Alberta’s oil sands are a prolific source of oil, comprising the largest crude oil deposit on the planet and accounting for about 98% of Canada’s total reserves. The oil industry there is a main driver of the Canadian economy and won’t be going away anytime soon. It will, however, need to change the way it operates. Through the Pathways Alliance the major players in the industry have pledged to achieve net zero emissions by 2050, and it’s going to take high levels of innovation and cooperation to get there.
The Pathways Alliance consists of six oil companies collectively responsible for 95% Canada’s oil sands production. The prolific area in northern Alberta currently emits roughly 70 megatonnes of CO2 per year (according to the Alberta government) and is Alberta’s leading source of emissions. While the companies are pledged to act on their own, Alberta is instituting a 100 megatonne/year limit with levies designed to incentivize more efficient operations in the quest to reduce emissions.
One major source of the emissions comes from the few bitumen upgraders operating in the region. The crude oil housed in the oil sands is too heavy to flow through a pipeline, so it needs to be upgraded to a lighter synthetic crude oil (SCO), diluted with a condensate to create dilbit, or trucked away as-is to be used as asphalt and roofing materials. The SCO is more easily refined into desirable end products like gasoline or jet fuel, while dilbit needs much more time, investment, and facilities to get the job done. Together, these two processes contribute significantly to the level of CO2 emissions in the region.
Aduro’s Solution
This is where an innovator like Aduro Clean Technologies, Inc. (CSE: ACT) (OTCQB: ACTHF) (FSE: 9D50) comes into play. Aduro has developed a patented water-based technology called Hydrochemolytic™ bitumen upgrading (HBU). HBU has several major advantages over current technologies, including decreased emissions, lower costs, and higher quality SCO.
Aduro, in conjunction with its partner Prospera Energy (TSX.V: PEI, OTC: GXRFF, FRA: OF6B), recently updated its progress toward building a pre-commercial pilot plant that will be capable of processing 50 barrels/day. If the companies are able to prove the advantages of HBU technology on a pilot scale, it could have a major impact on the oil industry’s ability to achieve net zero emissions.
Watch Aduro Clean Technologies’ CEO Ofer Vicus discuss the company’s progress toward commercializing its HBU technology for the Alberta oil sands industry.
Aduro has already cleared several hurdles along its path to the commercialization of its Hydrochemolytic™ technology, only recently unveiling the process to the public and to potential customers after several years of development in the lab. The company started with the chemistry, proving it on bench-sized models and independently verifying its capabilities in individual batches before building a small continuous flow model. That model, called the R2 HBU Reactor, is functional and will be fully commissioned this fall. It’s intended as a customer demonstration unit and will be used to prove the technology utilizing specific customer-mandated inputs and outputs.
The Prospera/Aduro partnership is advancing the progress to a larger pilot-scale, R3 version. Aduro has also been working with an anonymous larger oil company since 2019. So when the R2 unit is fully operational and the pilot project functioning, Aduro believes it will have enough data to present to the oil sands market as a whole. The technology is highly scalable, capable of being used by smaller producers like Prospera as well as the larger producers of the Pathways Alliance.
The Opportunity is Not Small
As noted previously, the Alberta oil sands is the largest proven crude oil deposit in the world. Production and refinery output is serviced by four main upgrading plants that together have the capacity to upgrade bitumen to about 1.4 million barrels of SCO per day. This accounts for nearly half of the bitumen output, with the rest being diluted prior to refinement or being used directly as asphalt or tar.
The scalability, low CAPEX, low OPEX, and low emissions of HBU offer a number of flexible opportunities for Aduro and its customers. As it stands now, bitumen needs to be transported (most often by truck) to an upgrading facility that is often tied to a refinery. HBU could end up being used at the upgrading facility itself to make operations more efficient there, or it could be used closer to the point where the bitumen comes out of the ground to decrease the reliance on emissions-producing transportation. It could complement current facilities or it could potentially replace them with a more efficient, lower cost large scale alternative.
The flexibility is a feature that should serve Aduro well when addressing the oil sands market. All of the organizations involved recognize the need for technological innovation if emissions are to be reduced. The Pathways Alliance is pursuing a $16.5 billion (all figures Canadian dollars unless otherwise noted) carbon capture and storage facility that could go a long way to achieving its goals, but that alone is not enough. Pathways is committing an additional $7.6 billion to investing in other emissions reductions projects and technologies.
This is where Aduro’s HBU could fit into the picture. For a company with a market capitalization in the $52 million range, it’s a very large opportunity indeed. Aduro’s licensing business model should ease the company’s entry into the market as well. Rather than committing to building its own large facilities, Aduro is focusing on its technology development and will license it to customers with existing operations or the ability to build their own facilities.
Investors are encouraged to follow Aduro’s steady progress toward commercialization. The need is there and the budget is already committed to technologies that can help oil producers meet their own emissions reductions targets. Aduro believes it has a unique solution that should be attractive to those producers. Stay tuned.
