure for an upward revaluation of all energy equivalents, Alberta's crude oil reserves became the center of vigorous and somewhat strained debate and controversy between federal and western provincial governments. The critical questions were for what price would Alberta's conventional crude oil be sold throughout Canada and what fraction of subsequent revenues would accrue to provincial and federal governments, as well as the producing companies. Alberta's goal was to maximize current revenues from its finite natural resources by reaching parity with international prices immediately. The federal concern centered around balancing its desire for self-sufficiency by accepting increased energy costs as being necessary to stimulate exploration and development efforts, and buffering industrial, populous Central Canada from the full effect of a five-fold price increase in energy. (The private sector was at least disheartened by all government activity in this area.)