More and more oil companies are diving into Canada's oil-soaked sands, eager to capitalize on vast resources in a stable country that welcomes outsiders. In 2007 alone, Royal Dutch Shell, Marathon Oil Corp. and BP increased or established positions in the sands, either to extract the thick, tarlike oil or work with a Canadian producer to refine it in the United States.

They joined the slew of Canadian producers as well as ConocoPhillips, Chevron Corp., Exxon Mobil Corp., Devon Energy and others that have sands operations or joint ventures.

Moratorium suggested

Some environmental groups advocate a pullback or a moratorium on new projects to address those concerns, while others are pushing for the industry to take the lead in a greener approach.

"We know that the tar sands are an important part of the oil supply to the United States, but it needs to be done responsibly," said Gary Stewart, a senior adviser to the International Boreal Conservation Campaign.

Earlier this month, a report from Toronto-based advocacy group Environmental Defence charged that oil sands operations have turned Canada into "the world's dirty energy superpower."

"It's time to clean it up or shut it down," Rick Smith, the group's executive director, said in the report, which calls for government to crack down on polluters.

Plan to cut emissions

Reducing emissions during such a growth spurt is far from easy, he said. But the government last month unveiled the beginnings of a plan to cut emissions in half by 2050 through increased efficiency, capturing carbon dioxide emissions and permanently injecting them underground and requiring that all new operations incorporate that technology into their building plans.

"We understand the importance of the oil sands, and the international attention that's being focused on them," Law said. "In the short term, we are honest enough to admit that our emissions will rise as we bring more operations on stream. But we will see a turning point."

Expensive operations

At a recent conference in Houston, ConocoPhillips Canada President Kevin Meyers compared the tarlike bitumen far underground to a hockey puck at room temperature. It must be melted by injected steam before it can be pumped to the surface, an energy-intensive process that consumes a lot of natural gas.

Once retrieved, it must be diluted to be transported by pipeline. Then it requires much processing to convert the heavy oil into usable refined products, so production costs can be four to five times as high as conventional light oil production.

But Canada has 179 billion barrels of proven oil reserves — second only to Saudi Arabia. And though Alberta increased its royalties last year, the country's "come on in" attitude has encouraged an influx as access shrinks in other resource-rich countries less willing to allow outsiders to control operations, such as Russia and Venezuela.

Of the 9.9 million barrels a day in total crude imports to the United States as of November, 1.9 million came from Canada. Saudi Arabia was second at 1.5 million barrels.

Canada's oil sands now produce about 1.3 million barrels a day, and that could ramp up to 3 million barrels a day by 2015, according to the Canadian Association of Petroleum Producers.

"This is a strategic resource not just for North America, not just for Canada, but for meeting global oil demand," Meyers said.

Stewart, the conservationist, acknowledged that Canada's current and potential output clearly illustrate that the boom will continue. But he hopes the U.S. players, many of whom are already involved in other environmental initiatives, will reduce emissions and police possible water contamination without waiting for Canadian government orders to do so.

"We're not trying to exclude the industry. That's not what we're talking about at all," said Stewart, who lives about 275 miles south of Fort McMurray, Alberta, the hub of much of the oil sands activity. "We're talking about doing it right. "

Going the extra mile

For example, Oklahoma City-based Devon Energy satisfies the need for water in its bitumen operation by drilling into a deep underground aquifer that contains saltwater, much like brine, rather than siphoning freshwater supplies. Once the water is used to heat and melt bitumen, it is treated and returned to the aquifer.

Devon spokesman Chip Minty said that when the company was drilling for water sources, it initially hit a reservoir that contained borderline drinkable water.

"Instead of using that, we spent another $1 million or $2 million to drill another well and go farther to get the stuff that was really bad. We wanted to ensure we were not tapping into water that could have any use for any other purpose," Minty said.

Stringham said other Canadian companies, including Syncrude and Suncor, have sought to increase efficiency by finding ways to get bitumen out of the ground using less natural gas to heat steam. Techniques they are studying in newer developments include using water that isn't superheated, and perhaps as cool as room temperature, to melt and move bitumen.

"The lower the temperature of the water, the less amount of fuel has to go into it," Stringham said. "It saves them money and saves on emissions."

Meyers, of ConocoPhillips, said at the recent conference that oil sands operations clearly "have a significant environmental footprint" with emissions, water use and intense use of natural gas. "We have to do more" to decrease emissions per barrel of production, he said.

"How are we going to do that? Technology," Meyers said.

The Alberta government has a similar view, and is relying heavily on encouraging study and implementation of carbon capture and storage technology.

Carbon capture

Law, of the Alberta government agency, said the industry has dedicated $500 million to carbon capture and storage research. In addition, the province will assemble a council of government and industry representatives to develop a plan to use that technology to cut emissions in half.

First they need the technology and infrastructure to make it work. "We expect to have a strategy after the fall of this year," Law said.

Source: Houston Chronicle|By KRISTEN HAYS

This comes as no surprise to people inside the industry. Membership in the Society of Petroleum Engineers has been graying for most of the past decade. Two-thirds of the membership is over 40. More than half of all oil-field professionals will reach retirement age during the next decade, according to CERA's calculations. Meanwhile, the low oil prices of the 1990s turned many petroleum engineering schools into near ghost towns.

With prices at near record highs, projects to extract hard-to-reach oil and gas are suddenly viable. But only if there are engineers and scientists to design the deep-water platforms, conduct the advanced seismology, route the new pipelines and so on. Complex projects take longer to build and put a premium on experience — at precisely the time that veteran managers and engineers are passing from the ranks.

American companies are responding to the shortage by opening design shops in Southeast Asia, where engineering graduates are more plentiful (though often inexperienced). Still, according to CERA's calculations, the supply of oil-and-gas professionals is stretched to the limit and can't keep pace with the long list of ambitious new projects planned for the next five years.

The brainpower shortage means these projects will cost more and take longer to complete, thus contributing to the high price of energy — great news if you happen to be an aspiring engineer. By graduation day last spring at the Colorado School of Mines, every student completing a petroleum engineering degree had already found a job — and most had their pick of competing offers. Starting salaries for undergraduate degree-holders range from $70,000 to $85,000, according to several sources, while engineers with graduate degrees command six figures. The average salary and benefits package for experienced oil professionals in the U.S. is over $160,000, a survey of SPE members recently found. Last year alone, average salaries rose more than 8%.

"Starting salaries for recent petroleum engineering graduates are the highest of any engineering profession," says Mark Rubin, executive director of the SPE, which has programs to encourage students as young as grade school to set their sights on the energy business. "In addition to the high pay," Rubin continued, "the work is exciting and high-tech — the oil and gas industry uses more computing power and data than any other industry except the military. An engineer sitting in a control room in Houston can steer a drill bit from a platform off the coast of Africa into an area the size of an average bedroom."

The University of Wyoming, which shut down its undergraduate program in petroleum engineering in 1997 due to lack of interest, revived the program last year. And colleges are clamoring for teaching staff: the Colorado School of Mines website, for example, is advertising for petroleum engineering professors at every level, from first-year assistants to candidates for endowed chairs.

But a shortage years in the making will not be cured overnight. Scott estimates that a young engineer needs eight years of experience to prepare for a lead role on a major project — even more to master deep-sea drilling. New mentoring programs are being developed to try to speed up the seasoning process, but that won't solve a problem that is right here, right now. Says Scott, "A problem the industry has known about for years is coming home to roost."

The line, which would carry gas south from the Prudhoe Bay oil fields in northern Alaska, would be the state's largest project since the Alyeska oil pipeline was built in the 1970s, setting off a Northwest boom and transforming Alaska's economy.

Though the line's route is still uncertain and construction might not start for five years, companies here already are preparing to tap the expected gusher of investment flowing north.

"It would have a huge impact on the Pacific Northwest," said John Parrott, a vice president at Totem Ocean Trailer Express Inc., which is based in Tacoma. "The pipeline is just breathtaking, how much money we're talking."

Joe Balash, special assistant to Alaska Gov. Sarah Palin, said two routes are under review: an 800-mile, $10 billion gas pipeline to Valdez, where crude oil currently is loaded aboard tankers; and a 2,100-mile route connecting with existing gas pipelines in Alberta, Canada, that would cost $20 billion to $25 billion.

Since the ports of Seattle and Tacoma are primary gateways for nearly every product that goes to Alaska, Northwest transportation companies and suppliers likely would reap much of the business generated by the project.

In early July, Palin re-invigorated interest in the pipeline by offering $500 million in state money to help build it. Her office has since extended its original Oct. 1 deadline for proposals to Nov. 30, in response to requests for more time from some would-be bidders.

The finished pipeline will tap 35 trillion cubic feet of proven natural gas reserves, with more in the field. Much of the gas has come to the surface with crude oil from the Prudhoe Bay oil fields, and then been re-injected into the ground to maintain oil field pressure and to preserve the gas for later sale. Now, with North Slope oil flow through the existing pipeline down to 800,000 barrels a day, or just 38 percent of the 1989 peak, the industry is turning to the state's gas fields to bring revenue again.

The Northwest already is a major supplier to Alaska, with two ocean carriers sailing out of Tacoma, and a variety of barge services leaving from Seattle. But shippers say they'll need a lot more capacity if the pipeline project goes ahead.

To meet the need, Totem Ocean Trailer Express, or TOTE, is holding onto an aging 790-foot cargo ship no longer needed for normal cargo service, because the ship's capacity would be essential if construction on the pipeline were to start. This is in addition to another ship the company already keeps for emergencies.

"We've always said we were going to keep one ship at least, with the promise of a pipeline," said Parrott. "We feel the pipeline project is another 10 years of business. They would be perfect ships to cover expansion through the building up of the pipeline."

TOTE expects to move lots of supplies, though it probably won't move much of the pipe. "It's all the other stuff that goes with it," Parrott said.