|
Entering a new generation Canadian producers and governments awaken to enhanced oil recovery prospects; Kyoto Protocol helps ignite investment By Gary Park Petroleum News Canadian Correspondent
The prize could be billions of barrels of oil that Western Canada’s producers have been unable to profitably drag to the surface by conventional means.
But the rapid descent of conventional crude, projected to slump from 1.4 million barrels per day for all of Canada in 1995 to under 700,000 bpd by 2015, has dreams and dollars shifting to enhanced oil recovery (EOR) schemes, bolstered by government incentives.
Saskatchewan alone estimates that EOR techniques can raise its recoverable oil potential to 35 billion barrels from the 5 billion barrels that are currently accessible by primary (vertical well drilling) and secondary (water flooding) techniques.
A mere 5 percent increase in the overall recovery rate would more than double Saskatchewan’s remaining recoverable oil reserves to 2.4 billion barrels, said the province’s Resources Minister Eric Cline. Environmental benefits In some cases, the drive to squeeze as much oil as possible from Western Canada’s aging fields also yields environmental benefits now that producers have figured out ways to pump carbon dioxide — the primary culprit among greenhouse gases — to rebuild reservoir pressures and, as the CO2 mixes with oil, allow the oil to flow more easily to the surface..
Federal and provincial cabinet ministers have also seized the chance to help Canada achieve its Kyoto Protocol commitments by offering C$30 million over two years as an incentive for companies to develop ways to capture and store CO2.
One of those emerging techniques involves pumping solvents into heavy oil, virtually eliminating greenhouse gases and significantly reducing water consumption. Penn West on verge of deal Penn West Petroleum, which is about to become an income trust, is hoping to cash in big time by playing the CO2 card.
Company President Bill Andrew said May 27 that his company is on the verge of negotiating a deal with the Alberta and Canadian governments to build a C$350 million-$400 million pipeline to move CO2 from refining plants in the Edmonton area to oilfields in central and southern Alberta and possibly Saskatchewan.
He hopes the two governments will each shoulder one-third of the pipeline’s costs, with the federal government tapping into money available under its Kyoto plan.
The objective is to get a pipeline in service by 2008 or 2009, initially supporting EOR activities in the mature plays of Swan Hills and Pembina in central Alberta.
Andrew said Penn West would operate the main line, while a supporting CO2 supply from the Fort McMurray oil sands region would be run by oil sands operators.
Without getting into details, he said the options on the table include a combination of tax, royalty and greenhouse gas emissions credits to accelerate construction.
Andrew bases his case partly on the costs of retrofitting refineries and coal-fired power generators to comply with Kyoto standards, which could run from C$150 million to C$500 million per plant.
He said Canada’s decision to implement Kyoto will help create a stable domestic supply of CO2 that is vital for a pipeline to proceed.
Canada’s Natural Resources Minister John Efford said experts have estimated that 75 million metric tons of CO2 “could be geologically stored in Canada every year.”
One CO2 sequestration project, operated by EnCana in the Weyburn area of southeastern Saskatchewan, earned high accolades from international scientists in 2004.
Funded by 15 public and private sector agencies, including the U.S. Department of Energy, BP, Chevron and France’s Total, the four-year, C$40 million study concluded that large volumes of CO2 can be safely stored in oil-bearing formations. Further work needed Billed as the largest in-the-field study of CO2 storage, the research effort estimated that over 5,000 years only a tiny fraction of CO2 would ever seep into the atmosphere.
However, the scientists said further work is needed before there is greater certainty about how much oil can be recovered.
“We don’t want any unanswered questions,” said study co-founder Malcolm Wilson, director of energy and environment at Saskatchewan’s University of Regina.
To date, the C$1.1 billion Weyburn venture has buried 14 million metric tons of CO2 and expects to produce an incremental 130 million barrels from the field.
EnCana injects 25 million cubic feet per day of CO2 into the reservoir, importing the volumes from a North Dakota synthetic fuel plant.
A study by the Canadian Energy Research Institute said the Western Canada Sedimentary Basin has CO2 storage space for 15 billion metric tons in 25,400 natural gas pools and 9,300 oil pools, although current costs of transporting and sequestering CO2 could be as high as C$4 per thousand cubic feet.
To make storage a better financial proposition, the Saskatchewan government this year revamped its policies relating to large-scale EOR projects as a first step in a 10-year plan to boost oil and gas production.
The changes lower EOR taxes and royalties and offer sales and fuel tax exemptions on EOR materials. Husky will take fresh look at projects “With the new regime, we will take a fresh look at the economics of (various) projects,” said a spokesman for Husky Energy, Saskatchewan’s leading driller in 2004.
Saskatchewan Premier Lorne Calvert said his government wants to create a positive climate for growth through competitive taxes.
But he conceded that the high-flying production goals will not be attained without greater industry investment in infrastructure and facilities to upgrade heavy crude.
The immediate response was encouraging for the government.
Apache Canada unveiled plans to recover 45 million barrels from the Midale field near Weyburn and store up to 8.75 million metric tons of CO2 in the process.
Calgary-based independent Nexen, which relies on Saskatchewan heavy oil for 40 percent of its Canadian production, said a 5 percent to 10 percent increase in its recovery rate would double its reserves in the province.
Alberta has taken smaller steps to improve oil and gas recovery methods through CO2 injection, offering royalty credits of C$15 million a year to cover 30 percent of approved project costs.
Penn West itself has led the way in central Alberta, injecting 3 million cubic feet per day of CO2 to generate 700 bpd of light oil and gain 15 percent incremental recovery.
Based on that success, it has started a second project involving pools that have more than 2 billion barrels of oil in place, with the goal of doubling its output.
Anadarko Petroleum has embarked on a pilot EOR project in central Alberta that could open up “several additional opportunities that have similar EOR potential,” the company said.
| 