New extraction technologies for Alberta Oilsands

Technology Review – large oil companies, including Shell, Suncor Energy, and Exxon subsidiary Imperial Oil, as well as entrepreneurial startups such as N-Solv and Laricina, are field-testing a growing number of in situ techniques. Some are pumping air deep underground and igniting some bitumen in hopes of melting the rest more efficiently. Others see potential in using electricity to heat deeply buried bitumen.

Cenovus is testing a method that uses a combination of steam and a solvent, butane, to help loosen up the bitumen. Pad A02 looks like any other at Christina Lake, except that it has just one pair of wells supported by some extra hardware: three 50-foot-long storage tanks for the butane and equipment to blend it with the 250 °C steam that roars in by pipe from the steam generators. Adding that equipment boosts the cost of building a new site by almost a third, but it’s worth it, says Harbir Chhina, Cenovus’s executive vice president for oil sands. Chhina says adding butane delivers 10 to 15 percent more bitumen from the same resource and does so roughly 30 percent faster.

The effects of that improvement on energy use, profits, and greenhouse-gas pollution are to get a first commercial-scale test at Narrows Lake, an in situ project immediately northwest of Christina Lake where Cenovus hopes to be producing 130,000 barrels of bitumen per day by 2016. (Approval for Narrows Lake is expected by next summer; Alberta has never rejected an oil-sands application.) Harbir Chhina, Cenovus’s executive vice president for oil sands prediction: Narrows Lake’s steam-to-oil ratio will be around 1.7, 15 percent lower than it would be without the solvent. He says the technology could decrease greenhouse-gas emissions by as much as 30 percent at most SAGD sites.

Nenniger is gearing up for tests of a solvent-only process that was invented in the 1970s by his father, who was vice president for process engineering at Hatch, Canada’s second-largest engineering firm and N-Solv’s majority shareholder. From a makeshift work space in Hatch’s Calgary offices, Nenniger plots the technology’s comeback: a $60 million pilot test is under way at Suncor Energy’s Dover site northwest of Fort McMurray, the same place where the SAGD process was originally tested.

Nenniger estimates that eliminating the use of steam and lowering temperatures will save $9 on each barrel of bitumen. What’s more, the solvent process can extract the best-quality bitumen, leaving more of the heaviest asphalt-like materials in the ground. That should make N-Solv’s bitumen easier to refine, fetching producers an extra $15 for every barrel they ship. Nenniger also pro­jects that the process will use 80 to 90 percent less energy per barrel of bitumen than SAGD, reducing carbon emissions accordingly.

N-Solv plans to drill observational wells at its pilot facility this winter, and injection and production wells should follow in the summer. Warm solvent could begin flowing as early as the fall of 2012, delivering production results by the following summer. Nenniger projects commercial-scale application in as little as five years. “Proving we’re better than SAGD on a head-to-head basis will open up the entire oil-sands market,” he says.

The question for oil-sands innovators is whether the financial risk of developing new types of in situ technologies will pay off. Cenovus needs a global oil price of just $45 to $50 per barrel to turn a profit on its Christina Lake investments; with prices now above $75 per barrel, it is making good money. In an era of cheap natural gas and pricey oil, Canada’s bitumen producers will need an extra push before they commit billions of dollars to alternatives to mining and SAGD. Nenniger believes that corporate decision makers have little incentive to change under current economic conditions, where energy costs are low and tax-deductible, and carbon emissions are free. “You have a system that doesn’t create market pull,” he says.

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