|
Boost for oil sands next phase JV by two startup companies raises production level with results over short time period; other Grosmont carbonate players stay low Gary Park For Petroleum News
Although only a fraction of Alberta’s existing 170 billion barrels of oil sands resources has been removed, the next, even larger deposit is making headway towards commercial development, spearheaded by two junior startup companies.
Laricina Energy, a 60 percent operator, and Osum Oil Sands have made a significant progress towards demonstrating that thermal extraction of bitumen of the Grosmont carbonate formation at Saleski in northeastern Alberta is commercially possible.
Backed by a C$500 million private equity issue last year, Laricina has reported that the production rate from its fourth well-pairing reached 1,200 barrels per day, compared with 800 bpd in the first quarter.
Company President Glenn Schmidt said in a statement that “although we are encouraged by these preliminary results, we note that the initial cycle was over a short time period.”
“Further and extended cycles are required to confirm production performance as we apply what we have learned from previous cycles and continue to employ a variety of systems and applications in startup and recovery to fully understand the Grosmont formation,” he said.
The Grosmont underlies much of the Athabasca oil sands deposit, which dominates Alberta’s oil sands production, and has an estimated 406 billion barrels of oil in place.
The Laricina-Osum joint venture pilot began in 2010 and has now completed four well pairs using horizontal steam-assisted gravity drainage, SAGD, technology, with the horizontal sections limited to about 1,500 feet to enhance early startup by reducing the volume of steam needed for testing.
Laricina said the latest well pair — one to inject steam and one to produce bitumen — occurred through May and June.
The company said the results “support both our confidence in the drilling techniques which we expect to use in the planned 10,700 bpd Phase 1 commercial expansion at Saleski and our goal to drive down the costs and improve performance of future well pairs.”
Laricina and Osum are now evaluating the incorporation of cyclic steam stimulation into an amended Phase 1 regulatory application, but is not attempting to forecast when a commercial operation might be possible.
Phase 1 cost estimate raised Calgary-based investment dealer Peters & Co. has noted that Laricina has already raised the Phase 1 cost estimate to C$660 million from C$400-C$450 million, pointing to the “potential for general cost inflation in the oil sands.”
Laricina has earmarked C$402 million (up about 33 percent from last year) for its capital and operating program this year to advance thermal recovery work in northern Alberta, targeting both its Saleski pilot and Germain commercial demonstration project, which is designed to start producing 30,000 bpd in the third quarter of 2015 at a cost of C$330 million and build to 150,000 bpd.
Proven technology exists for recovering more than 25 percent of Alberta’s bitumen resource locked in tight, low-permeability carbonate rock, but industry observers are closely watching the current efforts to open a new geological and technological frontier for Alberta oil production.
Pilot tests were run in the 1970s and 1980s, with reports by a now-defunct provincial government research agency estimating production rates of up to 550 bpd were possible from a single steam stimulation well.
But companies suspended the pilots because of concerns about the viability of production.
Impact of SAGD Interest in the resource was jolted back to life with the evolution of SAGD and other technologies.
In 2006, Husky accumulated Grosmont holdings for small outlays, estimating its properties contain 19.5 billion barrels of oil in place.
Husky, with 100 percent working interests in three carbonate formations totaling 241,000 acres, said it is evaluating the “optimal development” of the assets, but does not expect commercial development within the next 10 years.
Royal Dutch Shell sent the Grosmont temperature soaring in 2006 when it invested C$1.6 billion for land parcels in the Grosmont and established SURE Northern Energy to evaluate and potentially develop the resources using unspecified “new” technologies.
SURE was later absorbed into Shell’s Canadian division when its plans to test electric heaters for bitumen recovery and in situ upgrading were indefinitely delayed in late 2008.
Shell has provided little updated information over the past four years beyond indicating it would proceed at a “more modest pace.”
Athabasca Oil Corp., with 788,000 gross acres of rights, started an electro-heat pilot early last year, using extreme down-hole heat to convert the viscous bitumen deposits into medium crude which could be forced to the surface.
It is keeping a low profile on the work other than saying work is progressing on a pilot/demonstration project.
| 