Replacing Natural Gas in Alberta’s Oil Sands: Trade-Offs Associated with Alternative Fossil Fuels

Concerns regarding resource availability and price volatility have prompted industries to consider replacing natural gas (NG) with an alternative fuel. The oil sands industry utilizes large amounts of NG for the production of steam, electricity, and hydrogen, and several “replacement fuels” are currently being considered. A life cycle framework is developed and applied to two generic oil sands projects as a case study (mining with upgrading and in situ with upgrading) to examine the energy, greenhouse gas, and financial implications of replacing NG with four fossil fuels: asphaltenes, coke, bitumen, and coal. Key trade-offs are identified among the fuels, as well as those associated with applying carbon capture and storage (CCS) to the systems. The analysis indicates that there is no vector dominant alternative to NG among the fuels investigated, although asphaltenes appear to offer the most potential. The analysis confirms that CCS can reduce life cycle emissions to 25% of those of current systems but will not be implemented for oil sands energy systems without a financial incentive or regulatory requirement. Under the analysis’ base conditions, the CO2 avoidance cost is $66/tonne CO2 equivalent and $87/tonne for the mining and in situ asphaltenes cases, respectively. However, the impact of compounding uncertainties is demonstrated and shown to be critical for appropriate interpretation.