Price Puts Oil Sands in Spotlight

Coal’s Cousin Attracting Players

The considerable hype about the Canadian oil sands action just keeps escalating – and with good reason.

It’s understandable given what’s there, just waiting to be recovered by the operators.

We’re talking 174 billion barrels of reserves, qualifying this resource as second only to Saudi Arabia in the ranks of global oil reserves.

Not surprisingly, companies worldwide are scrambling to get a piece of the action.

The latest big-name entry into this hot play is Marathon Oil Corp., which recently announced that it’s acquiring Calgary-based Western Oil Sands.

A short list of the many other notable players includes:

  • Statoil, which purchased Canada’s North American Oil Sands Corp.
  • Shell Canada and Royal Dutch Shell, which purchased Calgary-based BlackRock Ventures.
  • Total, which purchased Deer Creek.
  • China National Petroleum Corp., which recently acquired rights to explore in the oil sands.

Counting the Costs

Canada’s oil sands are found in the province of Alberta, where they occur in three principal areas – the Athabasca, Peace River and Cold Lake regions – and encompass about 140,200 square kilometers. The Canadian Association of Petroleum Producers (CAPP) noted that in 2005 industry investment in the Alberta oil sands reached approximately $10 billion.

Oil sands activity actually dates back many years – back when $70-plus oil was unheard of. Suncor Energy, in fact, pioneered the world’s first commercially successful oil sands operation in 1967, according to Brad Bellows, spokesperson for Suncor.

But this is no ordinary resource, and economic recovery on a large scale is possible only when oil is bringing in a minimum of $40 per barrel, according to some industry analysts.

Image Caption

Canada Oil Sands
Canada's oil sands continue to be a major play, and geophysical crews are helping to define and exploit the potential. Typical deployment there uses a single vibrator per source point to eliminate source array and meet high spatial resolution needs.
Photo courtesy of Conquest Seismic Services

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The considerable hype about the Canadian oil sands action just keeps escalating – and with good reason.

It’s understandable given what’s there, just waiting to be recovered by the operators.

We’re talking 174 billion barrels of reserves, qualifying this resource as second only to Saudi Arabia in the ranks of global oil reserves.

Not surprisingly, companies worldwide are scrambling to get a piece of the action.

The latest big-name entry into this hot play is Marathon Oil Corp., which recently announced that it’s acquiring Calgary-based Western Oil Sands.

A short list of the many other notable players includes:

  • Statoil, which purchased Canada’s North American Oil Sands Corp.
  • Shell Canada and Royal Dutch Shell, which purchased Calgary-based BlackRock Ventures.
  • Total, which purchased Deer Creek.
  • China National Petroleum Corp., which recently acquired rights to explore in the oil sands.

Counting the Costs

Canada’s oil sands are found in the province of Alberta, where they occur in three principal areas – the Athabasca, Peace River and Cold Lake regions – and encompass about 140,200 square kilometers. The Canadian Association of Petroleum Producers (CAPP) noted that in 2005 industry investment in the Alberta oil sands reached approximately $10 billion.

Oil sands activity actually dates back many years – back when $70-plus oil was unheard of. Suncor Energy, in fact, pioneered the world’s first commercially successful oil sands operation in 1967, according to Brad Bellows, spokesperson for Suncor.

But this is no ordinary resource, and economic recovery on a large scale is possible only when oil is bringing in a minimum of $40 per barrel, according to some industry analysts.

The thick, heavy oil found in the oil sands is actually bitumen, which essentially is a semi-solid hydrocarbon so viscous it might best be dubbed a first cousin to coal. It is recovered either by pit mining or by underground in-situ (in-place) techniques.

“About a fifth of the resource is recoverable by mining because it’s close to the surface,” said Greg Stringham, CAPP vice president. “The cutoff is 200 feet, so above that it’s economical to remove the dirt, put it into an adjacent pit and then reclaim it afterwards.

“If it’s greater than 200 feet – where 80 percent of the resource is – then you can recover it through more conventional drilling techniques known as in-situ,” Stringham said. “At the current production level, the split is pretty close to 50-50.

“In-situ technology is relatively new, even though some has been around since 1964,” he noted. “But in-situ is just starting to take off, so more oil is coming from mining right now.”

SAGD: Drilling Two-by-Two

Canada’s largest in-situ bitumen recovery project is found at Cold Lake, according to the Alberta Department of Energy. The sands are heated using steam injection to bring the bitumen to the surface where it’s diluted with condensate to be shipped via pipeline.

Longtime oil sands player EnCana has been honing its skills with the now-commonplace in-situ technique known as steam-assisted-gravity-drainage (SAGD) for a number of years – and has some substantial production to show for it.

“Our two prime projects are Foster Creek and Christina Lake,” said Alan Boras, manager of media relations at EnCana. “From these, we produce in the neighborhood of 50,000 to 60,000 barrels a day on a gross basis.

“Foster Creek was a pilot project dating back to 1997 and became commercial in 2001,” Boras said. “So essentially we’ve been working on steam-assisted-gravity-drainage for a decade.”

The SAGD process entails drilling horizontal wells in pairs, parallel to one another and about 17 feet apart. Steam is injected into the upper well to warm the bitumen and make it less viscous so it can drain to the lower production wellbore.

Boras noted that research and development into SAGD in Alberta dates back to the 1980s with government and industry cooperative arrangements.

The two EnCana fields are located to the south of the remote town of Fort McMurray. This now-bustling community has become a magnet for oil workers worldwide, including folks from Venezuela who have extensive expertise in that country’s high profile heavy oil action.

Seismic Activity

As might be expected in such a hot play, the geophysical companies are a visible presence in the oil sands action.

For the most part, however, there’s only a narrow window of time when seismic data acquisition is possible.

“Typically, oil sands work must be done on frozen ground,” said Gary James, director of marketing and business development at Conquest Seismic Services. “This is because most of the surface in the oil sands is what they call muskeg, which is like a swamp. It’s a swampy, mossy surface that’s thick but wet, so most of the work is in the frozen winter.”

Conquest had six crews working in the oil sands last winter season. James said they’re optimistic for the same this season and maybe still one more.

For oil sands work, the company makes the most of its Envio-Vibe (a mini-vibrator), which is designed for high production and high resolution seismic prospecting in an environmentally sensitive manner. It’s particularly applicable for low impact, shallow target exploration.

“The oil sands play is a shallow play requiring high spatial resolution,” James said. “Our crews are providing the ability to get higher spatial resolution with shorter distances between receiver points and source points.

“We’ve found that where we can use the mini-vibes, we can provide that at a lower cost than having to do dynamite,” James said, “because we don’t have to drill holes and load dynamite. Also, we get earlier access, because with a hole for dynamite you need very hard frozen ground, but with the vibrators we can go in earlier – with a narrow time window, that’s important.”

Heliportable survey projects provide a way to circumvent the frozen ground requirement – but they’re more costly.

In fact, Conquest will kick off a heliportable job early in the fall because the client needs the data early on.

“To do this, the ground must be high enough,” James said. “You can’t be down in a wet bog.”

Full Speed Ahead

Participants in the current frenetic oil sands action don’t envision a slowdown.

“We anticipate an increase in oil sands activity industry-wide,” said Boras. He noted that price is a major contributor (whether positive or negative) to the growth pattern of this activity.

“We’ve had a confluence of advancing technology, which has continued to make the operations more efficient, alongside rising prices,” he said, “in order to access this unconventional resource.”

Stringham is equally optimistic.

“What we’re seeing is this will grow from about 1.3 million barrels a day now, up to three and a half or four million barrels a day by 2020,” he said. “It’s one of the strongest growing areas in the world.

“While we have the second largest resources in the world,” Stringham said, “we’re only about the eighth largest producer in the world. And between ourselves and the United States, we’re kind of the very few who are non-OPEC members.

“We hope with this growth that we’ll see between now and 2017, that we’ll probably be up with the United States as being maybe the third largest producer in the world, after Saudi Arabia and Russia.”