A question, if you have the answer. Is the 'upgrading' of the heavy oil/oil sands what produces the CO2 that I hear so much about? And does it use water?
Far as I know, yes, the upgrading produces about 300 pounds of CO2 per barrel. It uses natural gas for the hydrogen addition. The water is mostly used in the extraction process.
There is of course much more CO2 coming from the fuel that powers the heavy equipment used throughout)

Upgrading

The oil in oil sand is called bitumen, a complex hydrocarbon made up of a long chain of molecules. In order for bitumen to be processed in refineries, this chain must be broken up and reorganized. Unlike smaller hydrocarbon molecules bitumen is carbon rich and hydrogen poor.

Upgrading means removing some carbon while adding additional hydrogen to make more valuable hydrocarbon products. This is done using four main processes: coking removes carbon and breaks large bitumen molecules into smaller parts, distillation sorts mixtures of hydrocarbon molecules into their components, catalytic conversions help transform hydrocarbons into more valuable forms and hydrotreating is used to help remove sulphur and nitrogen and add hydrogen to molecules.

The end product is synthetic crude oil, which is shipped by underground pipelines to refineries across North America to be refined further into jet fuels, gasoline and other petroleum products.

It must be noted that some of the oil companies pipe their bitumen south in diluted form for upgrading at other refineries. Others produce either a single high quality synthetic crude oil or multiple petroleum products to suit market feedstock demand.