|
Testing big leagues with new technology Juniors bring talent to table, advancing ‘next big thing’ in Alberta oil sands by embarking on pilot projects in carbonate rocks Gary Park For Petroleum News
Investment banker Tristone Capital (now Macquarie Capital) observed last year that the Alberta oil sands region covers an area the size of Florida.
Thus, it suggested, a chunk equivalent to Disneyworld has the potential to support a 100,000-barrel-per-day project — “hugely material for a C$100 million company.”
All of which explains why a host of small, privately held companies, backed by experienced management and technical teams, have secured footholds in the region, where the common valuation benchmark for undeveloped bitumen is roughly C$1 per barrel.
But, as Tristone noted, moving from land acquisition to pilot or commercial project development is far from plain sailing.
“Not all land contains oil sands resources and not all bitumen in-place resource estimates will result in economically recoverable reserves,” the research report on junior oil sands companies said.
Increased recoveries expected Genuity Capital Markets, in a November report, suggested that new in-situ technologies are expected to increase total recoverable bitumen to about 300 billion barrels from the current 173 billion barrels of estimated potentially recoverable bitumen, with a yet-to-be-determined contribution from Saskatchewan.
Authored by Philip Skolnick and Benny Wong, the Genuity report said in-situ technology is still in its infancy and innovative changes could positively impact recovery potential and reduce costs.
It suggested those gains could stem from work being done by Cenovus (the new EnCana oil sands spinoff), E-T Energy, Ivanhoe Energy, Petrobank Energy and Resources, Oilsands Quest and Alberta Oil Sands.
It addition, the report identified Husky Energy, Laricina Energy, OSUM Oil Sands, Royal Dutch Shell and Sunshine Oilsands as companies seeking a breakthrough in the emerging bitumen carbonates formation of Alberta.
It said a “positive shift-change in the economics and recoveries of new resources, such as the carbonates,” could be a catalyst for mergers and acquisitions.
Carbonates in Grosmont The consensus view rates the carbonate rocks in the Grosmont formation — where companies of various sizes have invested hundreds of millions of dollars to lock up rights — as the next generation of oil sands development, leaving behind the conventional, unsightly surface mining operations that have blighted the landscape and allowed the critics to heap scorn on the industry.
“We’re always touring (in-situ development) as the future of oil sands development,” said Michael Burt, executive director of the In Situ Oil Sands Alliance.
The primary thrust now involves the injection of steam or solvents into deposits that are too deep for strip mining to melt the bitumen and force it to the surface — a technique that is being tailored to specific reservoirs, including carbonates.
Since pilot tests were run in the 1980s, the carbonates were off the radar screen until Shell, through its subsidiary in the Americas, invested almost C$500 million in 2006 for rights to the formation.
Others to trumpet their stakes in the carbonates include Husky Energy, Laricina and Athabasca Oil Sands, which sold 60 percent working interests in two in-situ projects during the summer to PetroChina.
No proven technology However, to date, no proven technology is known to exist for recovering bitumen trapped in the carbonate rock and opening a new geological and technological frontier for Alberta oil production.
Shell has made it clear from the outset that it is taking a long-term approach to the formation, indicating it is unlikely to proceed with a commercial project before 2015.
But the importance of the resource was underscored when it asked Alberta Energy Resources Conservation Board to grant at least eight years of confidential status to its Grosmont field test — a process the company says has been successfully tried in Colorado shales and to upgrade bitumen in conventional oil sands near Peace River in northwestern Alberta.
Shell told the Alberta regulator that public disclosure of information obtained from its research project “may significantly jeopardize (Shell’s) competitive position and result in undue economic hardship.”
Asked by the ERCB to further justify its request, Shell cited the “sensitive nature of this type of technology” and the need to protect its intellectual property as it works on a design for a potential commercial project.
Sunshine planning pilot While Shell keeps a blanket over its activities, Laricina and Sunshine are taking a higher public profile as they advance plans for pilot projects that some analysts believe could establish a market for foreign state-owned entities, such as PetroChina and Korea National Oil Corp., as they ponder their next moves in the oil sands.
Skolnick said in a research report that in-situ events could “dramatically improve the economics and increase Canada’s expected recoverable bitumen potential. This could be analogous to what has happened in the tight North American oil and natural gas plays,” such as the Montney and Bakken.
Sunshine is about to take its first step into the reality of pilot projects by gaining ERCB approval to conduct a single-well cyclical steam stimulation test of under 1,000 barrels per day, setting the stage for 2,000 bpd from a commercial operation in 2014 followed by two 20,000 bpd phases, due to come on stream in 2017 and 2020.
The private company’s eventual plans for all of its 1 million acres of land holdings include a conventional heavy oil project and a 180,000 bpd production profile for 30 years.
Based on 58 core holes within an area of 253,000 acres, Sunshine estimated original bitumen-in-place of 9.1 billion barrels, with a “best case” recoverable resource of 1.3 billion barrels.
The pilot will test the application of a thermal recovery process that is expected to improve the feasibility of heavy oil recoveries from the Grosmont formation.
Sunshine Chief Executive Officer Doug Brown said the regulatory approval is “a significant element in the progressing of our business plan. This in-situ pilot will move the evaluation of our carbonate resources ahead substantially.”
Laricina has inventory Laricina has assembled an extensive inventory of potential resources in both the established oil sands region and the carbonate plays, with its Grosmont prospects, where it has accumulated 180,000 acres, lying at an average depth of about 1,000 feet.
The lands have been verified by GLJ Petroleum Consultants as having estimated contingent resources of 4.1 billion-7.7 billion barrels.
The Germain zone has a potential 1.5 billion barrels net to Laricina and the potential for 180,000 bpd of production using Laricina’s patent-pending recovery process.
The company has received regulatory approval for a 1,800 bpd pilot and is eying a 5,000 bpd commercial demonstration project to startup by late 2012 at an initial cost of C$250 million.
The Saleski zone has a net 1.4 billion barrels and the potential for gross output of 270,000 bpd. Approvals are so far in place for a 1,800 bpd pilot.
| 