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Seeking answer to vexing gas-oil issue EnCana testing nitrogen, CO2 in bitumen production; Alberta Energy Resources Conservation Board continues to shut in gas wells Gary Park For Petroleum News
EnCana thinks it might be on track to solve what has been dubbed the most significant energy conservation issue in 70 years of a government regulated industry in Alberta.
What rapidly morphed into one of the nastiest disputes between the natural gas and oil sands sectors when it first surfaced 12 years ago has reappeared.
At play is the future of billions of barrels of potentially recoverable bitumen in northeastern Alberta and billions of cubic feet of natural gas reserves.
Despite six years of consultation and public hearings, Alberta’s energy regulator was unable to find a way to protect the value of both resources.
The issue boils down to the impact of gas production in an area containing some of Alberta’s highest-quality bitumen resources.
As the gas is produced, reservoir pressure drops in the gas pools posing a risk to bitumen recovery using thermal techniques, such as steam-assisted gravity drainage.
In the view of what is now the Alberta Energy Resources Conservation Board, there is no currently proven technology that can satisfactorily protect the value of the bitumen, whose energy content is about 600 times greater than the overlying gas.
Shut-ins in 2003 The initial round of regulatory decisions in 2003 shut in production by 16 producers from 835 gas wells that were yielding about 123 million cubic feet per day.
Faced with threats of costly lawsuits by the gas producers, the government agreed to a compensation formula that paid out C$95 million to 12 producers in 2005. No updated compensation figures have been released.
The so-called gas-over-bitumen issue flared up again Oct. 15 when the Alberta ERCB ordered an interim shut-in of 158 gas wells affecting a potential 33 million cubic feet per day of output pending a full hearing in spring 2010.
The board reiterated its earlier insistence that it was required only to determine that potential, not commercial, bitumen recovery was at risk from continued gas development.
But it said the interim order is “not conclusive or permanent” until it concludes a full hearing.
EnCana testing new technology EnCana, which has 16 wells in the affected area and is also a major oil sands operator, did not file a submission in the latest case.
But, as it has done before, the big independent is leading the way in seeking an answer.
Following the first shut-in, it obtained regulatory permission to develop the EnCana Air Injection and Displacement technology and has been running tests over the past two years.
To maintain pressure in the reservoirs, EnCana has been injecting nitrogen and carbon dioxide, which also helps heat up the bitumen, allowing it to flow more easily.
But, pending a solution, the ERCB shows no signs of wavering.
The latest case was triggered by oil sands startup Sunshine Oilsands and the French major Total.
Sunshine is seeking approval for an initial 8,000-barrel-per-day facility to exploit 15 million barrels of primary recovery bitumen and 30 million barrels using enhanced recovery methods.
It has budgeted C$31 million for an initial 1,800 bpd project and C$460 million for a five-phase project to reach 8,000 bpd.
The company estimates it has petroleum initially in place on its leases of 312 million barrels, enough to support a 180,000-bpd development, with an operating life of 30 years.
Total is involved in evaluations of steam-recovery potential for bitumen deposits, also in the Liege field of the Athabasca oil sands region.
Sunshine: protecting bitumen Sunshine Chief Executive Officer Doug Brown welcomed the ERCB decision as proof that the regulator wants to protect the bitumen resource “for the benefit of Albertans.”
He said the board’s response is “very helpful” for the timely development of his company’s plans to harness its bitumen resources by using conventional steam-recovery technology.
Athabasca Oil Sands (which recently sold 60 percent stakes in two of its oil sands projects to China’s CNOPOC) and Grizzly oil sands filed submission’s supporting Sunshine’s case.
Objections were registered by Canadian Natural Resources, and its working-interest partner Japan Oil Sands, which is licensee of 25 affected gas wells, and Paramount Energy Trust, which has 69 affected wells.
Paramount said price forecasts for gas and royalty reductions applicable to shut-in wells will soften the impact of the ERCB order and not have a material impact on the trust’s funds.
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