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Globe and Mail, Canada -
May 24, 2005
Deep pockets buy into
high tech
By
PATRICK BRETHOUR
Tuesday, May 24, 2005 Updated at 8:55 AM EDT
Globe and Mail Update
CALGARY — The lime-green pipes and valves at EnCana
Corp.'s Weyburn oil field in south Saskatchewan are the
only visible sign of the revolution taking place 1,500
metres underground.
A kilometre and a half from the surface, the pipes feed
a steady stream of carbon dioxide into the rock
containing light oil, pushing it sideways toward a
wellhead where it can be pumped above ground. At that
depth, carbon dioxide turns into a liquid -- and into
money, as EnCana and the rest of the oil industry are
discovering.
Carbon-dioxide injection will allow EnCana to extract
another 140 million barrels of oil from its 51-year-old
Weyburn field, an enormous volume at a time when the
average new well drilled in Western Canada yields a mere
50,000 barrels. EnCana says it hopes to repeat that feat
elsewhere in the Western Canada Sedimentary Basin, which
stretches across the Prairies and into British Columbia
and the Northwest Territories. "How big is the
opportunity? Obviously, we'd love to find another
Weyburn," says Jeff Wojahn, president of EnCana's
Canadian plains region.
Happy as EnCana is, the company is still leaving a lot
of oil in the ground, nearly two-thirds of the total 1.4
billion barrels it knows are in the reservoir. That fact
might shock outsiders, but it is a simple fact of life
in the petroleum industry that the vast majority of oil
never sees the light of day. In Western Canada, for
every barrel of oil pumped out of a well, another three
remain trapped underground. For some reservoirs, as much
as 95 per cent of the discovered oil cannot be
extracted, or at least not at a low enough cost to turn
a profit.
"I think it surprised me, when I first looked at it,"
says Eddy Issacs, managing director of the Alberta
Energy Research Institute.
An oil reservoir that has been drained to the point of
being unprofitable is often called a dry well, but that
term is misleading. In fact, it's more like a wet
sponge: You can wring it once, and get a lot of water. A
second squeeze will extract a bit more. Eventually, your
efforts are in vain -- even though that sponge is still
wet.
Now, better technology and high crude prices are about
to shift an enormous amount of oil into the grasp of the
industry. As many as five billion barrels could be
added, according to Mr. Issacs. That would more than
double Canada's conventional oil reserves.
Others have even higher hopes. Richard Baker, president
of Epic Consulting Services in Calgary, says eight
billion barrels could be added to reserves, a figure
that would include the widespread injection of water
into existing wells. "It'd be like finding eight giant
reservoirs," says Mr. Baker, who is working on a report
for the industry that is aiming to nail down the
opportunity presented by enhanced recovery. "It's a
question of when it's going to occur, not if it's going
to occur."
The rise of four-dimensional seismic technology -- a 3-D
model in real time -- is enhancing the prospects of
enhanced recovery. At Calgary's Computer Modelling Group
Ltd., 4-D imaging is used to simulate the effect of
carbon-dioxide flooding, for instance, on actual
reservoirs. Ron Kutney, vice-president of marketing,
says he has just one Canadian company at the moment --
EnCana -- among his client list of 200, but that he
expects interest to soar along with commodity prices,
matching the investment spree in other areas of the oil
patch. "Just look at the investment in the tar sands,"
he says.
For Mr. Issacs, the rising price of crude is the key
change. Just as important as today's high prices is the
prospect of elevated and stable prices for years to
come. That long-term trend is absolutely crucial to give
the oil industry the economic cushion to pursue enhanced
oil recovery, which by its very nature is more
expensive.
He says the excitement over the tens of billions being
spent in the oil sands in northern Alberta have
overshadowed the possibilities of enhanced oil recovery.
Part of the problem is that although the total amount of
oil is large, there aren't many reservoirs that are the
equivalent of EnCana's Weyburn. Instead, there is a
modest volume of oil waiting to be squeezed out of a
large number of wells. Profits will be made, but in most
cases it will be under-the-radar junior firms doing the
work of boosting production by a few hundred barrels a
day. "It's more and more the smaller companies," he
says.
Yet with prices on the rise, the first experiments are
starting up, with big players footing the bill. Earlier
this year, Penn West Petroleum Ltd. started a small
pilot project at its Pembina Cardium fields about 100
kilometres southwest of Edmonton, the heart of the
region that gave birth to Alberta's oil industry.
Penn West has years of experience with enhanced
recovery, from its Joffre fields about 150 kilometres
south of Edmonton, which get their carbon dioxide from a
Nova Chemicals plant that is within sight of its wells.
But the Pembina experiment is a different matter. The
carbon dioxide for those six wells has to be hauled in
by truck, a method as cumbersome as it is expensive. The
effort makes no money for Penn West; instead, it is
in-the-field research, aimed at honing techniques for
the day when a cheaper source of carbon dioxide appears.
"Longer term, we're looking at a pipeline," says Bryan
Clake, Penn West's vice-president of corporate
development.
And that is one of the great ironies of the
enhanced-recovery story. To succeed, it needs a stable
and clean supply of carbon dioxide. The most likely
source of the gas is the oil sands projects of Fort
McMurray -- which under the strictures of the Kyoto
Protocol will have a compelling reason to harvest carbon
dioxide. So, the environmental accord that the oil
industry loves to hate could just end up being the
catalyst for a years-long boom.
That would all hinge on a pipeline being built to span
the 500 kilometres between Fort McMurray and the older
fields south of Edmonton. Mr. Issacs is convinced that
the pipeline will be constructed, pointing out that it
would be a concrete way to help meet Canada's
Fuller recovery
Enhanced oil recovery techniques could squeeze as much
as eight billion barrels of oil out of the supposedly
tired Western Canada Sedimentary Basin.
Fort McMurray oil sands:
Could become a plentiful source of carbon dioxide, which
can be injected into an oil reservoir and push out more
oil.
Pipeline between Fort McMurray and southern fields:
A pipeline to carry CO2 southward would give the
industry a critical boost - but who will pay for it?
Leduc and Pembina fields:
Among the oldest oil fields in Alberta, they also have
the biggest potential for using CO2 to recover crude.
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