Thursday, March 18, 2010

THAI Passes Milestone

These two articles come out of the Globe and Mail.  The second brings one up to speed.  The first is much more important.  What it means is that sometime in the next two years, Petrobank is going to be able to add billions of barrels of producible reserves to its inventory.  It also means that Canada will likely see its reserves climb over one trillion barrels of producible oil, a sum surpassing all other global oil resources combined, sometime in the next decade.


We have always known this was possible.  Now these reserves will be formally recognized allowing easy extension of finance.


Most important is that this tech comes in at half the cap costs and half the operating costs of SAGD.  More important than even that is that no outside fuel of any significance is needed for THAI.


I have been tracking THAI for three years.  In this item they finally come clean regarding real time production.  It is too small but it is clearly working.  Upgrading the equipment will change those numbers.  Again this is to be expected.  WE have hard numbers. Ten percent of oil in place is burned to release the oil.


Question:  Will doubling the air flow double the area of the burn front?  More precisely is air flow volume related linearly to oil production?


Anyway children, this is shaping up very nicely to place Canada as the swing oil producer for the next century or as long as we insist on using oil.  We can go to ten million barrels per day with this technology and keep it there for three centuries in case anyone runs short.


THAI is opening up global oil reserves that are totally mind blowing and could allow a high hydrocarbon lifestyle for centuries although it would be a foolish proposition to sustain and simply unnecessary.  Regardless, the easiest fruit is in Canada and already prepped ready to go.


THAI passes milestone

Nathan VanderKlippe

Calgary  Globe and Mail Update

Beneath the surface at test locations in Alberta and Saskatchewan, an underground fire is heating up pools of oil, melting them from the surrounding rock so they can be brought to the surface. It may sound like a scene from a sci-fi movie, but it's real – and, after gaining an important stamp of approval from a respected engineering firm, one step closer to becoming a viable way to extract Canada's oil sands.

Petrobank Energy and Resources Ltd., (PBG-T54.600.681.26%) which is developing the technology it calls THAI (Toe to Heel Air Injection), said Thursday that McDaniel and Associations Consultants Ltd. has studied the technology and verified that it works. The consultants also verified that companies can access 15 to 21 per cent more oil in a given reservoir using THAI than the current method, called SAGD, which involves underground injections of high-temperature steam.

The report is not the final thumbs-up: McDaniel has yet to certify reserves based on THAI, since Petrobank has struggled with production issues, and doesn't yet have a reliable enough system to bring the oil to the surface. But Petrobank, which is installing new equipment that it believes will solve some of its issues, called the initial approval an important development.
The Globe and Mail spoke Thursday with Petrobank chief operating officer Chris Bloomer.
What does the McDaniel report mean?
It's key to third-party validation on the technology, that it works and is working the way we anticipated it to. That analysis is based on six to eight months of very rigorous review of all the data. McDaniel has done all of that and they assigned an exploitable bitumen-in-place number based on THAI. So if you looked at the path to assigning reserves to THAI, if there was 100 steps, we've completed 90-plus to get to where we are today with that McDaniel report.
How do you get to reserves?
The only remaining aspect of it is that we need to show sustained production rates of 250 barrels a day or more for a short period of time. If you look at the data based on the Conklin or Whitesands projects, we had a number of operational issues early on in the life.
Your wells are currently flowing at about half that 250 rate. Is that not a serious concern? Are there reliability issues here?
No. I think that we have shown that we can flow at those rates, and today what we are doing is focusing on reconfiguring our production wells. The next objective is to really optimize the production side of things and get those rates [using new well pumps Petrobank is installing]. The fact that we're constantly producing, even given the inefficiency at [some of our projects] gives us very high confidence that with this next step we will achieve our goals.
Do you see THAI as a replacement for SAGD, or as a complement to it?
We think it is a replacement. And usually the corollary question is, why isn't everybody using it? I think the issue is that we own the technology, and we will licence it, so that's more of an economic benefit for us. But also, companies have committed billions of dollars of capital to SAGD projects, and it's pretty hard for them to shift after they've sunk all that capital. But a lot of SAGD guys now are saying they'll use combustion as a secondary recovery mechanism.
Given the amount of money already spent and committed to other technologies in the oil sands – and given that it has taken SAGD decades to be commercialized since it was developed in the ‘70s – are you too late to have much impact in the oil sands?
I think like everything, technology moves faster today than it did in the 1970s. If you really dig deep in the SAGD, there's a lot of sustainability issues, things people are still figuring out. It has been accepted as a resource recovery methodology, but the economics of SAGD are very thin. Very thin. [With THAI], we're looking at half the capital and half the operating cost of SAGD projects.

Battle for the oil sands

Across Alberta, companies have spent years developing new technologies that promise cheaper, greener production. In the next few months, some will move from the lab to the field in critical tests that could radically reshape the industry.

Nathan VanderKlippe

Calgary  Globe and Mail Update
Inside a small garage-like laboratory in a north-east Calgary industrial park, there sits a box.
It's small, less than a metre to a side, with 72 wires attached to its top in a dense snarl. Two exposed stove elements are stuck vertically to the outside of one of its side walls, which are made of metal. The elements are on, and hot. On the opposite side, a thin metal pipe descends to the floor and into a small vessel that looks like a steel bowling pin.
But if the exterior of the box has all the elements of a high school science project gone madly awry, what it contains makes this a serious experiment, with potentially enormous consequences for the economic future of Canada's oil sands and its environmental impact. This box is designed to find a new way to lift the oil out of the thick, crude-filled sand that surrounds Fort McMurray.
Across Alberta, tiny upstarts and major energy companies have spent years developing a number of promising new technologies to tap the oil sands. In recent months, several have taken a major step, moving from the lab to the field in small pilot tests that will, finally, prove whether they work or not. Companies are spending millions to prove out a variety of new approaches that could substantially cut the cost of producing oil sands – now among the highest for crude production anywhere – while also greatly cutting back on greenhouse gas emissions and, in some cases, opening access to hundreds of billions of barrels currently considered unrecoverable.
The field tests are critically important, both to the companies racing to win the technological battle for oil sands supremacy, and for Canada's oil patch as a whole. What's at stake is no less than a radical reshaping of the industry and, potentially, a type of Oil Sands 2.0 that no longer bears the shame of being dirty.
Getting there may require heeding lessons from the past. It may also require leadership not currently on display – either among politicians or industry titans. The search for improved oil sands technology is made all the more urgent by increasing political pressure, highlighted at the Copenhagen climate summit, to reduce global carbon emissions.
The road ahead remains fraught with risk. Oil sands projects under engineering and construction today aren't employing these innovations. That means it will be years before any large-scale change in oil sands technology could possibly take root.
Though new methods have great promise, they remain some distance from proving they work well enough to merit billions in investment; some will likely be discarded.
To get a sense of what's possible, consider that box in Calgary. Packed into its small confines are a few kilograms of oil sands – a blend of sand, water and crude that is churned together in a nearby cement mixer. If you could peek inside, you would see a wall of fire moving slowly through the oil sands, which are glowing bright red like a charcoal briquette.
For the scientists who oversee its operation, the most exciting part is the liquid that comes out of the box, and is then collected in several dozen jam jars. It is crude oil, but a better kind of crude than what's initially extracted using current methods from the 1.7-trillion barrels that lie beneath northern Alberta.
Only about 10 per cent of the oil in the box burns. The rest is melted out of the sand at temperatures of 600 degrees Celsius, hot enough that it changes the composition of the oil, making it lighter and cleaner.
In its large-scale application in the field, that means oil produced through this process is cheaper to extract. That's because it doesn't require huge volumes of natural gas to boil water, which is used to melt bitumen from the oil sands. It's also more climate-friendly, since it requires less refining. In total, Petrobank Energy and Resources Ltd., which is developing it, believes that what it calls Toe-to-Heel Air Injection, or THAI (so-named because it pumps air into the ground to generate the combustion) could cut oil sands greenhouse gas emissions in half.
“The fact that we have, from day one, produced a higher-quality oil in the ground is absolutely world-changing,” says Petrobank chief operating office Chris Bloomer, whose company has begun operating the process at several demonstration sites. “Nobody has ever attempted this. Nobody has ever done this. And we're doing this day in and day out.”
The box was built by Conrad Ayasse, a chemist who runs the Calgary lab and consults for Petrobank. Surrounded by blue-coated lab technicians from around the world and glass jars labeled “Toluene” and “Standard Silver Nitrate,” he engages in a moment of blue-sky dreaming: This technology, he hopes, could be worth billions.
But Mr. Ayasse, a man who has been called “Merlin” for his technical wizardry, knows as well as anyone that building a new technology – particularly one with the potential to unseat other technologies that have already seen tens of billions in development dollars – won't be easy.
“It was a completely untested technology,” he says. “A potential world-changer, but a potential bomb if things don't pan out the way you expected. It's a big risk.”
The same is true for the other leading oil sands technologies currently under development. Some of these technologies have been tinkered with for decades. They are the products of creative minds who have access to computers, where they can be modeled, and laboratories, where they can be tested.
But what those tests can't do is perfectly mirror the conditions in the oil sands, where changing rock types can pose unforeseen obstacles. Nor can they perfectly simulate the challenges of working in an environment where winter temperatures routinely drop to -50 degrees Celsius and equipment is prone to malfunction.
There's only one way to figure out whether any of them work: Find some land, drill a well and, most importantly, find the tens of millions of dollars it takes to pay for it.
The fact that several companies have recently succeeded in doing exactly that makes this a particularly important time in the development of the oil sands, which have been the object of international pillory and protest, in large measure for their high greenhouse gas emissions. The industry faces plenty of other challenges – including massive water usage and huge tailings ponds – but the emissions problem is particularly serious since, in a carbon-constrained world, it exposes the industry to a potentially destabilizing escalation in costs.
All of which explains why, on a windswept field not far from Fort McMurray, a small privately held Calgary company has run thick power cables to a series of wells. E-T Energy has installed the wells as an early test bed for its electro-thermal technology, which directs electrical currents underground to heat the oil sands and free the bitumen.
The technology promises a cheaper, more climate-friendly way to suck bitumen from depths too deep to mine and too shallow to access with steam. Though the company has had difficulty pulling together financing for a major expansion, it is now working to corral enough money to construct a crucial demonstration project, which it plans to start building in February.
The demonstration will be designed to produce 1,000 barrels per day, a sweet spot for converting technological skeptics into believers, E-T Energy president Bruce McGee says.
“That's the standard that the industry is going to hold anyone with a new technology to,” he says. “In the next 12 months, you're absolutely going to see some definitive results that are going to be very, very impressive.”
Small companies aren't alone in pursuing oil sands advances. EnCana Corp. spinoff Cenovus Energy Inc. plans to test a solvent-assisted steam process at Narrows Lake, a new oil sands project that it says could cut greenhouse gas emissions by 25 to 30 per cent. Imperial Oil Ltd. has spent years testing a similar approach.
And this fall, Suncor Energy Inc. sought regulatory approval for a new method of treating tailings. Unlike other technologies, which are designed to more efficiently extract bitumen that is buried too deep to mine, Suncor has developed a way to radically speed its processing of mine effluent. Traditional mine tailings are filled with tiny bits of clay that, left to natural processes, remain suspended in water for decades, if not centuries, a period during which the tailings water cannot be released back to the environment.
It's a serious problem for mine operators, but Suncor believes it has found a solution. By adding a specially-blended polymer, it now says it can compress decades into days. In fact, if the technique gains approval, the company will be able to discard its plans for new tailings ponds, eliminating environmental sore spots the size of small lakes.
“It's a game-changer,” says Bradley Wamboldt, Suncor's director of tailings reductions operations, who uses a tree analogy to explain the impact. It takes 30 to 40 years to replant a tree cut down for mining operations in current systems.
“We estimate with this technology, we'll have a reclaimable surface within 10 years,” Mr. Wamboldt says.
Yet there remains a profound skepticism on the part of industry to embrace new technology. It's visible in spending patterns – energy companies spend half as much on research and development than the Canadian industrial average.
And it's visible in the lab of John Nenniger, a man whose pedigree alone would appear sufficient to give him a leg up on others. Mr. Nenniger's grandfather, Emil, was one of the founders of SNC-Lavalin, the global engineering, construction and procurement firm. His last name, in fact, formed the “N” in SNC.
Mr. Nenniger has carried on the family's engineering traditions, and has spent the past decade perfecting a technology first developed by his father, who in the 1970s and 1980s studied a way to extract oil sands without steam. Steam is problematic primarily because it takes huge amounts of energy to make. Mr. Nenniger's process uses only other petroleum products like propane, and uses them at a relatively cool temperature.
He formed a company called N-Solv, which conducted tests that show it works three times faster than steam processes, and is far cleaner.
“If our technology achieves what we've seen in the lab, you would basically have a process that would be able to produce oil with less emissions than conventional oil,” he says. “So it completely eliminates the whole ‘dirty oil' moniker.”
Bitumen produced using his process would still need the extra refining that all oil sands crude requires, meaning it is still “dirtier” than regular light oils. But the technology is still promising enough that Mr. Nenniger has created plans for a particularly intriguing test: He wants to build a demonstration plant at the exact same spot that current steam extraction processes were first commercially tested.
“We want to demonstrate in a head-to-head comparison at the same site that SAGD was originally done that we can beat the pants off SAGD,” he says.
The problem: despite years of trying, he can't get the money to build the demonstration plant. Both Enbridge Inc. and Suncor have kicked in, but he remains about $25-million away from his $85-million funding requirements.
“I'll be blunt, part of the problem is Alberta,” he says, blaming government-owned research facilities who control the flow of some research dollars. “I think part of the issue is that we may represent competition to the steam status quo. … I don't understand that myself. The industry has so much to gain and so little to lose.”
Whether or not Alberta is to blame, Prime Minister Stephen Harper insisted yesterday from Copenhagen that since the oil sands represent the fastest-growing source of Canadian emissions, it will have to be part of the solution.
Few in either industry or government will deny that new technology is desperately needed in the oil sands. But the march of new projects is largely proceeding without any new innovations. EnCana's Narrows Lake is an exception: Suncor's Firebag project expansions, StatoilHydro's development plans and a host of other projects are being designed and built using status quo technologies.
The reason is largely one of measured risk. New projects cost billions, and few have the stomach to devote those vast sums to something unproven. Massive shifts also take time, in particular because no company wants to risk jeopardizing its daily production for something new. It was largely for that reason that it took Syncrude more than a decade to shift from using massive bucket wheels to shovels and trucks, the system it uses today.
“To some people that may seem slow but it was actually quite fast,” says Eric Newell, who was the chief executive of Syncrude minority owner Nexen Inc. during that transition. “You just can't jump from the lab bench. We've been burned too many times. The scale of the operations and the environmental challenges – with the cold climate and very abrasive sand – means you have to have a very disciplined approach to how you bring new technology on.”
Yet those who have watched the oil patch transform itself in the past say a cleaner new future for the oil sands is unlikely without one key element: leadership. It was former Alberta Premier Peter Lougheed who created the Alberta Oil Sands Technology and Research Authority (AOSTRA) in 1974. An arms-length institution dedicated to developing new ways to profit from the oil sands, it invested $415-million over 18 years, and was largely responsible for proving that SAGD works – a success that reaped a reward far greater than its expenditures.
The process, however, took both enormous patience. It produced 116 patent applications and a long series of failures. It failed with most of the technologies it tried. But it also birthed a discovery that revolutionized the oil sands.
Clement Bowman, who led AOSTRA through its first decade, says a new AOSTRA-style program is needed, one that is led by the federal government and focuses on preparing Canada for a new era in energy. What it will also take, he says, is a visionary – a Peter Lougheed for the new millennium.
“We would reshape Canada over this century. We're not going to do it in forestry. We're not going to do it in mining. We're not going to do it in the automotive industry. The only chance that Canada has to be a world leader is energy. And we've got huge resources to call on – we've got natural gas, we've got the oil sands,” Mr. Bowman says.
“We've got everything. We're lacking one thing: that's the will.”

Latest Comments

2/4/2010 12:02:10 PM
We need to look at new technology as a way of improving productivity and the environment.

Most importantly we need to be ahead of the curve in developing the technology and we must remain not just the leaders but the owners.

Case in point the idea that smelting metal from sulphide ore needed to use required huge amount of coal and would release vast amounts of SO2 ( acid rain ) was excepted as the price we had to pay.

I work for Vale Inco ( don't get me started about the strike ). We started to developed oxygen enrichment in the 40s to save money in smelting costs. This is something INCO invested a lot of time and effort in for decades. At the same time in the Soviet union the similar technology was being developed.

Here in Canada we developed the Flash furnace technology that not only eliminated the need to burn coal to smelt but made emissions reductions easy. ON the other hand the Soviet system reduced cost and killed every green thing growing out of the ground for hundreds of miles.

WE don't want to go that direction so we must be sure our technical solutions are environmentally friendly.

In 1990 Prince Charles tapped the first flash furnace and reverb technology and massive SO2 releases became a thing of the past.

Fast forward 20 years the technology still works and continues to be developed but its no longer Canadian. We sold out for the quick dollar and this technology and everything developed from it belongs to Brazil.

If we let our oil sands industry go that way we will have missed an opportunity to not only make Canada a cleaner place but we will loose the technical know how to develop it and it the jobs that go with it.

Is the solution Nuclear?
I'm not so sure, but standing around with our hands in our pockets waiting for someone else to hand the solution is no solution at all.
Time to Invest in the future and not let the technology slip from our hands.

12/22/2009 2:37:53 AM

Instead of whining these Tar Sand pirates could use nuclear steam to end GHG emissions from the tar sands. We'd need 8 big mass produced reactors or 300 small hot tub sized Hyperion units ($400 kw of steam). The cost of the GHG producing natural gas is ten times the cost of mass produced big nukes or Hyperions with less than a three year payback period.

Natural gas displaced by nuclear steam could be used in a massive program to convert Canadian vehicles to natural gas. See Utah for an example on how to do it. Encana is advocating it for the 401.

Call it the nuclear Picken's plan.

Only a replacement of fossil fuel production with nuclear can save us from a as little as ten years civilization threatening peak oil and climate disaster. Pollution from toxic radioactive waste spewing coal power plants which kills and sickens hundreds of thousands of Canadians would be gone.

A $150 billion investment in mass produced nukes, would be paid for by and would end Canada's $100 billion annual fossil fuel bill- a two year payback using only a small fraction of our industrial capacity.

The US needs 2500 new reactors but is crippled by inefficient private power companies, a biased Nuclear Rejection Commission and corrupt and litigious political and legal systems, quadrupling nuclear costs and time frames.

By rimming the border with AECL reactors, Canada's public power companies would make $trillions selling the US nuke power at premium rates. Instead of just cleaner Oil we can sell them clean and green nuclear power. It would create hundreds of thousands of hi tech jobs making Canada the world leader in booming nuclear tech with massive orders for AECL ACR-1000 nukes.

Even you deniers should be happy as the conversion saves a ton of money, creates a bunch of jobs, maybe gives Harpo that majority government you've been dreaming of and as an aside saves hundreds of thousands of lives from coal and tar sands plant pollution.

12/21/2009 5:50:25 PM

At a world price of $75/bbl US 1.7 trillion bbls = $127.5 trillion dollars.

Canada's 2008 GDP = $1.4 trillion

AGW junk science discussions aside, there is no way that Canada can afford to ignore this industry when it equals 91 years worth of Canada's current GDP.

Anyone who argues against the value of this asset to Canada is simply not rational.

Perspective: the Canadian automotive industry is only responsible for 12% of manufacturing GDP. Think about it.

Now tell me we don't need the Oilsands.

12/21/2009 3:04:17 PM

I am both an environmentalist, and a proponant of oil sands development. I know this sounds like a major contradiction, but it isn't.

What needs to be done to reconcile the two is to set environmental standards and enforce them. 

Economics will take care of the rest.

If energy producers are unable to conceive of and implement the technology to produce oil profitably from oil sands bitumen, while complying with these regulations, than none will be produced.

In my opinion, the oil from these sands is critically necessary to se the world through a long term transition to renewable non polluting energy forms. Therefore necessity will, as always, be the mother of invention.

This may slow the development of this resource, but I don't think that's a bad thing either from the economic or environmental point of view. 

12/21/2009 1:08:33 AM

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