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Tunneling to oil sands Startup plans to go underground to extract bitumen; claims technology drops drilling costs by 60% Gary Park For Petroleum News
OSUM Oil Sands wants to burrow its way to recoverable resources estimated at 252 million barrels and is ready to join others in opening up an unexploited carbonate trend, where OSUM holds another potential 845 million barrels.
The private Calgary-based company made its biggest public appearance yet at the Canadian Association of Petroleum Producers investment symposium to lay out its trail-blazing and controversial plans.
It also came armed with a report from GLJ Petroleum Consultants, updating its resources at the two holdings, where it has accumulated 75,000 gross acres (50,000 net) over the past 18 months.
OSUM is backed by management, technical teams and a board of directors with more than 200 years of experience in all aspects of the petroleum industry and underground construction.
Company president is Peter Putnam, also chairman of Petrel Robertson Consulting. He previously worked with Husky Energy in heavy oil exploration and development.
Chief executive officer and chairman is Richard Todd, who formerly held the top posts at Mustang Resources.
The most daring part of OSUM’s current strategy involves drilling thermal recovery wells in tunnels under Marie Lake in Alberta’s Cold Lake heavy oil region.
Underground operations allows ‘optimal pressures’ By avoiding the cost of surface casing and tubulars, well costs are about 60 percent less than traditional drilling, Putnam said.
Being underground also allows operations to be conducted at the “optimal pressures” a reservoir can handle, thus reducing fuel consumption and “vastly” improving the economics.
The process involves drilling shafts from the surface to the pay zones. Tunnels up to several miles long are excavated from the shaft and horizontal steam-assisted gravity well pairs are drilled into the zone from tunnels.
Putnam told the symposium the benefits include providing access to upper tier reservoirs that are currently viewed as inaccessible, impractical or uneconomic; reducing lifting costs; improving thermal process efficiency; and minimizing environmental impacts.
OSUM has a 100 percent working interest at Marie Lake near Cold Lake, where it hopes to apply the underground thermal technology to produce 30,000 barrels per day.
Its property is alongside three major ventures — Imperial Oil’s 160,000 bpd operation at Cold Lake, Shell Canada’s Orion project and Husky’s Tucker Lake project.
The symposium was told that GLJ Petroleum has boosted net recoverable resources from 843 million barrels to 1.097 billion barrels (no reserves can be booked until there is a commercial project) as a result of winter drilling and seismic activities.
Putnam describes the recoverable oil at Marie Lake as the “most lucrative bitumen barrel that you will find at this stage of development anywhere in Canada.”
Oil prices of US$40 per barrel, plus general and administrative costs, would be the breakeven mark for 30,000 bpd of production, he said.
Putnam said the technology has undergone a successful pilot by the Alberta Oil Sands Technology and Research Authority under commercially relevant conditions, with three well pairs producing up to 2,000 bpd.
He said underground production has been applied at a thermal project in Texas and a conventional project in Wyoming.
Landowners concerned about water quality But the road ahead is not without its potholes. Landowners in the Cold Lake area, concerned about the impact on water quality, are opposed to OSUM’s plans to conduct three-dimensional seismic work on and around Marie Lake. A petition carrying 1,200 signatures was delivered to the Alberta legislature earlier in June.
OSUM’s second major undertaking is at the Saleski carbonates in the southwest Athabasca oil sands region, where OSUM has partnered with Laricina Energy. Shell and Husky are also active in determining the scope of the Saleski resource and figuring out ways to achieve a breakthrough in the untapped deposit.
Privately held Laricina has already raised C$200 million and expects to raise another C$100 million this year to finance its share of a field pilot at Saleski. The company is run by the same team that started Deer Creek Energy, which was sold in 2005 to France’s Total for C$1.7 billion.
Putnam listed three thermal recovery projects operating from carbonate reservoirs in the Middle East — Royal Dutch Shell is operator of the Omani national oil company’s successful pilot that is on the verge of commercial production of 4,000 bpd, while two Canadian companies are active — Rally Energy in Egypt and Tanganyika Oil in Syria.
Work at Saleski has so far included drilling five winter wells, acquiring some new two-dimensional seismic data and purchasing, reprocessing and interpreting existing data.
OSUM’s timetable includes converting recoverable resources to reserves through drilling, seismic and technical evaluations; filing an application for a pilot project at Marie Lake in early 2008 and another application for the Saleski joint-venture by mid-2008; pilot production and resource delineation in 2009-11; and full commercial development in 2012. It now needs to raise C$435 million in common equity and flow-through shares.
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