Making an economic case for nuclear power

Atomic official says nuclear power could slash 20 percent off oil sands’ input costs; pitches idea to operators

Gary Park

Petroleum News Canadian Correspondent

The nuclear option is again being aired as high natural gas prices, a strong Canadian dollar and rapid expansion pose challenges to the economics of Alberta’s oil sands.

A senior official with Atomic Energy of Canada Ltd., a federal government corporation, said the use of nuclear power to extract and process raw bitumen could slash 20 percent off operational costs by lowering the use of scarce gas resources.

Jerry Hopwood, Atomic Energy’s general manager for advanced reactor applications, noting that up to one-quarter of the energy content of a barrel of synthetic crude is consumed in the extraction process, said the economics increasingly favor nuclear power.

“We need to lessen the reliance on natural gas, which is a diminishing energy source,” he told a Canadian Energy Research Institute oil sands conference earlier in May.

Studies have indicated that Atomic Energy’s newest generation of reactor could generate enough electricity and steam to support a 200,000 barrel-per-day oil sands plant with minimal environmental impact and “negligible” greenhouse gas emissions.

Hopwood said Atomic Energy has told five oil sands operators it is prepared to build and operate a reactor at a cost of up to C$2 billion for a limited period, provided it could eventually turn over the controls to a power utility.

He said reactor units should be tailored to individual needs and, although the front end costs would be high, the reactors would be competitive with coal-fired cogeneration plants of equivalent capacity.

But Hopwood acknowledged that nuclear power is a tough sell, given the cool reception it has received in the past because of security fears and environmental opposition. However, the oil sands sector is more open to any cost saving measures at a time when the gap between heavy and light crude has widened, the Canadian dollar has remained strong and capital costs have continued to rise.

Bob Dunbar, president of Strategy West consultants, said the higher dollar and higher gas prices alone have boosted input costs by C$5 a barrel, although the sector remains “economic under the most bearish oil price scenario.”

Wilf Gobert, vice-chairman of Calgary-based investment dealer Peters & Co., painted a less cheerful picture.

He said the light/heavy differential, which averaged C$29.84 per barrel in April, has created a “heavy blow for the economics of heavy oil,” with Petro-Canada’s bitumen price dropping below C$10 per barrel during the first quarter.