The curse of Fort Hills is finally lifted
After several failed attempts, corporate takeovers and dissolved partnerships, Fort Hills is finally starting to take shape. In their 2015 annual report, Suncor declared the project's construction is finally over the hump, having achieved the 50% completion milestone. And the project's engineering is pretty much all wrapped up. By all accounts, there's no turning back now. Fort Hills is going forward and is well on its way to a late 2017 start-up.
Although Suncor has only been working on the project for the past 7 years, the Fort Hills lease has actually been under development for almost a century. In many ways, the project has been around the block several times and seems to have jinxed the many companies that have crossed its path.
HOW HISTORY REPEATS ITSELF
Alberta's very first oil sands extraction plant was located on the Fort Hills lease. Dr. Karl Clark, inventor of the Clark Hot Water Process that separates bitumen from the oil sands, helped develop Bitumount, Alberta's first "commercial" oil sands plant built along the banks of the Athabasca River with the help of PEI entrepreneur R.C. Fitzsimmons in the late 1920s.
Luckily, the oil sands deposit at Bitumount is located very close to the surface, which made it possible to manually shovel the ore into the process plant. But it takes two tonnes of oil sands to make just one barrel of oil, making the process very labour-intensive. Due its remoteness and lack of amenities, the plant was plagued by chronic labour shortages.
Bitumount managed to produce 2,000 barrels of bitumen in 1931, displacing coal tar as roofing and road paving material (giving the oil sands its erroneous "tar" sands label). To help improve the product's marketability, Fitzsimmons built a very basic refinery onsite in the late 1930s. But the plant never reached its full potential and the company was later sold to Montreal-businessman Lloyd Champion in 1943. Bitumount never made a penny after that and was eventually taken over by the Alberta government. The site was abandoned in the late 1950s and declared a provincial heritage site in 1974.
Dr. Clark passed away less than a year before Suncor started up its base plant operation in 1967, finally proving the commercial viability of oil sands mining 40 years after the Bitumount experiment. But the ghost of Bitumount seems to have haunted the Fort Hills lease ever since. It would take another 70 years before Fort Hills would become a reality. The history of the project is a long and tortured one.
FORT HILLS - A BRIEF HISTORY
A PROVEN PROCESS
Fort Hills now has the distinct advantage of not being the first to produce marketable bitumen, following in the footsteps of Imperial Oil's Kearl process. The greenfield project consists of a mining facility, a bitumen production plant, a tailings storage area, utilities and all supporting infrastructure. The Secondary Extraction plant will employ a High-Temperature Paraffinic Froth Treatment (HT-PFT) process, very similar to the one used by Imperial Oil and Shell. The Fort Hills deposit is relatively good grade with a slightly high strip ratio (indicating a larger volume of overburden needs to be removed in order to access the bitumen-rich ore). Some sections of the mine contain ore grades in excess of 12% bitumen.
AN INTERNATIONAL AFFAIR WITH CANADIAN CONNECTIONS
Suncor followed the lead of Exxon/Imperial Oil and decided to fabricate most of the Fort Hills modules offshore, split between South Korea, India, China and the Phillippines. However, having learned from Kearl's very public struggles with oversized modules, Suncor is instead building smaller sections offshore, then reassembling the components like puzzle pieces closer to home before transporting the oversized loads to site. This minimizes the number of workers required at site and helps keep costs under control. Suncor expects the construction workforce to peak in the summer of 2016 at a maximum of 6,000 people, much lower than the 10,000+ workforce typically needed to build an oil sands mine.
Building the $13.5 billion mega-mine is nothing short of a global effort. Suncor has tapped engineering and manufacturing resources from around the world, including many small and medium sized firms located in Alberta and across Canada.
MINE & SITE DEVELOPMENT
The contract for mine-site development was awarded to Canadian construction firm Aecon Group. The contract was reported to be worth $123 million. Foundations and early works were awarded to Ledcor, including the River Water intake structure along the Athabasca River and a 9 km piping corridor connecting to the Water Treatment and Waste Water Treatment plants. Kelowna-based Inline Construction Surveys is the prime survey contractor for the site.
The materials handling plant (the dry side of OPP) was awarded to Germany's FAM with much of the structural steel fabricated by Chinese firm BOA Steel. Fort Hills will have 2 double-roll crushers feeding to a single Triple Surge Bin which feeds three independent trains of rotary breakers. The Surge Feed Conveyor will have 18 installed pulleys, capable of transporting up to 14,500 tonnes/hr of mined oil sands to the process plant.
Edmonton-based Waiward Steel was awarded the contract to fabricate structural steel components for the OPP facility, including stair towers and HVAC modules stretching from the crushers to the slurry preparation feed conveyors.
Pumpboxes for the Slurry Preparation Plant were fabricated by Saskarc Fabrication. The company's fabrication shop is located in the town of Oxbow in the SE corner of Saskatchewan near the US and Manitoba borders. Detailed engineering for the Slurry Preparation, Primary Extraction and the tailings facility was awarded to WorleyParsons in a contract worth an estimated $140 million.
Two large bore Hydrotransport pipelines will transport the oil sands slurry from the Ore Preparation Plant to the main bitumen extraction plant. Primary Extraction consists of 2 Primary Separation Cells (PSC) and a series of column flotation cells to help recover bitumen from the middlings and tailings streams of the primary separatio cells. Fort Hills will use thickeners to dewater fine tailings from the flotation circuits, recycling the water and waste heat back to the extraction plant.
SECONDARY EXTRACTION (FROTH TREATMENT)
One of the largest contracts was awarded to South Korean firm SK E&C for engineering and construction of the Secondary Extraction facility (more commonly referred to as Froth Treatment). SK E&C reported the contract to be worth $2.55 billion for both Detailed Engineering and construction of modules. The company had previously completed Front-End Engineering (FEED) for Fort Hills in Seoul, South Korea. There are en estimated 600 modules in the entire Secondary Extraction facility.
Belgium-based Cofely Fabricom opened a 14 hectare assembly yard in Fort Saskatchewan to assemble 80 modules for SK E&C. In keeping with the project's modularization strategy, Fort Hills will consist of 3 Secondary Extraction trains with smaller vessels built offsite (versus the original plan of 2 larger trains which would have required the vessels to be stick-built onsite). Malaysia-based KNM Process Equipment will be fabricating 6 Froth Settling Units (FSU), each measuring about 10 meters in diameter and stand 30 meters tall. KNM is also fabricating 6 Tailings Solvent Recovery Units (TSRU), 6 drums, a froth deaerator, a process water heater and numerous other vessels for the process plant.
Sancon was awarded the contract to develop commissioning procedures for Secondary Extraction as well the Utilities & Offsite facilities.
UTILITIES & INFRASTRUCTURE
The utilities plant, which produces water and steam, was awarded to Fluor with about half of the engineering farmed out to their Indian office. Much of the large bore piping for the utilities plant is also being fabricated in India. Fluor's contract was reported to be worth $1.3 billion. Calgary-based Pacer Corporation was awarded a $15 million contract through Fluor for deep undergrounds, including firewater, potable and recycled water, storm sewers and sanitary systems.
Steam boilers were fabricated by US-based Cleaver-Brooks. Cleaver-Brooks is a major supplier of modularized boilers for oil sands in-situ process plants. Heat exchangers are being manufactured by Chinese firm Jiangsu Sunpower Technology. High pressure boiler feed water (BFW) pumps are being supplied by Flowserve.
Quebec-based H2O Innovation was awarded a $9.4 million contract to design, build, install, and commission a water treatment package, including potable water for the facility.
CO-GENERATION POWER PLANT
The COGEN plant was awarded to TR Canada, the Canadian arm of Spanish engineering firm Tecnicas Reunidas. The turnkey contract includes engineering, procurement and construction of two 85 MW gas turbines, two heat recovery steam generators (HRSGs) and all related interconnecting systems. The contract was reported to be valued at $250 million. COGEN facilities produce steam and power simultaneously using natural gas, reducing the load on Alberta's power grid. This helps reduce greenhouse gas emissions from the mine since Alberta's power grid is still predominately coal-fired.
PROCESS CONTROL & AUTOMATION
Honeywell was selected as the Main Automation Contractor for the project and will handle process control and simulation for the facility. A $70 million telecommunications contract was awarded to UK-based Kentz Corporation, a subsidiary of SNC-Lavalin.
ENVIRONMENT & WATER MANAGEMENT
The McClelland Lake Wetlands Complex (MLWC) which runs right through the Fort Hills mining area has been a major point of contention among environmental groups. Vancouver-based Hatfield Consultants was awarded the contract for aquatic monitoring of a new compensation lake for any fish, invertebrates and vegetation displaced by construction of the mine (referred to as the No Net Loss Lake). Hatfield will also be monitoring environmental compliance of the River Water Intake Structure and measuring water quality of various settling ponds located throughout the Fort Hills site. Settling ponds knock-out sediments in clean (non-process affected water) which is eventually released back to the environment.
PIPELINES & STORAGE TANKS
The Solvent Recovery Unit (SRU) in Secondary Extraction produces a relatively high-temperature, partially-deasphalted bitumen. Since the bitumen is hot, it can be pumped to Suncor's base plant without the use of diluent. The new 24 inch 90 km pipeline (known as Northern Courier) connecting Fort Hills and Suncor's East Tank Farm will be constructed and operated by TransCanada. Northern Courier also consists of a 12 inch diluent/diesel return line, providing fuel for the mining fleet and giving Fort Hills the ability to dilute the bitumen onsite if required.
The Fort Hills partners are also building more storage capacity at Suncor's East Tank farm, where the hot bitumen will be blended with diluent pipelined from the Cheecham Terminal near Fort McMurray. A new 447 km Norlite Pipeline, constructed and operated by Enbridge, will supply Suncor with diluent from Enbridge's Stonefell Terminal near Edmonton.
Blended diluted bitumen (or dilbit) will be transported to the Hardisty Terminal via Enbridge's extended Wood Buffalo Pipeline. Teck Resources has secured 425,000 barrels of dedicated storage capacity at Hardisty, allowing the dilbit product to be refined locally in Edmonton, sold to market via existing pipelines or loaded onto rail cars. The new Fort Hills dilbit blend is expected to be similar in quality and price to Western Canadian Select.
THE FORT HILLS DIFFERENCE
Fabricating piping modules and pressure vessels offshore is nothing new. The initial phase of Imperial's Kearl Oil Sands Mine was also criticized for building most of its modules in Asia. But Fort Hills is one of the first mega-projects to outsource most of its engineering to China, India and South Korea.
When Fort Hills was sanctioned in 2013, engineering offices in Calgary were bursting at the seams. Shell, Imperial and CNRL were in the midst of building and expanding their mining operations in Fort McMurray, making workforce shortages a top concern for Suncor investors. Fast forward just 2 years later and the picture became very different. After several oil sands operators wound down their major projects, engineering houses in Calgary began mass layoffs. And Fort Hills wasn't there to save them.
Suncor also faced a barrage of hate-mail last year when a HR recruiter told Fort McMurray locals not to bother applying for fly-in fly-out jobs at Fort Hills. Suncor later clarified the statement noting it would prefer to have Fort McMurray residents work at Suncor's base plant (located just 30 km north of the town) and not have commuter busses run 90 km up/down Highway 63 to the Fort Hills plant. However, Suncor later modified their hiring policy, allowing local residents to apply for positions at the remote Fort Hills operation. The mine is expected to employ 1,600 permanent staff, excluding maintenance contractors.
The Fort Hills partners insist they can keep operating costs, including sustaining capital to less than $30 a barrel over the life of the mine. The project has an anticipated start date of late 2017, with ramp up to nameplate capacity within the first year of operation.
AVG BITUMEN GRADE
AVG FINES CONTENT
YEARS MINE LIFE
TPH CRUSHER FEED
BBL 2P RESERVES