James Miller Williams, a carriage maker from Hamilton, Ont. and the founding father of Canada’s petroleum industry, was drilling for water in 1858 when he struck oil at a site known as Black Creek in southern Ontario. The discovery became North America’s first oil well and the area was renamed Oil Springs. Williams went on to found The Canadian Oil Company, creating facilities for petroleum production, refining and marketing — the first integrated petroleum company on the continent.
Roughnecks adding a joint of pipe inside the derrick at a Royalite well in southern Alberta’s Turner Valley oil field, 1938. Photo credit: Glenbow Archives 6d-2-16
Much of the Canadian oil and gas industry’s history is like that first discovery: more business acumen and incremental innovation than paradigm-shifting invention. “In the Canadian petroleum industry, very little basic research is carried on; a few companies do development research, while most carry out some form of application research,” states a 1960 article in this magazine, then called Chemistry in Canada. Not much has changed. There were some exceptions, most notably in the sour (containing hydrogen sulphide) natural gas industry and the heavy oil/oil sands sector, where the nature of the resource necessitated innovation.
“The reason why our industry has had a slow rate of innovation relative to other industries is simply that experimentation, testing and evaluation are very expensive,” says Ian Gates, a professor in the Department of Chemical and Petroleum Engineering, Schulich School of Engineering at the University of Calgary. Even a field trial of new technology costs tens of millions of dollars and takes years to run, says Gates, who is leading a major study, titled Reassembling the Oilsands: Industry, Technology, Society, Environment and Innovation, looking into why the sector has been slow to innovate.
Workers lay pipeline from Leduc oil field to railhead at Nisku, Alta. near Edmonton in Leduc County, 1947. Photo credit: Glenbow Archives 14a-4310
As for the petrochemicals industry, Canada represents only about one percent of the global chemistry sector, says David Podruzny, vice-president of business and economics at the Chemistry Industry Association of Canada. Arlanxeo, a global synthetic rubber company headquartered in the Netherlands, does world-class research and development in London, Ont. NOVA Chemicals employs more than 300 people in Calgary doing research and development on plastics and chemicals. But overall, “virtually all of the key discoveries and developments have taken place elsewhere,” Podruzny says. “Canada has a good reputation for development of ways to improve on what was discovered elsewhere.”
Still, there have been some firsts. In 1851, Ontario businessman Charles Nelson Tripp founded the International Mining and Manufacturing Company. It explored the asphalt beds and later the oil springs in Lambton County, Ont., for manufacturing oils, naphtha, paints and varnishes. Three years later, physician and geologist Abraham Gesner of Halifax opened his first plant — albeit in New York — to make keroselain, later known as kerosene. Gesner developed a fractional distillation method to produce the new synthetic lamp oil from coal, natural tar and, eventually, oil.
Eugene Coste, an entrepreneur from southwestern Ontario, began drilling for natural gas in 1889 in Essex County, Ont., to supply nearby communities with fuel for lighting, heating and cooking. After moving west, his Canadian Western Natural Gas Company constructed a 270-kilometre pipeline from Bow Island, Alta., to Calgary in 1912. At the time, it was one of the longest and largest-diameter gas pipelines ever built.
In 1924, the first plant in Canada to chemically scrub poisonous hydrogen sulphide (H2S) from sour natural gas was built in Turner Valley, Alta. But it wasn’t until 1952 that the first plant to remove H2S from natural gas and convert it to sulphur — sold mainly for making fertilizer — was built at Jumping Pound west of Calgary. Joe Lukacs, then a young petroleum engineer and now president and CEO of Canadian Environmental Technology Advancement Corporation (CETAC)-WEST, worked on several of Canada’s first sour gas-processing plants. The technology, designed and built in the United States, wasn’t suitable for Alberta’s high-H2S natural gas and the harsh winter climate, Lukacs recalls. “Everything was blowing up because of freezing in pipelines due to hydrate formations.” The problem with these ice-like plugs of gas and water was solved when Trajan Nitescu, president of Canadian Fina Oil, had twin pipelines heated with glycol buried alongside the gas-gathering pipeline, while Lukacs and Walter Nader, a chemical and petroleum engineer at the University of Alberta, calculated the thermodynamics equation to make it work. The late Don B. Robinson, FCIC, a U of A chemical engineer, and his graduate student Ding-Yu Peng, FCIC, (now head of the Department of Chemical and Biological Engineering at the University of Saskatchewan), subsequently developed the Peng-Robinson Equation. This mathematical model predicts the effects of pressure, volume and temperature on the behaviour of hydrocarbon-based fluids. The famous equation is still applied in myriad processes and industries every day.
Lukacs went on to form Western Research in Calgary, where he developed the world’s first automated system for continuously measuring sulphur dioxide emissions from gas-processing plants’ stacks, along with technology to automate the sulphur-recovery process. “Those technologies were developed in Alberta and they’re now being used all over the world.”
Imperial Oil Company Ltd., established in 1880 when 16 Ontario oil-producing and refining companies merged, played a starring role in Canada’s early petroleum and petrochemicals industries. Imperial Oil consolidated its refining operations in 1898 in Sarnia, Ont. The company, which had drilled 133 wells in western Canada without finding a major new oilfield, struck a gusher in 1947 at its Leduc No. 1 exploratory well south of Edmonton. That discovery marked the birth of the modern Canadian oil and gas industry.
Meanwhile, Canada’s now-famous oil sands industry was developing in parallel. In 1925, more than a century after explorer Alexander Mackenzie saw Chipewyan natives using natural bitumen seeps along the Athabasca River to caulk canoes, Karl Clark of the Alberta Research Council perfected a method using hot water and caustic soda to separate oil sands bitumen from sand. In 1964, Great Canadian Oil Sands (now part of Suncor Energy Inc.) won approval for the first of the modern oil sands projects and began production in 1967. Its plant pioneered such processes as separating the lighter hydrocarbon fractions and removing asphalt and sulphur to produce light, low-sulphur synthetic crude oil.
In the 1970s, Roger Butler, an engineer at Imperial Oil and later the first Endowed Chair in Petroleum Engineering at the University of Calgary, invented the steam assisted gravity drainage (SAGD) technique. The method is critical for accessing the estimated 140 billion barrels of bitumen that are too deep to be mined from the surface — comprising about 80 percent of Alberta’s proven oil sands reserves. Using two parallel horizontal wells, steam is injected into the upper well and heated bitumen flows into the lower well.
As for the future, Gates expects to see new additives such as catalysts and nanoparticles and so-called smart hydraulic fracturing that will increase production of shale oil and gas and heavy oil and bitumen while reducing energy, water use and greenhouse gas emissions. “It’s about having better, more robust processes, not just for the technology in the ground but also for the regulatory and environmental assessments and the social acceptance.”
Petroleum industry is heavy economic hitter
Canada’s petroleum industry may have lagged historically in game-changing chemical innovation but its economic impact in indisputable. “Over the past five decades, this sector has been the lifeblood of Alberta’s economy,” says Todd Hirsch, chief economist at ATB Financial. As for the national economy, remember the wildfire in May 2016 that ravaged Fort McMurray in northern Alberta? It forced the temporary shutdown of several oil sands operations: Suncor Energy, Syncrude Canada, Shell Canada, ConocoPhillips Canada, Nexen Energy ULC and Athabasca Oil, knocking 1.2 million barrels a day offline, or more than 40 percent of provincial oil sands production. That was enough to drop Canada’s real gross domestic product by an annualized rate of 1.6 percent during the second quarter, Hirsch says.
Robert Mansell, academic director and emeritus professor of economics at the School of Public Policy at the University of Calgary, says the oil and gas industry has, on average, accounted for about one-third of all business investment in the country. “It’s the largest private investor in the Canadian economy.” According to the Canadian Petroleum Producers Association, the industry invested $36 billion in 2016, down from a peak of $81 billion in capital projects in 2014. Half of Canada’s exports of goods and services are related to oil and gas, Mansell says.