Canadian Manufacturing

Oil sands developer closing in on Ontario fabricating deals

Portable processing plants still on the table despite shipping obstacles


CALGARY—Despite logistics obstacles, Oak Point Energy Ltd. is still keen to build modular processing plants in Ontario and ship them to the Alberta oil sands.

Ken James, co-founder of the Calgary-based junior oil sands developer, said he hopes to have financing contracts signed by the end of 2012.

“Our interest has not waned at all,” he said.

Fabricating hotspots such as Sarnia, Burlington and Oakville are attractive for their capacity and stable workforces—increasingly hard to access in the booming Alberta market. Ontario shops have also invested in automation and are accustomed to producing the type of standardized assemblies needed for the modular plants, said James.

The SAGD (steam assisted gravity drainage) plants can be assembled or taken apart in 30 days. There are three configurations ranging in size and capacity but the ultra-lite exploration model is small enough to travel on all major highways.

According to James, portable plants deliver cost savings, a lighter environmental footprint and less risk to project owners.

They can be assembled in Ontario, Quebec and other provinces; sharing the economic benefits of the oil sands beyond Alberta.

“Not only is this an economic solution; I think more important, it’s a political solution…If there’s not a benefit for more Canadians, there will be more political interference in moving the energy industry forward,” James said, during a presentation at the recent National Buyer-Seller Forum in Edmonton.

He sees modular plants as the solution to many oil sands woes. Right now, development is chaotic, he said, due to capricious oil prices, long project cycle times and cost overruns.

“Nobody’s needs are getting met today. I talk to the [Alberta] service sector folks and they’re making great money, but every day they’re nervous and they’re watching every time there’s a wobble in the oil price.”

A drop in price means projects are put on hold, and work dries up throughout the supply chain. As soon as the price ticks up, project owners all move at once, putting unrealistic demands on capacity, labour and services, he said.

Typical oil sands plants take years to build, and by that time, economic conditions might have soured, so risks are high. Another threat is an under-performing oil reservoir.

Going portable mitigates those risks, James said. If a reservoir under-performs, the exploration plant can be taken down in about a month, and moved to another location. The plants are also less capital intensive to build.

The units borrow a strategy germane to offshore drilling—building upwards, instead of sprawling horizontally—meaning less intrusion on the environment.

Just as significant is the prospect of reducing the need for migratory workers. Today, plants are built in the field, necessitating work camps, travel and poor quality of life for thousands of employees commuting to the oil sands for weeks at a time.

Oil sands productivity rates hover around 60 percent—largely due to high turnover and poaching of skilled workers between project owners, James said.

“You take someone, put them through the training cycle and he leaves for $5 [extra] across the street. The whole industry suffers.”

Oak Point’s plants would be assembled by local workforces throughout Canada, and sent west via barge, rail and road. Larger units can be started in the east and added to as they hit the Prairies.

“Workers are a lot better when they go home to their families every night for dinner,” he said.

Whether modularization is the panacea remains to be seen. Oak Point is up against infrastructure challenges but James is confident December will bring the green lights he’s been waiting on to get orders in play.

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