Fuelling the future: Shell and Caterpillar trial LNG solutions in Canada
Shell Canada and Caterpillar are testing a new engine and fuel mix using liquefied natural gas (LNG) that could reduce operating costs and greenhouse gas emissions from oil sands mining. We assess the potential of LNG and dual fuels, and the implications for the global mining industry.
Contemplating the vast Athabasca oil sands in 1888, Robert Bell, then director of the Geological Survey of Canada, reported presciently that: "The evidence ... points to the existence in the Athabasca and Mackenzie valleys of the most extensive petroleum field in the US, if not the world."
The deposit is now recognised as the world's largest known reservoir of crude bitumen and the biggest of Alberta's three major oil sands reserves, along with nearby Peace River and Cold Lake. Together, they are thought to contain 1.7 trillion barrels of bitumen - or extremely heavy crude oil - in-place, comparable in magnitude to the world's total proven reserves of conventional petroleum.
Since 2003, the Athabasca Oil Sands Project (AOSP), a joint venture between Shell (60%), Chevron Canada Limited (20%) and Marathon Oil Canada Corporation (20%), has pushed the boundaries of mining, extraction and processing technology in order to exploit this invaluable natural resource.
Now, this remote part of north-eastern Alberta is the test bed for another industry innovation, this time involving Shell Canada and Caterpillar, who hope to pioneer a truck engine and fuel mix using liquefied natural gas (LNG) that could reduce operating costs and pollution from oil sands mining.
"To succeed commercially in the future, we believe we have to be able to compete economically and environmentally; we believe that is what Canadians want," said John Rhind, Shell's vice-president, oil sands. "With heavy hauling being such a core part of our operation, success with this could make a real difference in our operations costs and emissions."
A key differentiator: Caterpillar flies the flag for dual fuels
AOSP's Muskeg River and Jackpine mines, which came online in 2003 and 2010 respectively, produce up to 255,000 barrels of synthetic crude a day and account for 17% of Canada's total oil production.
Heavy haulage trucks, each capable of carrying 400t, are a vital link in the production supply chain, transferring bitumen-rich ore to crushers, where it is prepared for extraction. Using warm water, the bitumen is then separated from the sand and clay, diluted with a solvent and transported south via pipeline to Shell Canada's Scotford Upgrader facility, where it is converted into synthetic crude oil.
By substituting up to 95% of the trucks' diesel fuel with clean-burning LNG, Caterpillar aims to lower greenhouse gas (GHG) and criteria pollutant emissions, and reduce running costs. The US equipment manufacturer will leverage its experience with LNG in other applications to design and build a fully integrated vehicle ready for field-testing in 2016 at the Shell Albian Sands base near Fort McMurray.
"Caterpillar had already begun looking at the cost and emission-reducing potential of using LNG in mining trucks, but by working together on this pilot, we can possibly accelerate the timeline for when this option is available to us," a spokesperson for Shell said. "Caterpillar is developing the prototype engine, and Shell is providing the site facilities to conduct the trial, as well as two trucks to be retrofit with the trial engine.
In Caterpillar, Shell has a partner operating at the leading edge of LNG innovation. The company supplied its first integrated dynamic gas blending (DGB) retrofit kit to a Russian oil and gas operator in 2012. The following year, it delivered its first MaK M 46 DF dual fuel marine engine - designed for unlimited operation on LNG, marine diesel oil and heavy fuel oil - to Germany cruise operator AIDA.
Julian Turner talks to Deloitte’s global mining leader Phil Hopwood about resource nationalism, the mines of the future and why collaboration is key.
"LNG as a transport fuel is in its infancy, but there is a large and growing market in haulage and marine transport that makes it attractive for us to develop," the Shell spokesperson says. "LNG offers improved local air quality and a reduced GHG profile, but more work needs to be done."
Clean machines: Shell's long-term commitment to LNG
LNG is natural gas chilled to -162°C. A clear, colourless, non-toxic liquid, it occupies up to 600 times less space than natural gas and can therefore be transported and stored cheaply and easily by sea.
Shell provided the technology for the world's first commercial liquefaction plant at Arzew, Algeria, in 1964. Today, as the world's largest LNG shipping operator, the giant multinational operates 50 of the world's 370 LNG carriers and manages fleets based in Australia, Brunei, Nigeria and Qatar.
"Shell has many decades of experience globally in LNG production and shipping," the Shell spokesperson said. "In Canada, for example, natural gas is used as a clean energy source for heating in our industrial operations. We are keen to look at technology advancements that will help to drive performance improvement in our operations. LNG as a transport fuel offers choice to our customers looking for long-term, cost-competitive options."
Global demand for LNG solutions is expected to grow in the mid to long term. In Australia, where the mining industry has been hit hard, the ongoing LNG boom in Queensland is expected to create 20,000 jobs and boost the state economy by an average of $25bn a year over the next two decades.
Determined to achieve its goal of making integrated LNG technology a key differentiator in the mining industry, Caterpillar is developing three LNG-powered mining trucks - the Cat 793, 795 and 797. Mining vehicles will also be among the first to incorporate high-pressure direct injection technology as the company expands its DGB programme across its high-horsepower product lines.
Caterpillar also intends to provide dedicated natural gas and natural gas-diesel dual-fuel options for E&P operations and across the rail, construction and remote power sectors.
Fuelling growth: LNG to become commercial reality for global mining industry
The global mining industry, forced into ever more remote locations in search of precious reserves, is under increasing pressure to reduce its environmental footprint and engage with local communities.
Mine trucks emit significant quantities of CO2 and emissions from oil sands operations are currently 4-18% higher than from the average barrel of crude oil consumed in the US. By investing financial and intellectual capital in integrated LNG technology, Shell and Caterpillar are banking on LNG to become the fuel of the future, something the latter company has recognised for many years.
"Natural gas for large engines is going to happen - Caterpillar is betting on it," engines strategy director Joel Feucht stated during a keynote speech entitled 'The New Energy Reality - A Transition to the Natural Gas Economy', delivered at the annual HHP Summit back in 2012.
"In large engines, we have the opportunity as an industry to concentrate the infrastructure, to really focus the infrastructure investment.
"What we see in North America today is going to, over the long run, become a global phenomenon. We're going to invest because we see a global market long-term."