Reality check: Oil sands projects in Alberta have a history of disappointing openings

A humbling heritage of setbacks taught leaders in the early oil sands developments not to be cocky and to avoid rash promises

By Gordon Jaremko

October 27, 2008

A quarter-century later, the next big oil sands event dealt out yet another reminder that the 140,200-square-kilometre northern bitumen belt is an unforgiving technical frontier. As the Athabasca Oil Sands Project started up the third mining and upgrader complex in early 2003, a fire caused $150 million in damages and set back production for months.

Then in May of 2006, the Syncrude plant again upheld the tradition of surprise reminders that the world’s 175-billion-barrel, second-biggest oil supply source after Saudi Arabia is anything but easily conquered. A ribbon-cutting ceremony for an $8.4-billion addition had to be moved off the plant site when a startup glitch in a sulphur removal subsystem vented smelly, potentially hazardous waste gas.

On the financial side, the newest projects are models of planning and cost control by traditional oil sands standards.

Construction inflation was held down at Horizon to 36 per cent, to $9.3 billion from an initial estimate of $6.8 billion. The price tag for Long Lake climbed about 70 per cent into a range of $5.8-$6.1 billion from the original budget of $3.4 billion, but even that escalation fell far short of the oil sands pioneers’ experience.

GCOS began as a $110-million proposal to produce 31,500 barrels a day. By the time the industry’s founding plant was completed after a seven-year regulatory and construction marathon, it grew to 45,000 barrels daily and costs more than doubled to $250 million.

Syncrude was an even longer epic told in much bigger numbers. The first construction application in 1962 called for a 100,000-barrels-daily plant forecast to cost $356 million. The production target stayed the same, but costs multiplied six-fold to $2.2 billion over the 16 years it took to sort out the ownership and get the project built.

The oil sands heritage includes a note of defiance instilled by experiences of founding the industry against economic, political and environmental odds.

Prized keepsakes of the pioneer generation – valued at least on par with vintage GCOS shares and medals – include T-shirts worn on the job at the pilot plant, known as Tar Island. Brave words silk-screened onto the cotton were directed towards oil sands critics.

Illegitimus non carborundum, said the Latin motto. To the workers who wore the shirts, who called themselves the Loyal Order of the Sons of Bitumen, the phrase meant, “Don’t let the bastards get you down.”

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