Oil Sands Centre of Excellence

If you’re trying to run an oil sands operation in Northern Alberta you need all the help you can get. The potential may be huge – but so are the challenges. You face:

• Exorbitant capital costs: Since 2001, capital costs for oil sands projects have tripled. Building or expanding a refining complex requires lots of steel, the cost of which is running at an all-time high, and engineering, procurement and construction services that are in peak demand worldwide.
• Inflated operating costs: The labour, raw material and transportation costs incurred in operating a business in this remote corner of Canada are significant to begin with, and rapidly increasing. In 1996, existing oil sands companies were pushing hard to get their operating costs down below $12 per barrel. Today fixed operating costs are running at $25-30 per barrel.
• Uncontrollable economic conditions: The appreciation of the Canadian dollar in relation to U.S. currency is having a significant negative impact on the competitive pricing of bitumen-based oil.
• Substantial environmental costs: Oil sands projects are developed under a strict regulatory framework and face some unique environmental challenges associated with bitumen processing. The cost of initiatives such as decreasing dependence on fresh water and higher sulphur recovery is escalating.
• A lack of resources and expertise: Not only are you operating a business in an area where temperatures can dip to a bone-chilling minus 40 degrees Celsius, your projects can be scattered over the three major deposit areas in north-eastern Alberta – an area twice the size of New Brunswick. Attracting skilled labour to work in this remote, inhospitable area is difficult and costly.
• Project delays and cost overruns: Oil sands production requires billions of dollars of up-front capital investment. All projects encounter delays and cost overruns. It can take 4-7 years before the first barrel of oil ever goes to market. Banks and investors are naturally very leery about financing this kind of risk.
• Huge information management issues: The quantity of information associated with multiple, complex projects is daunting in and of itself. But there are also the challenges associated with accessing that information and enabling the processes that allow it to flow to key stakeholders who are often globally dispersed.

Light at the end of the pipeline

To help oil sands' owner/operators and engineering contractors deal with some of these issues, the IBM Oil Sands Centre of Excellence (CoE), based in Calgary, Alberta, is inviting oil sands stakeholders from the industry, academia and government to be part of the Centre and work together to create new and innovative solutions. The Centre is bringing together the global research capabilities of IBM and its technology partners to address challenges such as:

• Health, Safety and Environmental Management: to address safety and security, emissions management, reclamation, and long term sustainability.
• Capital Project Delivery: to address project construction, schedule and logistics, cost control and visibility, labour and resource productivity.
• Operational Excellence: to address reliability, quality and cost competitiveness.
• Industry Collaboration: to drive common standards and practices and addressing common industry issues such as the environment.

With oil and gas reserves declining in other parts of the world, attention is squarely focused on the development of Alberta’s oil sands – but only if it can be operated in a financially viable way. Technology will be a key enabler – and IBM’s Oil Sands Centre of Excellence is front and centre, ensuring it offers a forum to help alleviate some of the risk in what is a very risky business.