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Petrobank tries new twist at oil sands project

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Some interesting developments in the oil sands area







Predicts success of Toe-to-Heel Air Injection at Whitesands could mark sea change in how energy is wrung from ground




August 13, 2007


CALGARY -- The crude oil produced by Petrobank Energy and Resources Ltd.'s Whitesands operation doesn't appear noticeably different to that produced anywhere else in Alberta. However, the oil represents not only a realization of the company's dream, but a potential sea change in how Canadian companies wring energy from the ground.


Whitesands is an unimposing oil sands project southwest of Fort McMurray that's been in operation for about a year. Operations there are very different from other companies' attempts to extract crude from Alberta's oil sands.


Most companies pump steam into their reservoirs to move the putty-like deposits, a process called steam-assisted gravity drainage (SAGD). But this consumes a lot of costly natural gas.


Calgary-based Petrobank has taken a different route at Whitesands, injecting hot air into the ground to force the bitumen - the heavy crude produced from the oil sands - to the wells. "This is what all our work is for," says Dave Reddecliff, operations manager at the plant. "It might look simple, but it's also really exciting. To me, this is the answer for the oil sands."

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The method, Toe-to-Heel Air Injection or THAI, is based on techniques that have been around since the 1920s. It is used in countries such as India, Kazakhstan and Romania. Hot air is injected down one vertical well, creating a combustion front that forces the crude toward a second vertical well, where it is extracted.


The process has historically been inefficient, as the air has a tendency to break into the second well, ending production. To overcome those problems, Petrobank has added a twist to the system. Like SAGD, THAI uses a horizontal extraction well, employing gravity to increase the proportion of crude recovered.


However, the company believes the combustion process could increase recovery rates in heavy crude oil reservoirs to between 70 per cent and 80 per cent, a step up from the 40 per cent typically seen at SAGD projects. Capital and operating costs are estimated to be roughly half of those at SAGD projects because no steam is required.


Furthermore, the combustion process has the effect of upgrading the quality of the crude in the reservoir; the heavier parts of the barrel are burned off, so the oil produced is less viscous and doesn't need to be as heavily treated to get it to market.


The company has encountered a fair amount of skepticism, not unusual in an industry that doesn't always embrace new technologies, said Chris Bloomer, Petrobank's vice-president of heavy oil. However, the success of the pilot project indicates THAI is a viable option for future oil sands projects, he said.


"This is a game-changing project; we proved it in the laboratory, but we needed to prove it in the field. We've done that; now we just have to optimize and enhance it."


While Petrobank is coy about just how much its three pairs of wells at Whitesands produce, output rates of as much as 1,000 barrels a day of crude appear to have been achieved. However, issues of large amounts of fine sand gathering at the extraction well have also been encountered.


The next step for Petrobank is to bring on three more pairs of wells, which will be further apart and will test out a potential enhancement to THAI, called CAPRI, in which a nickel-based catalyst is added to the well bore, potentially further increasing the amount of upgrading that happens in the reservoir to the extent that crude produced could flow down a pipeline. "We think THAI is effectively an in-situ coker, and we hope CAPRI could be an in-situ catalytic cracker," Mr. Bloomer said.


From there, the company plans to develop an initial 10,000 b/d commercial project, which, at capital costs of roughly $15,000 a flowing barrel, could cost about $150-million and be constructed in a year, Mr. Bloomer said.


It's part of Petrobank's ambitions of operating a series of projects capable of producing 100,000 b/d from its Whitesands reserves.


The company also hopes to license its technology to other heavy oil producers in exchange for an equity stake. "This is our card to get into other resources," Mr. Bloomer said. "We can license the technology to other companies, especially those in places of the world we wouldn't necessarily want to operate a project."


For now, the company is focused on the next stage of Whitesands. It recently secured $250-million (U.S.) in financing allowing it to buy the minority stake in Whitesands held by Winnipeg-based Richardson Financial Group. Petrobank says owning all of the equity will enable it to advance its Canadian operations.


As a result, pursuing a commercial development appears within reach, Mr. Bloomer said. "We've taken the approach that we just need to say what we're going to do, and then going out and doing it," he said. "The next phase is a pretty big step and pretty challenging, but it is just the beginning, I think."




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Petrobank's plan to milk the oil sands




In THAI, or Toe-to-Heel Air injection, crude extraction, hot air is injected into the reservoir through a vertical well, creating a combustion front. the heat not only burns off some of the heavier elements of oil in the reservoir, improving the quality of what is produced, but also forces the crude towards a second horizontal well around 500 metres away, where it is extracted.




Petrobank believes the process can recover as much as 80% of the crude from a suitable reservoir, twice as much as that from current Steam Assisted Gravity Drainage, or SAGD, projects. THAI also doesn't consume much natural gas as it doesn't need to create steam, unlike SAGD.





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