Cenovus is a Canadian oil company based in Calgary, Alberta. Our roots date to the 1880s, the earliest days of the oil and gas industry in western Canada. Today we have oil and natural gas production across Alberta and southern Saskatchewan; however, the growth of our business will be within our oil sands properties in northeast Alberta.
The oil on Cenovus's oil sands leases is deep underground and cannot be mined. In fact, as the committee has likely heard, 80% of the oil in the oil sands region in Alberta cannot be mined. These deep oil sands reservoirs require specialized methods to drill and pump the oil to the surface. We produce this oil by injecting steam into the reservoir to soften the oil deposits so that they can separate from the sand and be pumped to the surface. This is a production method known as steam-assisted gravity drainage, or SAGD, a technology we helped pioneer at Foster Creek in 1996.
A single well pad, with nine well pairs, covers about four to six acres on the surface, but accesses approximately 185 acres underground.
In 2010, we produced about 116,000 barrels of oil a day from 177 wells at our oil sands projects, and by 2019 we expect that the gross production capacity at our two major producing projects, Foster Creek and Christina Lake--both of which are also 50% owned by ConocoPhillips--could reach 493,000 barrels per day.
As we grow our business, we consult with local stakeholders. Where we can, we train and hire locally and use local businesses and services. We also work with many aboriginal communities and organizations in our operating areas.
In the Christina Lake area, for example, about 120 kilometres south of Fort McMurray, we have worked closely with Chipewyan Prairie Dene First Nation, which is our closest first nation neighbour. We have worked with this community to identify preferred vendors from among their joint venture companies. Overall, in 2008 and 2009 we spent $186 million with aboriginal businesses that provide oil field services and help to keep our camps running smoothly.
Wherever we can’t source materials locally, we expand our reach. Many of the materials used by our company and our industry require the skills of Canadians beyond Alberta’s borders. In 2010, we procured services and materials from all 10 provinces. In Ontario, our spend was almost $57 million. More than130 Ontario-based businesses benefited, including BlueSky Process Solutions in Stoney Creek, which provided us with pipe connectors and fittings. East of Ontario, our spend was more than $6.6 million. We bought environmental cleaners from suppliers such as West Penetone in Montreal, and commissioning and startup services from suppliers such as OTS in Sydney, Nova Scotia.
But within the industry we are just one of many companies that have contributed to the wealth of Canadians. A July 2009 report by the Canadian Energy Research Institute, CERI, indicated that oil and gas businesses paid $58 billion to Canadian governments in 2007. Further, the report anticipates that over the next 25 years the industry will add about $3.6 trillion to Canadian GDP, 25 million person-years of employment, and over one trillion dollars in net revenues for Canadian governments.
Those are significant numbers, but I’d like to shift now to the economic impacts of in situ development. Another CERI report, from January 2010, found that a 30,000-barrel-per-day SAGD project, with a lifespan of roughly 30 years, generates economic benefits throughout Canada. Over its lifetime, that single project would support more than 5,500 direct jobs, generate more than $9.5 billion in royalty revenues, more than $2 billion in federal tax revenues, and more than $3 billion in GDP nationally, and would contribute $35 million and $15 million to the GDPs of Ontario and Quebec respectively.
However, we don’t believe that economics is the only thing we should consider. Like every human activity, energy development has an impact on the environment. One of our ongoing objectives is to advance technologies that increase oil production while using the smallest amount of water, natural gas, electricity, and land possible.
Since our first oil sands well in 1996, we have taken a measured approach to our growth in the area. We develop our projects in phases, increasing production in 30,000-40,000 barrel-per-day increments, applying what we learn from one phase to the next in a process of continuous improvement.
The key measure of efficiency for SAGD operations is the amount of steam needed to produce a barrel of oil. Our steam-to-oil ratio is less than 2.3, which is among the lowest in the industry. A lower steam-to-oil ratio translates to lower energy usage, lower water usage, lower emissions, and a smaller surface footprint.
I'd like to share with you a few examples of innovations that have allowed us to steadily reduce our steam-to-oil ratio.
Recently, we introduced a new technology that taps into zones of previously inaccessible melted bitumen near our producing well pairs. This technology is a Cenovus innovation that allows us to access that wedge of bitumen and pump the oil to the surface using only single wells and little or no incremental steam. We call these “wedge wells”. They increase the amount of oil recovered while lowering our environmental impact.
We are also pilot-testing another technological improvement in our SAGD operations. It involves combining the injected steam with solvents, such as butane, to help bring the oil to the surface. Using the solvent also reduces the amount of steam required in the SAGD process.
These and other technologies come from our significant investment in research and development. We recently announced that we would increase our budget for research and development to $65 million. At any one time we have approximately 50 research projects under way, each designed to improve processes, protect the environment, or improve the energy efficiency of our operations.
Thanks to the hard work of our people, we increased our oil sands production 190% from 2004 to 2009. During that same period we lowered our sulphur dioxide intensity by 77%, reduced our well pad footprint by 23%, improved our greenhouse gas intensity by 17%, and improved our fresh water-to-bitumen ratio by 91%.
The majority of the water we use is saline water, which is not suitable for animal or human consumption or agriculture and is not taken from rivers, lakes, or streams. We use less than 5% fresh water in our oil sands operations. This water comes from wells in the area and not from surface sources. Fresh groundwater is used mostly for domestic purposes, such as drinking water and sanitation at our camps and facilities; wastewater is reused in our operations whenever possible.
In 2009, Cenovus produced enough oil that, refined into gasoline and diesel, it would fuel 2.8 million cars for one year, but oil is more than a source of fuel. Oil and natural gas are essential materials needed to develop cutting-edge technologies that make a positive difference in our lives. Indeed, nearly everything we use is either made from oil and natural gas byproducts, made by machinery or in facilities powered by oil and natural gas, or transported by fuels refined from oil, such as gasoline or diesel.
We are a company that prides itself on its innovative spirit. Since 2003, Cenovus has committed $14 million towards early-stage technologies through our environmental opportunities fund. We have funded 11 projects spearheaded by internal teams, external entrepreneurial firms, and academic researchers, all of whom are developing technologies focused on renewable and alternative energy, as well as environmentally driven improvements for the oil and gas sector.
In closing, I would like to assure the committee and Canadians that the people at Cenovus are committed to applying new ideas and new approaches to develop energy resources safely and responsibly. We are committed to making smart decisions, advancing technology, and continuously improving.
Thank you. We'd be pleased to answer your questions, sir.
