Program Design: A Case Study of AITF’s MARIOS Industry Consortium

Dr. John Wolodko, P.Eng.Portfolio Manager, Advanced Materials and

MARIOS Program DirectorAlberta Innovates – Technology Futures

I-CAN Innovation SchoolOctober 31st, 2012

Outline

■ Introduction to AITF

■ Overview of the Alberta Oil Sands Sector

■ The Materials and Reliability in Oil Sands (MARIOS) Program

■ Keys to Success

■ Current Challenges

■ Future Direction

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Introduction to AITF

■ Alberta Innovates – Technology Futures (AITF) was established on Jan 1st, 2010 (merger of Alberta Research Council, Alberta Ingenuity, iCore & NanoAlberta)

■ Non-profit corporation funded by Gov’t of Alberta & industry■ “Tech Futures” offers:

Applied R&D and technical services Innovation and talent development programs Regionally accessible commercialization support

■ 600+ Employees; 5 Research Centres; ARC est. 1921

Introduction to AITF

AITF Research Centres

Calgary

■ Energy (Oil Sands, Oil & Gas, Alternative/Renewable)

■ Sustainable Resources (Agriculture/Forestry)

■ Environmental Sciences & Monitoring

■ Eco-systems Management

■ Geosciences and CO2 Storage

■ Advanced Materials & Manufacturing

■ Industrial Sensors

AITF’s Research Focus

How AITF Works With Industry

Testing & Consulting Services

Technology Development

Professional Training

Applied R&D

■ 100,000 m2 of bench and pilot-scale facilities

■ 1,000 industry clients per year ■ Funding programs focused on

technology and business development■ Regional innovation networks■ Demonstration/scale-up■ Consulting & testing services■ Joint industry projects &

collaboration

AITF’s R&D Capacity

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Overview of the Alberta Oil Sands Sector

■ Canada has the third largest proven oil reserves in the world at 175 Billion barrels (approx. 10%) –Venezuela has 297B barrels; Saudi Arabia has 265B barrels.

■ The Alberta Oil Sands represents 99% of Canada’s proven oil reserves.

■ Canada is only 6th in annual oil production (behind Russia, Saudi Arabia. US, Iran and China).

■ Canada is the largest exporter to the US at 2.5 million barrels/day.

■ Investment in the Alberta oil sands is expected to reach $180B over the next decade.

The Alberta Oil Sands

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What are Oil Sands?

To Bitumen(high viscosity, 4.5% Sulfur, containsVanadium, Nickel, Nitrogen, Oxygen)

To Synthetic Crude Oil(low viscosity, low Sulfur, low V, Ni, N, O)

From Oil Sands

Oil Sands – combination of Bitumen (3 - 18%)Water (2 - 10%) Sand (50 - 75%) Clay (10 - 30%)

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How are Oil Sands Produced & Processed?

Surface Mining &Extraction

In-situ Production(sub-surface)

Refining(Canada, US

or International)

UpgradingConversion to

Synthetic Crude(Alberta or US)

Petro-chemicalProducts

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Oil Sands Deposits in Alberta

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Oil Sands Deposits in Alberta

Alberta land area: 661,848 sq. km Boreal forest area: 381,000 sq.km Oil Sands deposits area: 142,200 sq. km (England has 130,000 sq.km) Mineable oil sands area: 4,800 sq. km (only 3% of total oil sands land area - located mainly north of Fort McMurray) Active oil sands mining area: 602 sq. km (with 67 sq. km under active reclamation)

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Mining/Extraction Operations

■ Uses strip mining and mineral processing to separate bitumen from sand & clay

■ Mineable reserves restricted to areas with <75 m overburden (only 3% of oil sands land area)

■ Represents only 20% of Alberta’s oil sands reserves■ Bitumen recovery: >90%■ 2 tonnes mined oil sands = 1 barrel (synthetic) crude oil■ Typical materials issues:

Abrasive wear (due to high sand content) Erosion-corrosion Impact Fouling/scaling

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Typical Mining/Extraction Process

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OIL SANDS MINING

NAPHTHA RECOVERY UNIT

TRUCK TRANSPORT

PRIMARY SEPARATION

VESSEL

SECONDARY SEPARATION

DEAERATOR

CRUSHER

BITUMEN RECOVERY PROCESS

HYDROTRANSPORT

HOT WATER + CAUSTIC SODA

FROTH TREATMENT

PLANT

TAILING PONDS

STEAM

IN-SITU

CSS SAGD CHOPS THAI VAPEX

OR

UPGRADING SITE

REFINERY

ASPHALT

OR

HOT WATER

BIT

UM

EN

BITUMEN

DEAERATED BITUMEN FROTH

BITUMEN FROTH

BITUMEN FROTH

NAPHTHA

MIDDLINGS

TAILINGS (SAND + WATER)

MIDDLINGS RESIDUE

AIR

OIL SANDS

CRUSHED OIL SANDS

SLURRY

RESIDUE WATER, SOLIDS + NAPHTHA

AIR

RESIDUE WATER + SOLIDS

In-situ (Thermal) Operations

■ Subsurface production of bitumen (akin to conventional oil production)

■ Typically uses injected steam to reduce viscosity of the bitumen (allowing it to be pumped to the surface)

■ Represents 80% of Alberta oil sands reserves■ Bitumen recovery: approx. 30% to 40%■ Typical materials issues:

Corrosion (recycled, produced & brackish water) Fouling/scaling SCC Thermo-mechanical loading (dissimilar materials)

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Typical In-situ Process - SAGD

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Materials and Reliability in Oil Sands (MARIOS) Consortium

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■ 40+ member R&D consortium managed by AITF and directed by the oil sands industry to collaboratively tackle materials, equipment, maintenance and reliability issues. The oil sands sector spends over $3B in maintenance and losses

another $5-7B in lost production every year!

■ Two tiers of memberships: Oil sands operators (oil & gas companies) Suppliers (any company selling materials, equipment or services in

the oil sand supply chain)

■ Areas of R&D: Improved materials for oil sands mining and in-situ operations Coatings/Overlays, Welding, Slurry Systems, Corrosion, Wear

(abrasion), Impact, Water Systems, ….

Materials & Reliability in Oil Sands (MARIOS) Consortium

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History of MARIOS

■ “Emergent” Program Design developed from existing JIPs and projects with oil sands sector (operators & suppliers)

■ Initiated in Feb 2009 (currently in 4th year) – took approx. 1.5 years to kick off

■ Consortium model based on successful AITF/ARC AACI Program (25 years)

■ MARIOS in 2012-2013: 41 Members (from initial value of 23) $2.4M Budget (2012-2013) – 80% Industry Funding

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Oil Sands Producers

MARIOS Program Objectives

Oil Sands Suppliers

Applied R&D(Understanding &

Assessment)

SupplierTechnology

Development

AITF ContractTesting

(confidential)

Industry Needs

TechnologyDevelopment(for all MARIOS

members)

Testing:Lab to Field

(Proof of Concept &3rd Party Validation)

MARIOS Program

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MARIOS Deliverables

■ Confidential research reports■ Guidelines & Recommended Practices (RP) for

material selection, design, fabrication and inspection for specific oil sands services

■ Qualification Test Methods for evaluating new products and equipment (specific to oil sands applications)

■ Technology Screening■ Specification Harmonization (industry wide)■ Dissemination & Training (workshops, monthly project

updates & one-on-one meetings) ■ Long-term Roadmaps

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Benefits for MARIOS Members■ Conduit for information sharing, collaborative R&D and

screening of technologies (community)■ Significant leveraging of R&D investment■ Confidentiality■ Provides an opportunity to learn from the experience of

other members■ Oil Sands Operators benefit by setting research priorities

and providing R&D direction■ Supplier members benefit by directly working with end

users, and provide a means to get new products to market

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Benefits for MARIOS Members

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MARIOS Governance

■ Directed by two Program Steering Committees (PSC): MARIOS-M - Strategic area focused on

mining/extraction MARIOS-T - Strategic area focused on in-situ

(thermal) recovery■ Each “Producer Member” has one vote on each

committee■ All members can participate in any project of

interest (access to all information)

MARIOS Program StructureMARIOS Program Management

AITF

Program Steering CommitteeMARIOS – M

(Mining/Extraction)

Program Steering CommitteeMARIOS – T

(Thermal Recovery)

Mining/ExtractionFocused Projects

In-situ FocusedProjects

Common Projects

Supplier Participation

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MARIOS Intellectual Property Management

■ All IP is owned by AITF■ IP divided into two groups: Patentable IP (disclosures) – available to all members

in a given term for internal research purposes only -allows AITF/PSC to determine best partner(s) for commercialization (any revenue generated flows back into MARIOS)

Know how (reports) – available to all members in a given term to use in commercial operations

■ Report buy-back program available to members (revenue flows back into MARIOS)

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Current MARIOS-M Projects (2012-13)

A

MARIOS-M Program

Assessment & Optimization of

Overlays

WeldingProductivity &

Spec Comparison

Assessment & Improvement of

Slurry Pipe Materials

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A

MARIOS-T Program

Water Treatment Systems– Chemistry and Mechanism

Chloride/Sulfide Stress Crackingin Thermal Operations

Current MARIOS-T Projects (2012-13)

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Keys to Success

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Keys to Success: General

■ “Right place at the right time”■ Oil sands sector has problems and funding■ Geography (the industry is in our backyard)■ Shift in industry uptake (non-competitive area of

interest) – partly due to growth in the sector■ Interest from operators, suppliers & government■ Diligence & hard work by AITF (even though

industry is “rich”, still difficult to get funding)■ Many potential partners & established supply chains

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Keys to Success: Understanding Stakeholders

■ Understand the needs of your stakeholders: Industry (operators) – reduced operating costs;

practical deliverables Industry (suppliers, SMEs) – access to markets;

proving new technologies Government (align with priorities) – growth of

Alberta industries; increased productivity; sustainability of sector – Gov’ts like to support NEW initiatives

■ Define & communicate the “Value Proposition” of the program & individual projects: Qualitative and quantitative measures (ROI) Critical for sustaining engagement & growth

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Keys to Success: Stakeholder Engagement

■ Build networks and relationships with industry, government, trade associations, etc. Having multiple points of engagement within one

organization will minimize risks■ Be patient with developing champions Program & project uptake often take time to develop

(dwell effect)■ Once on board, regular communication with

stakeholders is critical!■ Development of project ideas (needs) is non-stop

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Keys to Success: Good Leadership & Management

■ Find right industry & government champions!■ Show early success to build critical mass■ Provide portfolio of both short-term and long-term

projects ■ Find new, creative ways to leverage funding Government – e.g. Nano-Tech SME Pilot Program Industry – e.g. U.S./International trade organizations

■ Develop collaborative partnerships (win-win) Other research providers Universities

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Keys to Success: Talent Acquisition & Development

■ Strategically hire and train quality work force: Technical capabilities Understanding of business focus Communication and client engagement skills

■ Contract specialized skill sets outside of core competency (collaboration)

■ Develop innovative HR programs: Support for advanced degrees Secondment of staff to industrial partners

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Current Challenges

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Current Challenges

■ Staff retention (competition with industry)■ Knowing what industry really needs (goal often

clear but solution is not)■ Adaptability (how to deal with capacity inertia and

changing industry requirements)■ Determining value proposition (quantitative ROI) ■ Competition with other research providers (how

to develop collaborative frameworks)

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Future Direction

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Future Direction

■ Alignment with AITF University Chairs program –provide fundamental R&D support to MARIOS and development of HQPs (may be a way of engaging other RTOs)

■ Expand SME engagement programs■ Development of a parallel consortium in “Pipeline

Integrity & Corrosion Management” (PICoM) –identical model of operators & suppliers (to launch in 2013)

Thank you for your attention!

For more information, please contact:Dr. John Wolodko, P.Eng.Portfolio Manager, Advanced Materials, andMARIOS Program DirectorAlberta Innovates – Technology Futures250 Karl Clark Rd.Edmonton, AB T6N 1E4

ph. 780-940-9934e-mail: john.wolodko@albertainnovates.ca