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Alberta Oilsands Trying Substitutes For Natural Gas in Producing Heavy Oil

Poor prices are breathing life into plans to slow down the growth rate of natural gas use by northern Alberta thermal oilsands plants, the biggest Canadian industrial fuel consumer and source of carbon emissions.

Replacements for gas-fired steam injections into bitumen deposits -- cooler solvents and jumbo microwave heaters -- emerged from laboratories into starring roles at the 2015 annual Calgary conference of the Canadian Heavy Oil Association.

“When you can’t make money the old way you have to look at new things,” said N-Solv Corp. President Joseph Kuhach. His firm replaces oilsands shots of steam heated to 200-220 degrees C (390-430 degrees F) with 40-60 degrees C (100-140 F) baths of propane or butane.

Like current standard practice for extracting bitumen from sand in deposits too deep to mine -- SAGD, short for steam-assisted gravity drainage -- the new method uses pairs of horizontal wells, one to inject the separation material and the other to pump up the oil.

But by discarding water treatment and steam generating facilities as well as cutting gas use, an N-Solv bitumen production complex could earn a 10% return on investment even at currently depressed oil prices, Kuhach said.

A pilot plant north of Fort McMurray has produced more than 60,000 bbl since 2Q2014, Kuhach said. The solvent technique’s operating costs are turning out to be less than C$20/bbl ($15).

“We are now at the point where we can take it commercially into the field,” Kuhach said.

He added that by cutting facilities construction, the new method gains an added attraction of being economic to install in production stages as small as 10,000 b/d -- about one-third the industry minimum for SAGD operations.

The microwave method would also work in 10,000 b/d packages and be even cheaper, said Chris Patterson.

As an engineer with oilsands producer Devon Canada, Patterson leads an industry group that is starting a two-year field trial of a system called ESEIEH, pronounced “easy” and short for “enhanced solvent extraction incorporating electromagnetic heating.”

The consortium includes oil producers, pipelines and the technology’s inventor, defense and communications contractor Harris Corp. based in Florida, which has Canadian roles such as servicing F-18 fighter jets at NATO and NORAD air bases in Alberta.

Like N-Solv, ESEIEH uses pairs of horizontal wells drilled in close parallel across oilsands deposits. One well in each pair houses a long, low frequency microwave antenna. Propane warmed up to 70-80 C (160-175 F) serves as an underground heat conductor. In both new technologies the fluid is recycled, not lost in the production process.

Experiments to date indicate that operating costs of an ESEIEH extraction network would only be C$10-14/bbl ($7.50-10.50/bbl) of bitumen production, Patterson said. He compared the potential of the new system to the evolution of railways from lumbering coal-fired steam locomotives to agile electric trains.

Former Devon Canada President Chris Seasons, now an adviser to Calgary energy investment banker ARC Financial Corp., agreed. “In many ways we’re still operating with 1950s and ‘60s technology. There’s a lot of room for improvement.”

Kuhlach, a veteran of numerous senior Alberta technical and corporate roles, said “lots of people [are] playing with solvents today. I think that’s the future of the industry.”

Confirmation was at hand from Imperial Oil Ltd., Canada’s publicly traded affiliate of ExxonMobil Corp. Imperial’s 3Q2015 report to shareholders disclosed that a solvent extraction method will be incorporated into its next oilsands development. Imperial calls its variation on the new technology theme SA-SAGD, short for “solvent-assisted, steam-assisted gravity drainage.”

The technique figures in a megaproject called Aspen, which would tap a 1.2 billion bbl deposit too deep to mine that is 45 kilometers (27 miles) north of Fort McMurray, for up to 162,000 b/d and forecast to cost C$11 billion ($8.2 billion) over two stages of construction.

Not the least of the new technologies’ attractions is built-in deep cuts of carbon emissions from producing Alberta bitumen, which is politically vilified as “dirty oil” and a symbol of the carbon-based economy.

N-Solv’s environmental billing includes a 75% reduction in carbon emissions by oilsands production including upgrading the initial bitumen output to refinery-ready light crude: down to 29 kilograms/bbl (64 pounds/bbl) from 122 kilograms (268 pounds).

An ESEIEH microwave extraction system would cut carbon emissions to half the volume of gas-fired steam injections even if the electricity came from coal-burning power plants, Patterson estimated.

Current oilsands operations consume an average of 1 MMBtu/bbl of gas production, with open pit mines burning less fuel but growing in-situ underground extraction from deep deposits using up to 2 MMBtu/bbl.

An ARC Financial survey found that the oil price drop postponed 1.2 million b/d in Alberta bitumen projects but that 800,000 b/d of capacity is still under construction, to increase total output to about 3 million b/d by 2020.

N-Solv and ESEIEH are both supported by provincial and federal industrial research assistance agencies including Alberta’s Climate Change and Emissions Management Corp., which invests funds collected by a levy on large emitters of greenhouse gases.

Industry is expecting both technologies to be accepted as examples of good Canadian intentions during the United Nations climate change summit that starts Nov. 30 in Paris. But public attention, across Canada and elsewhere, remains riveted on oilsands plants and pipelines as symbols of the carbon economy popularly blamed for planetary heating.

In Canada, both ends of the climate change political spectrum -- eco-puritans and doctrinaire free-enterprisers alike -- are convinced that President Barack Obama is poised to make a grand display of U.S. Democrat green virtue at Alberta’s expense.

Both factions predict that before or during the Paris conference Obama will formally reject TransCanada Corp.’s application to build the Keystone XL pipeline for oilsands exports to the Gulf of Mexico.

Moderates, including the freshly elected Liberal regime in Ottawa and the New Democrat government in Alberta, still hope any White House decision will respect the long tradition of close trade ties, Canada’s authority to manage its own resource development and initiatives such as the evolution of cleaner oilsands operations.

After Obama confirmed the predictions of political drama by the climate change debate's extreme poles, Prime Minister Justin Trudeau and Alberta Premier Rachel Notley agreed they were disappointed but not surprised.

The Canadian leaders also agreed that the president's rejection of Keystone XL highlighted needs to stiffen Canadian environmental regulation, repair the nation's international reputation and keep working on alternative east-west pipelines and tanker ports as new outlets for Alberta oil exports.

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