Advanced Lessons in Profitable Oil Sands Production

Canadian oil sands production is headed upward, thanks in large part to increasing efficiencies of in situ production methods.

WSJ Advanced Oil Sands

...oil companies... are experimenting with technologies that could unlock even more reserves from what is some of the world's heaviest and stickiest petroleum. The new technologies could also drive down the cost of producing oil in Canada.

One consortium aims to get oil flowing to the surface by sending radio waves from huge antennae pushed through wells deep underground—adopting technology first developed for the U.S. government to eavesdrop on underground bunkers.

Another company is working on inserting electrical heating coils into wells to melt the oil, while other firms are tinkering with petroleum-based solvents they hope to pump into wells to get more oil out.

All the experimentation is aimed at improving a standard method of oil-sands extraction: so-called steam-assisted gravity drainage, or SAGD.

...SAGD quintupled the amount of bitumen that may be possible to recover in Canada, and helped lift Canada's overall recoverable oil reserves to No. 3 in the world, behind Saudi Arabia and Venezuela.

But those reserves are only a 10th of the 1.7 trillion barrels of bitumen found in Canada. Alberta's Energy Resources Conservation Board estimates there are also more than 400 billion barrels of bitumen trapped in carbonate rock formations in Alberta, mostly in a large formation called the Grosmont that stretches across the center of the province.

"If we postulated that 25% of that can be recovered, Canada could move to No. 1" in world oil reserves, said Glen Schmidt, chief executive of privately owned Calgary energy-technology company Laricina Energy Ltd.

...Basic SAGD technology uses two horizontal wells drilled parallel to each other, one above the other. Natural gas is used to boil water into steam, which is injected underground into the top well. The steam heats and softens the bitumen, separating it from the sand, causing it to drip down to the bottom well, which sucks it back up.

Laricina is part of a consortium including large Canadian energy companies Suncor Energy Inc. SU -0.96% and Nexen Inc. NXY +51.82% that is testing replacing the steam with an antenna, developed by Melbourne, Fla., telecommunications-equipment manufacturer Harris Corp. HRS -1.24% After being fed down a well, the antenna blasts out heat, warming the bitumen.

..."If we eliminate steam, we eliminate potentially 60% of the cost of a facility, which is huge," he said. The technology could be ready as soon as 2019.

...Harris and other antenna designers try to reduce electromagnetic heat as much as possible to improve the efficiency of a radio antenna for communication. Harris "realized that we can take our antennae and instead of using them for communications, we can use them as a source of electromagnetic energy that generates heat," Mr. Covell said.

Athabasca Oil, another big Canadian oil producer, is testing a similar electric-heating technology to unlock bitumen from carbonate rock. The company inserts electric coils, made of the same material as heating elements on a stovetop, into wells. If tests are successful, Athabasca plans to start a commercial project for its technology by 2018.

Laricina and several other companies are also testing adding light hydrocarbon solvents to steam in SAGD wells to boost output. The solvent dilutes bitumen, making it easier to flow.

_WSJ

The bottom line is that oil sands producers are learning how to reduce the cost of in situ extraction of bitumens, while also increasing the overall yield.

Breakeven prices may approach $50 a barrel for some approaches, and yields may improve by 30%. How quickly all of this happens will depend in part upon global oil demand over the next 10 years.

Using nuclear power and heat to economically produce oil sands (PDF)