Going after next oil sands frontiers

Using science to crack formations thought to hold 450 billion barrels of oil

BY GARY PARK FOR GREENING OF OIL

Editor’s note: This is the first in an intermittent series about industry and government’s efforts to produce cheaper, “greener” oil from Canada’s oil sands.

The decades-long drive to liberate more of the commercial value trapped in Alberta, Canada’s bitumen-bearing deposits without exacerbating the industry’s “dirty oil” image has given rise to a bewildering array of mostly-unproven technologies.

Some are barely beyond the concept stage, some are still in the lab phase and some are moving to field tests, demonstration projects and pilot operations as companies jostle each other to open the door to mind-boggling riches that are more than double the 172 billion barrels currently considered to be economically recoverable.

Grosmont, Nisku and Peace River formations next in line

Next in the line-up of untapped deposits is the Grosmont carbonate, which occupies the vast space between the Fort McMurray and Peace River oil sands regions in northeastern and northwestern Alberta.

Unlike the more conventional oil sands deposits, where bitumen is trapped between molecules of water and grains of sand, the Energy Resources Conservation Board of Alberta estimates Grosmont holds an additional 320 billion barrels of resource encased in limestone in a structure underlying the Athabasca deposit that fuels today’s oil sands industry.

Two other deposits—the Nisku formation which is associated with Grosmont and Peace River – each hold about 65 billion barrels.

In comparison, Alaska’s Prudhoe Bay field, the largest oil field in North America and the 18th largest field ever discovered worldwide, holds 25 billion barrels of original oil in place, more than 13 billion barrels of which can be recovered with current technology.

Shell in the lead

“When you’re talking about the Grosmont, it’s pretty easy to get into some very big numbers,” Jen Russel-Houston, geosciences manager at Osum Oil Sands Corp. , told a late March meeting of the Canadian Society of Petroleum Geologists.

For 60 years, there have been sporadic, unsuccessful attempts to profitably extract oil from the Grosmont. That pace is quickening as a number of companies—led by Royal Dutch Shell and Husky Energy, with Osum as the third largest leaseholder—look for the economic and environmental keys.

Shell stunned the industry four years ago when it forked over C$465 million for Grosmont rights and recently filed a regulatory application to apply its experiments in Colorado’s oil shales and use underground heaters to release the value contained in Alberta’s bitumen carbonates.

Jan van der Eijk, Shell’s chief technology officer, has disclosed that two years of testing in Peace River have produced a substance that it as “mobile as water.”

Osum plans network of tunnels: cheaper and less impact

While Shell is carefully guarding its proprietary information, privately-owned Osum (an acronym for “oil sands underground mining”) is planning a network of tunnels to develop its Saleski project in the Grosmont formation.

It estimates the capital costs at about C$5,000 per flowing barrel compared with the C$14,000 cost of projects that use conventional mining methods to remove the bitumen.

The process was originally designed for use in recovering 250 million barrels at Marie Lake, northeast of Cold Lake, until community opposition forced Alberta Premier Ed Stelmach to cancel the plans and Osum turned its attention elsewhere.

For the Grosmont deposit, Osum plans to carve out a horizontal tunnel, and then inject steam to melt the bitumen and force it to the surface through underground processing facilities. It then proposes to backfill the hole with clean tailings that have been returned from the extraction plant.

The plus, according to Russel-Houston, is the opportunity to avoid extensive surface disruption and respect the environment.

Osum expects to file an application for a large-scale commercial development once it collects the first results from pilot projects later this year.

Report suggests tunneling approach could be effective

A report for the Petroleum Technology Alliance Canada by University of Alberta engineering professor Clayton V. Deutsch suggested the tunneling approach “could be an effective method to extract oil sands in carbonate deposits that give poor in-situ performance or oil sands that lack the critical level of confinement necessary for in-situ extraction.”

Osum is a member of the In Situ Oil Sands Alliance that includes Petrobank Energy and Resources, Athabasca Oil Sands, Laricina Energy and MEG Energy, which have a combined 20 billion barrels of resource in place and have already made capital investments totaling about C$3 billion.

Bloomer acknowledges image problem

Alliance director Chris Bloomer said the producers’ objective is to develop resources in an “environmentally sustainable” manner by deploying their technological know-how.

“We really have an image problem that we need to work on,” he conceded, acknowledging that the oil sands have been the target of international pillory and protest. “We do use water, we do use natural gas and we do have carbon emissions.” But Bloomer insisted in-situ companies are developing solutions to all of those problems.

Aggressive reclamation plan to shrink footprint

To provide the cash infusion needed to drive its expansion, Osum has just filed a commercial application for its Taiga in-situ thermal project near Cold Lake—a 35,000 bpd operation it hopes to launch in early 2014 and produce for 35 years based on the 320 million barrels of proved plus probable reserves assigned by GLJ Petroleum Consultants.

Richard Todd, Osum’s chief executive officer and chairman, said the best estimate of 2.1 billion barrels of contingent recoverable resources at the Taiga lease could eventually support production of more than 200,000 bpd.

The application to Alberta government regulators said Taiga will use cogeneration facilities to greatly increase energy efficiency, will apply a progressive reclamation plan to shrink its footprint and intends to re-use several times over the non-potable water that will make up the bulk of water used to generate steam.

However, despite Osum’s ambitious timetable, scientists at the Alberta Research Council, Alberta Research Council, now part of Alberta Innovates Technology Futures, have suggested that commercial production from the Grosmont carbonates could be 16 to 20 years away. And that’s a big part of the challenge facing those who think they’re within sight of a solution to “dirty oil.”

Links of interest

Petroleum Technology Alliance Canada, report from Clayton V. Deutsch
http://www.ptac.org/search1.html

University of Alberta, fact sheet on Clayton V. Deutsch
http://www.ualberta.ca/~cdeutsch/ContactInfo.html

In Situ Oil Sands Alliance
http://www.iosa.ca/

Alberta Research Council, ARC, now part of Alberta Innovates Technology Futures
http://www.arc.ab.ca/

Energy Resources Conservation Board of Alberta
http://bit.ly/bQH9S8

Shell Canada, a subsidiary of Royal Dutch Shell
http://www.shell.ca/

Osum Oil Sands Corp.
http://www.osumcorp.com/

Canadian Society of Petroleum Geologists
http://www.cspg.org/

Prudhoe Bay Fact Sheet
http://bit.ly/dlovH2

Contact Gary Park via publisher@greeningofoil.com
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