Surmont and Greenhouse Gas Regulations

The first full year of commercial operation at the Surmont Phase 1 central processing facility was 2008. In 2008 the emissions at Surmont Phase 1 were 325,898 tonnes (65 kilograms carbon dioxide equivalent of barrel of oil equivalent) of carbon dioxide equivalent, so Surmont Phase 1 will fall under the Specified Gas Emitters Regulation as a new facility. As a new facility, Surmont is establishing baseline emissions intensity in 2010 and will have a two percent reduction obligation in 2011. In 2008 and 2009 there were no reduction obligations required at the Surmont Phase 1 processing facility.

Surmont Phase 2

The regulatory production capacity for Surmont Phase 1 is 27,000 barrels per day and for Surmont Phase 2 is 83,000 barrels per day. Surmont Phase 2 will emit an average of approximately 1.9 million tonnes of carbon dioxide per year, which averages a carbon dioxide intensity of 60 kilograms per barrel of bitumen. The future estimated absolute carbon dioxide emissions for the Surmont project are 4.7 times greater than current emissions because of the addition of the second phase facility and future operations.

Managing Greenhouse Gas Emissions

Much of our ongoing focus is on generating fewer emissions per barrel of oil. In addition we are evaluating opportunities to retrofit facilities, purchasing carbon offsets and investigating technologies including carbon capture and storage.

We commissioned a study on the cost of capturing carbon dioxide from the natural gas-fired “once-through-steam-generators” that we use at Surmont. This study determined the cost per tonne to capture carbon dioxide using current steam production as well as carbon capture and storage technologies to be cost-prohibitive. As result, we have a comprehensive carbon management strategy.

Carbon Management Strategies

We are developing carbon management strategies for current or near-term oil sands projects (now to 10 years from now) and for future, longer-term oil sands projects (over 10 years).

• Current and near-term projects: For near-term projects we are developing plans to meet regulatory obligations through a combination of offset purchases and/or retrofitting facilities by:
  1. Developing models to better understand compliance scenarios and estimate reduction obligations required, along with determining the marginal abatement cost.
  2. Identifying opportunities to retrofit facilities.
  3. Developing carbon market capabilities so that we can transact and purchase carbon credits to meet compliance obligations
• Future facilities: We are investigating new technologies that could significantly reduce emissions through a combination of carbon dioxide avoidance and back-end carbon capture and storage. We are also looking at options for future designs at Surmont Phase 2. (Surmont will have the physical space required for a future carbon capture and storage retrofit, should it become economic for the project.)

Almost 95 percent of our greenhouse gas emissions are created in the steam generation process. A reduction in the amount of steam required to get the bitumen out of the ground and the amount of fuel consumed to generate steam is needed to reduce these emissions. Some of the specific applications we are considering for current and future facilities to improve our emissions performance are:

• Reducing the steam-oil ratio: Reducing the steam-oil ratio reduces the amount of natural gas we need to burn, reducing greenhouse gases and oxides of nitrogen emissions. We are looking at new ways to drill our wells to increase production efficiency and add lighter hydrocarbons or carbon dioxide to the reservoir to reduce the oil’s viscosity. These measures will reduce the steam required per barrel and thereby greenhouse gas emissions.
• Improving energy efficiency: We are investigating energy efficient technologies that are focused on ways to run our future facilities more efficiently and to use less energy, which reduces our overall greenhouse gas emissions and some air pollutant emissions. We are also designing plans for improved heat integration to get the most out of the natural gas we burn. We are looking at the benefits of pre-heating steam generator water with warm emulsion produced from the wells.
• Using insulated tubing: We are experimenting with insulated tubing to reduce heat losses from injected steam.
• Evaluating alternate combustion techniques and fuel sources: We evaluate high efficiency heat-generating technologies as well as in-situ combustion and in-situ upgrading to reduce the bitumen’s viscosity.