Massive mining operations punctuate the remote boreal forest north and east of Fort McMurray. Suncor began production in 1967 after taking over the company that had initiated mining in the area three years earlier. The Suncor operation became the world’s first commercially successful oil-sands plant. It has been expanding its operation, having merged with Petro-Canada in 2009 to create Canada’s second-largest company. Suncor pumps around 230,000 barrels of oil per day and has 15 million barrels still to extract. Established in 1978, Syncrude, the world’s largest producer of synthetic crude oil, is also expanding its Fort McMurray operations. The company has spent $12 billion in the first decade of the 21st century to increase production to 350,000 barrels per day, increasing to 200 million barrels per year by 2015. In the lead up to pumping its first oil in 2002, Shell Canada’s Albian Sands site was the world’s largest construction project, employing up to 15,000 workers on-site at any one time. Canadian Natural Resources is one of many companies starting from scratch in the oil sands. Their Horizon site, slated to be pumping 230,000 barrels of oil per day by 2012, is costing $30 billion, making it the most ambitious construction project ever undertaken anywhere in the world by a private company.
All told, around $50 billion have been spent on oil-sands development since the mid-1990s, with the major players in the industry having collaborated on a development proposal that guarantees a combined regional investment of a further $70 billion over the next 15 years. The current total production rate of 1.3 million barrels a day is expected to increase to three million barrels by 2020.
As the name implies, the deposits are of highly compacted sand containing heavy oil or bitumen. The sands are mined in two different ways—deposits close to the surface are strip-mined, while the oil deeper down is extracted in situ (using steam injection). In the case of surface deposits, the size of the machinery used to scrape off the surface layer of muskeg and excavate the oil sands below it is mind-boggling. Syncrude’s walking draglines are the largest pieces of land-bound machinery in the world. Each moves slowly, dropping buckets as large as a two-car garage into the ground and dragging them back on a boom the length of a football field. The process continues around the clock, with a constant stream of 170-ton heavy haulers taking the overburden to reclamation sites and the oil sands to conveyor belts bound for the processing plants.
Extracting oil sands that lie deep below the earth’s surface is very costly. A simplified explanation of the process is that the fields are tapped by parallel wells. Steam is injected in one, loosening then liquefying and separating the oil from the sand. A second lower well extracts the resulting oil. Around 80 percent of known deposits will require this type of extraction technique.
Once on the surface, it must be chemically altered to produce a lighter, more useful oil. This process—in stark contrast to other operations where the oil is simply brought to the surface and shipped or piped around the world—requires an enormous amount of machinery and labor. Hot water and steam are used to separate the sand from the bitumen, which is then diluted with naphtha to make it flow more easily. The bitumen is heated to 500°C (930°F), producing vapors that, when cooled, condense at three levels. The sulfur and the gases produced during the process are all drawn off and put to use, but the liquid products are the most precious. By blending them and increasing the hydrogen content of the mix to make it “lighter,” a high-quality synthetic crude oil is produced. This oil is piped to Edmonton and distributed around North America for use in vehicles, airplanes, and derivative products such as plastics.
In 1974, the population of Fort McMurray was just 1,500. Today it stands at 75,000, having been rising by almost 10 percent annually for the last decade. While the current permanent population is quoted at 75,000, this doesn’t take into account the tens of thousands of temporary contract workers living in modular camps up at the actual oil sands. Factors these folks in, and you have Alberta’s third-largest city.
Workers are attracted to Fort McMurray for one reason: money. Local dishwashers make $50,000 a year, entry-level workers at the mines make over six figures, and the exotic dancers in town make the workers happy. With the super-high wages paid in the oil fields, downtown businesses are chronically understaffed, so much so that many offer retention awards or provide hiring bonuses to employees who find new workers. Up in the oil fields themselves, companies like Canadian Natural Resources have found it easiest to fly its construction workers into a private airstrip by charter plane from Edmonton. The province of Newfoundland and Labrador is a big supplier of labor, so much so that there are direct flights from Fort McMurray to St. John’s, as well as a “Newfie” music hour on the local radio station and even the only Mary Brown’s (a fast-food chain) outside of that eastern province.
The downside to high wages is a high cost of living. Incredibly, Fort McMurray currently has the hottest market in Canada, with trailers selling from $300,000 and single-family homes averaging $500,000. The rental vacancy rate is generally quoted at zero percent, and if something does come up, you can expect to pay around $1,800 per month for a one-bedroom apartment.
Excerpted from the Seventh Edition of Moon Alberta.