In the boreal forests and on the remote prairies of Alberta, Canada, a handful of firms are running pilot projects they hope will end a two-decade drought in innovation and stem the exodus of top global energy firms from Canada's oil sands.
They are searching for a breakthrough that will cut the cost of pumping the tar-like oil from the country's vast underground bitumen reservoirs and better compete with the booming shale industry in the United States.
If they fail, a bigger chunk of the world's third-largest oil reserves will stay in the ground. Canada's oil sands sector has become one of the biggest victims of the global oil price crash that began in 2014 when top OPEC producer Saudi Arabia flooded the market with cheap crude to drive out high cost competitors.
This year alone, oil majors have sold over $22.5 billion of assets in Canada's energy industry, and been lured south to invest in the higher returns of US shale.
Joseph Kuhach is among the entrepreneurs in Canada hoping they can turn the tide. He runs a small Calgary-based firm, Nsolv, that is testing the use of solvents to liquefy the bitumen buried in the sands and make it flow as oil.
Mr. Kuhach says using solvents can cut 20 to 40 percent from the cost of producing the oil. The technique currently used is to use steam to heat the sands underground to extract the oil.
It's a hard sell, he said, to Canadian producers struggling with low oil prices. They are reluctant to invest in a multi-million dollar technology that is unproven on a commercial scale, he said.
"The comment I hear so often when I am talking to companies is, 'We want to be the very first in line to be second'," said Kuhach. "It's easier to go after incremental improvements that they can back away from with no great cost and no great risk."
Nsolv is winding down a three-year pilot project with Canada's second-largest energy producer Suncor Energy at its Dover oil sands lease in northern Alberta. Suncor is evaluating the results, the firm's spokeswoman Erin Rees said.
Fourth-largest producer Imperial Oil, controlled by ExxonMobil Corp, is also developing solvent technology and has had an ongoing C$100 million pilot project since 2013, the company said.
The caution of oil sands producers stems in part from the unique challenges of operating here, where projects take years to build and require billions of dollars in upfront capital.
The development of the technique using steam two decades ago made Canada's sands the new frontier for the oil industry, and majors were among the firms that flocked to buy in.
Since then, innovation has stalled. That failure, energy-industry entrepreneurs and venture capitalists told Reuters, is rooted in a risk-averse culture that has left oil sands years behind US shale.
The exodus of international oil firms such as Royal Dutch Shell and Statoil ASA from oil sands has made innovation tougher because there are fewer potential customers who might adopt new technology, said Joe Gasca, chairman of Fractal Systems Inc. His firm processes bitumen into higher-quality crude at the wellhead.
Fractal is running a 1,000 barrel-per-day (bpd) test plant in eastern Alberta for third-largest producer Cenovus Energy, which has yet to make a decision on whether to proceed commercially.
Dating and marriage
The shale sector moved fast to innovate and cut costs to survive the oil price crash. In 2014, producing oil from most shale fields cost more than the average $60 a barrel needed for a new Canadian oil sands project to make money. Now, there are some shale patches that can make a profit at $15 a barrel.
It takes months of pumping steam into underground reservoirs before bitumen starts to flow from the oil sands. That makes engineers reluctant to experiment with the delicate balance of heat and pressure.
Shale, by contrast, provides comparatively fertile ground for innovation. The initial investment is a fraction of what the cost of an oil sands project. Relatively easy access encourages competition as the many firms involved look for an edge. Wells can be drilled quickly. The stakes are lower and the scale is smaller if experiments fail.
Drilling longer wells and being better able to pinpoint where in those wells to fracture the rock, among other techniques, have supercharged US shale output in the past two years. That has boosted firms including Noble Energy and Devon Energy and drawn billions of dollars in new private equity investment.
Canadian producers have fewer projects to experiment with and are unwilling to risk their massive upfront investments, said Steve Fisher, chief executive of Calgary-based startup Veerum.
"Shale is like going on a date, the oil sands is like getting married," he said. "The risk for capital is high in the oil sands, you have massive assets that need to complete on time and operate for 40 years to make money."
Veerum's technology cuts capital costs by tracking how accurately a new project sticks to design specifications during construction, reducing the need for costly fixes later.
The company is supported by General Electric's Zone Startups Calgary, an incubator for new firms in the energy capital of Canada.
Another hurdle to innovation is the lack of sales and marketing expertise in the city's oil industry to carry ideas through to commercial execution, said Marty Reed, chief executive of clean-tech fund Evok Innovations.
"At $100 a barrel it didn't take a sales and marketing genius to sell the product," Mr. Reed said. "But if you are a new company trying to get Suncor to adopt a new widget those skills are crucial."
Evok was launched last year with a C$100 million investment from Cenovus and Suncor over 10 years to accelerate development of technologies to cut oil sands costs and emissions.
Since oil prices began falling in 2014, the long-term forecast for oil sands output in 2030 has fallen to 3.7 million bpd, down from 5.2 million bpd, according to the Canadian Association of Petroleum Producers. Current output is around 2.4 million bpd.
Expansion will mostly come from adding units at existing projects, given new projects are unprofitable at current international oil prices of around $45 a barrel.
Canadian oil sands producers recognize that innovation is crucial for their survival, and some firms are spending more.
The country's top energy producer Canadian Natural Resources Ltd allocated C$549 million ($406.97 million) or 14 percent of its 2016 C$3.8 billion capital budget on research and development (R&D), up 4 percent from C$527 million in 2015, when capital spending was higher.
"It's mostly about incremental gains, but we do have some big stuff that could change things," Canadian Natural President Steve Laut told reporters last month, declining to elaborate.
Suncor and Imperial both held R&D spending steady from the previous year while reducing overall capital budgets. Suncor spent C$150 million, or 3 percent of its budget in 2016 on what it calls "step-change technologies," while Imperial spent C$195 million, roughly 17 percent of its budget, company filings showed.
The firms all said they were working on ways to reduce costs and environmental impact. Producers also said new technology is often developed in the field during normal operations and does not necessarily show up in R&D budgets.
A number of producers, including Cenovus and Suncor are looking at ways to add solvents to steam in their commercial operations.
Unlike the solvent-only technique being pitched by Nsolv, this would allow firms to adapt existing thermal plants rather than build new ones, Kuhach said.
Even if pilot steam-and-solvent projects are successful, it would take another three to five years for the technology to spread across the industry, said Dan Wicklum, chief executive of the Canadian Oil Sands Innovation Alliance.
Vancouver-based Chrysalix Venture Capital has become more cautious about new oil sands investments since the oil majors pulled out, Chief Executive Wal van Lierop said, but is investing in technologies that may prove valuable to the sector.
"I am really hoping we can get breakthrough technologies, but I don't see them yet," he said.
"Mediocracy will not help. It will be go big or go home."