The Wall Street Journal: Total May Use Atomic Power At Oil-Sand Project: "Shell Canada Ltd. said it isn't considering nuclear power as part of its oil-sands plans. Rather, the company said it is looking into the possibility of turning asphaltene, very heavy oil, into gas to save on its natural-gas bill.": Thursday 22 September 2005

PARIS -- French oil giant Total SA, amid rising oil and natural-gas prices, is considering building a nuclear power plant to extract ultraheavy oil from the vast oil-sand fields of western Canada.

This comes as oil prices -- driven even higher by Hurricane Katrina and now the threat of Hurricane Rita -- are removing lingering doubts about the long-term profitability of extracting the molasseslike form of oil from sand, despite the fact that the output is much more expensive to produce and to upgrade than is conventional crude.

At the same time, prices of natural gas -- which oil-sands producers have relied on to produce the steam and electricity needed to push the viscous oil out of the ground -- have risen 45% in the past year. That is prompting Total, which holds permits on large fields in Alberta that contain oil sands, to consider building its own nuclear plant and using the energy produced to get the job done.

Despite the attraction of abundant electricity, industrial companies have been reluctant to install nuclear devices, however small, on their premises because of safety and cost concerns. Small nuclear reactors have been used for purposes other than generating commercial electricity, but mainly to power ships -- submarines, icebreakers and aircraft carriers, for example.

A notable exception was the Soviet Union, which built four small nuclear reactors at Bilibino, inside the Arctic Circle, in the mid-1970s to operate a gold mine. The plant still is in operation.

Even now, despite wanting to cut production costs, few oil-sands producers have been willing to talk openly about the nuclear possibility for fear of protests from environmentalists. Nuclear power doesn't bring back good memories in Alberta, where in the 1950s U.S. and Canadian scientists looked into the possibility -- later abandoned -- of detonating an atomic bomb to bring oil to the surface.

Total would speak about its plan only in general terms. "It's not foolish to look into the nuclear option," Yves-Louis Darricarrère, Total's director for natural gas and power, said in a recent interview. "We have a team looking into it."

Total's interest is the latest sign that nuclear energy is making a global comeback. Finland commissioned a new reactor in 2003, the first such order in Western Europe in 13 years. France has chosen a site in Normandy where a reactor will be built. The U.S. hasn't commissioned a new nuclear plant for three decades, but the industry is talking seriously about a revival, encouraged by the Bush administration and the rising cost of fossil fuel.

In Canada, Total holds half of an oil-sands permit in Alberta and has secured more heavy-oil acreage with the purchase of Deer Creek Energy Ltd., located in the same western province. Total said it plans to invest $7 billion in Deer Creek, on top of the $1.4 billion it expects to pay for the company. The company says it could one day produce 200,000 barrels of heavy crude a day, close to 8% of Total's current global output.

Canada's oil sands contain 174 billion barrels of recoverable reserves, the world's second-largest oil resource behind those of Saudi Arabia, according to Canadian government estimates.

Oil sands, a mixture of grit and a tarlike grade of crude oil known as bitumen, were discovered more than a century ago but have been considered economical to produce only in recent years as the price of oil has surged. In addition to nuclear power, producers are considering burning oil-sands residue and coal as alternatives to natural gas to make the steam needed for extraction.

Mr. Darricarrère said a nuclear power plant would help Total comply with tougher constraints on carbon dioxide and other so-called greenhouse-gas emissions. Although they generate toxic, radioactive waste, nuclear reactors don't emit greenhouse gases that scientists believe contribute to global warming.

The government of Alberta said that although there are no nuclear power plants in the province, there is no moratorium on nuclear energy. "We don't favor one form of energy over another," said Alberta Energy Ministry spokeswoman Donna McColl. "We let the market decide."

Atomic Energy Canada Ltd., the Canadian government-owned nuclear-power developer, has proposed building a regional nuclear power plant in northern Alberta to provide electricity and steam to oil-sands projects, according to company spokesman Dale Coffin. He said the proposal has been received with "great interest" by Alberta oil-sands producers.

Still, Jerry Hopwood, Atomic Energy Canada's general manager of product applications, said it would take several years to get a regulatory application on the table. Among other hurdles, any new nuclear project in Canada would face rigorous environmental scrutiny, from both provincial and national authorities.

Such reviews also would apply to any application for a Total nuclear plant. "I'm not confident that the public in Alberta would be supportive of opening Alberta to the nuclear industry," said Dan Woynillowicz, an oil-sands expert with Pembina, an environmental policy research institute based in the province.

Mr. Darricarrère said Total is relying on Areva SA, the French state-run nuclear engineering company, to define what type of reactor might suit its needs in Canada. Research is focusing on a dedicated reactor significantly smaller than those used by utility companies to produce electricity for large city grids.

Areva said discussions with Total are centering on a new type of reactor, known as a High Temperature Reactor, with a capacity of around 500 megawatts, about a third of the size of a traditional reactor. Areva also has been approached by other oil companies but discussions are most advanced with Total, Jean-Jacques Gautrot, Areva's director for international operations and marketing, said.

A spokesman for Imperial Oil Ltd. of Canada, an affiliate of Exxon Mobil Corp., which operates some of the world's largest oil-sands operations, said it looked into the nuclear option in the past but didn't pursue it because of cost and technology challenges.

Shell Canada Ltd. said it isn't considering nuclear power as part of its oil-sands plans. Rather, the company said it is looking into the possibility of turning asphaltene, very heavy oil, into gas to save on its natural-gas bill.

Write to David Gauthier-Villars at David.Gauthier-Villars@dowjones.com