New Oil Sands Bitumen Technology Coming Online

In a world desperately in need of more and better energy sources, areas like the oil sands of northern Alberta play a crucial and controversial role in the energy supply puzzle. Processing the heavy, tar-like crude bitumen extracted from these sands into more transportable and refineable synthetic crude oil (SCO) is a necessary step on the way from the fields to the refineries. It’s called upgrading, and the current technologies used in the process are either very expensive or not very efficient.

Aduro Clean Technologies Inc. (CSE: ACT) (OTCQB: ACTHF) (FSE: 9D50) recently announced the imminent completion of its pilot-scale Hydrochemolytic™ continuous flow bitumen reactor. The company’s Hydrochemolytic™ platform is a patented, water-based technology that operates more efficiently and less expensively than the current methods for upgrading bitumen. Hydrochemolytic technology also has applications that could revolutionize plastic recycling and other upgrading processes that turn wasted renewable oils like corn and canola into renewable products like biojet fuel. Here we will focus on the technology’s potential impact on the oil refinery industry. 

Bitumen Upgrading 101

The bitumen that comes out of Alberta’s oil sands and similar deposits around the world can be used close to its ‘natural’ tarry state for paving and roofing applications. It contains high levels of asphaltenes and similar compounds that make it very heavy, and unable to be transported via pipeline. To make it into the lighter SCO, bitumen can be upgraded by either removing carbon or adding hydrogen. Carbon is removed by coking - high temperatures are applied to bitumen to crack it into lighter oils and natural gas liquids while also creating a solid, carbon-rich byproduct called coke. Coking units can cost in the $500 million to $1 billion range to build.

Hydrogen is added through hydroconversion, an upgrading process where the bitumen is cracked and combined with hydrogen in the presence of a catalyst, such as platinum, at high pressures. As hydrogen is added to the bitumen, with no carbon rejection, the volume of synthetic crude oil produced from hydroconversion could be equal or more than the volume of bitumen consumed during the process. Hydroconversion is both more expensive and more complex than coking while producing higher yields.

In 2020, there were four active upgraders in Alberta and two nearby in Saskatchewan. These facilities processed 42% of the 3 million barrels/day of Alberta bitumen produced that year, yielding 1.1 million barrels/day of SCO. The economics of building and expanding upgrading facilities have become increasingly problematic, and oil sand production is still on the upswing.

The Aduro Difference

Aduro’s patented Hydrochemolytic™ platform utilizes a water-based chemical conversion process with a number of advantages over the systems widely used today. The technology is highly scalable and significantly less expensive to build than the coking and hydroconversion facilities noted above. It also operates at a lower temperature, with lower energy needs, while greatly reducing the need for dilutive hydrocarbon substances in the upgrading process. Hydrochemolytic™ processing also results in greatly reduced emissions, making the oil produced ‘greener’ than that created by conventional methods. It can even be applied to the lowest grade bitumen left over from these conventional methods in refineries, essentially turning waste into a much higher value and usable oil.

In the current stage of development, Aduro is completing its R2 Bitumen reactor on a pilot scale. The company has been building to this moment, with previous accomplishments including the implementation and testing of small-scale batch reactors (R1) and the testing of a pre-pilot R2 continuous flow reactor. The continuous flow approach marked a significant leap forward from the initial batch-by-batch R1 reactors.

“Results achieved with the continuous-flow R2 pre-pilot reactor exceeded expectations. Compared to batch mode, it delivered equivalent upgrading results more quickly and at lower temperatures, and with lower catalyst loading. We had already proven HCT in small-scale R1 batch reactors, but the efficiency of HCT in R2 increased by a factor far greater than 10. This significantly strengthens our projections regarding lower operating costs in commercial applications, along with improved scoring on environmental factors, such as reduced emissions and energy consumption,” said Marc Trygstad, CTO of Aduro.

The pilot project is slated to be fully operational by the end of October or so, and features an upgraded vapor-liquid separator that increases the technology’s versatility in terms of what types of feedstock it can handle. In anticipation of demand for customer trials, Aduro is significantly upgrading its lab facilities and testing capabilities to make the trials as efficient and effective as possible. 

Where It’s All Headed

Aduro Clean Technologies is at an interesting inflection point in its corporate development. The R2 Bitumen reactor allows the company to move into its commercialization and revenue generation phase, pending the outcome of customer trials. Aduro is already well down the road with an unnamed publicly traded company on a potential asphaltene upgrading project, and the pilot-scale reactor will allow the companies to complete the evaluation of the potential deal. 

On a parallel track, Aduro is working on a pilot-scale R2 plastics reactor. Expected to be completed later this year, the pilot project should get the company’s plastic recycling program to a similar point of development as the bitumen project - on the verge of commercialization and revenue generation.

Both opportunities represent massive market potential for Aduro and its patented Hydrochemolytic™ platform with a combined total addressable market of over $100 billion in North America alone. If the technology proves itself on a larger scale in these pilot projects, the revenue generation could make its current ~$36 million market cap look silly. Stay tuned for further developments.