Monday, December 1, 2008

THAI Expansion Approved

This newspaper story is much more revealing than normal corporate pronouncements and is very encouraging. In fact, the technology is advancing rapidly and needs to be sped down the road in view of pending supply difficulties. It is business as usual with the regulators, though.

He is talking about a eighty percent recovery of oil. That is utterly amazing in terms of oil industry practice and experience. All conventional fields with extremely light oil are lucky to approach fifty percent after decades of drainage and stimulation.

I suspect that when the Saudi’s bounced their reserves from 110 billion barrels to 260 billion barrels, it was done by the expedient of merely adding in the total resource including the unrecoverable 60%.

In other words our boy is been very bullish. However, read my lips. This is all done with wells on the world’s single largest oil resource. The initial pilot was three wells. This phase is another three wells to fold in the CAPRI protocol.

They have not given us bench marks but I suspect that the wells will ultimately produce nearly 1,000 barrels per day of 15 to 18 gravity oil from the 8 gravity bitumen. Now you too know what to watch for.

The next phase now entering permitting is for production levels of 100,000 barrels, if I recall correctly. That can be replicated a hundred times without putting a dent in the ultimate resource, particularly if recovery approaches eighty percent.

You do get a sense of the slowness of regulatory process in these matters. If we do have a supply emergency, then fast tracking this all is a matter of putting a thousand drills to work tomorrow morning. It would still take time to ramp up even then but it would be predictable also.

The second article is now giving us numbers. A barrel of production is capitalizing at $10,000. In other words, if the operating net is a mere $10.00 per barrel, then it is paid of in three years, which is very good by industry standards particularly when you do not have to find the oil. Even at $50.00 per barrel, I suspect we have a $15.00 net. You can do the rest of the math.

Petrobank wins approval for heavy-oil project expansion

ERCB rejects objections from two local groups

Dave Cooper, The Edmonton Journal

Published: 2:34 am

An Alberta petroleum company using a revolutionary process to extract underground bitumen has finally won ERCB approval for an expansion to its heavy oil pilot project south of Fort McMurray.

Petrobank Energy's Whitesands site had three insitu wells demonstrating the THAI (toe-to-heel air injection) process, and wanted to add an additional three to further study the CAPRI process which uses a catalyst between the inner and outer liners of the slotted horizontal production well.

"We would have liked to have those three wells on stream so we could have more information for our next application" for a nearby 10,000-barrel-a-day project, said Chris Bloomer, a vice-president of Petrobank.

The Energy Resources Conservation Board rejected the "broad letters of objection" from two local groups, said Petrobank.

In a release, the firm said "the delay in receiving the decision was not related to the technical merits of the application. Petrobank views this decision as a validation of our values and strategy to consult, rather than compromise the process by making extraordinary financial payments to intervening parties to facilitate the withdrawal of objections and thereby shortening the regulatory process."

The ERCB dismissed objections by the Beaver Lake Cree Nation and the M├ętis Nation of Alberta - Local 1935.

Bloomer would not comment further on the release, but "you could say it has added a year to what is really a development project."

He said THAI could replace the current SAGD (steam assisted gravity drainage) and CSS (cyclic steam stimulation) systems used to extract bitumen that is too deep to mine. But some in the oil industry say THAI won't be a significant technology for another 20 years.

"I think that's unfair. If you take a look at the state of the technology today, being able to do simulations and monitoring, and knowing what we know about the reservoirs, the tools we can use are light-years away from what was available in the past," said Bloomer. "I think they are taking a very parochial view, that it took SAGD 20 years so it's going to take any other technology 20 years. We think this is a technology that has to proceed."

Earlier this month, Petrobank signed a royalty and joint venture deal with True Energy Trust to apply THAI technology to two test wells at a heavy oil property in Saskatchewan.

Bloomer said THAI is applicable to many heavy oil fields around the world. The process offers high recovery rates -- up to 80 per cent of the oil in place compared with 20 to 50 per cent for SAGD. It also uses little natural gas and water. In THAI, air is pumped under pressure into the toe of the reservoir, creating natural combustion to heat the cold heavy oil, which flows into horizontal slotted pipes.

Oilsands regulatory delay frustrates Petrobank boss

Holdup leaves CEO fuming

Dan Healing, Calgary Herald

Published: Saturday, November 29, 2008

The head of a Calgary company with a promising technology to recover bitumen from the oilsands says he is regretting choosing to build in Alberta after an 18-month wait to obtain regulatory approval for a three-well expansion.

"It's cost us time. It's cost us a world of opportunity," said John Wright, president and chief executive of Petrobank Energy and Resources Ltd.,which owns the toe-to-heel air injection or THAI technology that uses in-situ combustion to enhance recovery of bitumen and heavy oil.

"We think our technology is going to change the way heavy oil is extracted by reducing the amount of fresh water that's used, eliminating the need for gas and cutting the greenhouse gas emissions in half, so why would we ever want to see that delayed?

"If we'd known it was going to be this long an approval process in Alberta, we would have thought twice about doing our first project here."

Petrobank announced late Thursday it had received copies of letters from the regulator, the Alberta Energy Resources Conservation Board, to the Beaver Lake Cree Nation and Metis Nation of Alberta--Local 1935 indicating that their objections to Petrobank's project had been dismissed.

Both parties indicated they traditionally used the area 120 kilo-metres south of Fort McMurray for hunting, trapping and fishing, but the ERCB wrote that neither had proven those claims and therefore would not be granted standing at a hearing.

opportunity.See of expansion plans has "cost us a world of "

The decisions clear the way for approval of the project.

ERCB spokesman Bob Curran defended the process, noting the public often loudly accuses the regulator of rubber-stamping every oil project and the companies complain more quietly that the process takes too long.

"We hear it from both sides all the time," he said. "It just goes to show we have a thorough process and we make no apologies for that."

Curran added that although the objectors can appeal the ERCB decision within 30 days, the licensing of the project will not face further delays.

Drew Mildon, a Victoria lawyer who represents the Beaver Lake band, said it hasn't been decided if the decision will be appealed.

"It's not unexpected," he said. "I've seen the approach the ERCB has taken to First Nations complaints in the past."

He criticized the ERCB for not considering cumulative effects and for its insistence that complaints are"very site specific,"noting that development affects the forest and therefore the natives' treaty rights.
The process left Wright vexed and vowing to put all of the correspondence related to the application on the Petrobank website.

"If you read those letters," he said, "they have actually stated the parties that have written these general objections . . . don't have standing. (They're saying) you can't make a general claim that anything happening anywhere within 100 miles of you is going to affect your future enjoyment and your ancestral use rights."

He added the dissenting par-ties had offered to drop their objections in return for compensation from Petrobank.

"That's not the way we do business,"said Wright. "We're not going to buy someone's approval.

Curran said companies are allowed to compensate parties affected by their development plans and those arrangements are not part of the ERCB's mandate.

Gary Leach, executive director of the Small Explorers & Producers Association of Canada, said 18 months is too long to wait for approval of a straightforward project.

"That's the kind of delay you'd expect with a very complicated, significant project with scores of people with interests, and lots of studies and environmental assessments. For a relatively modest project to drill a couple of wells, I'm surprised it would take that long. It's probably excessive."

Leach added there is growing concern among oil and gas developers about interveners in regulatory matters who object (and have their expenses covered by the company if they are granted standing) for the sole purpose of delaying development.

"We're not looking for a relaxation of standards, but there are points in the process where there is potential for abuse by people who aren't legitimately affected and use the rules as they stand to stop resource development."

David Pryce, vice-president of western Canadian operations for the Canadian Association of Petroleum Producers, said slower regulatory processes create uncertainty and delays that result in additional cost for businesses.

"I think it is a concern," he said. "We've seen the approval process kind of stretch out around these sorts of things."

Both CAPP and SEPAC are working with the government on regulatory reform.

Wright said Petrobank had wanted to wait until it drilled the three wells before seeking approval for its planned 100,000-barrel-per-day May River commercial project, but it has moved that forward while waiting and now expects to file its application within days or weeks.

The project is to be centred within two kilometres of the demonstration site and built in phases, at a cost of about $150 million for each 10,000 to 15,000 bpd phase.

He said May River will reach 100,000 bpd by drilling 100 to 150 wells within three to four years. The resource is big enough to produce for 25 to 30 years.

Petrobank has drilled three wells at Whitesands to demonstrate its THAI technology. The new wells are intended to further demonstrate its CAPRI technology--which employs chemical catalysts to further improve the quality of the oil --as well as a revised down-hole completion design and longer well lengths.

The company recently licensed its technology to True Energy Trust in return for an initial 50 per cent interest in a portion of its Kerrobert, Sask., heavy oil pool.

In addition, Petrobank will earn a 10 per cent share of all production on the True lands following a threshold reserve recovery.

Late last year, Petrobank licensed the technology to Duvernay Oil Corp., which was then sold to Shell Canada.

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