Sunday, January 03, 2010

Low-Carbon Recovery


CO2 based theories of global warming need to be balanced by consideration of other ideas. This chart, which came off the Internet, illustrates an important opposing idea.
By Peter McKenzie-Brown

There are a number of people like Harold Nikipelo out there. The president of Edmonton-based Lifeview Oil and Gas Management Services, Nikipelo thinks he’s developed a better mousetrap – a new tool for heavy and conventional enhanced oil recovery. He joins such innovators as Sonic Technology Solutions Companies and N-Solv Corporation in his efforts to create practical, low-carbon recovery systems.

When you get him started, Nikipelo begins by enumerating the competing systems. Steam-assisted gravity drainage (SAGD) has been advancing for more than 20 years. More recent approaches include Petrobank’s toe-to-heel air injection (THAI) and its CAPRI system, which places a nickel-based catalyst bed in a horizontal wellbore. Other companies are experimenting with pulsed wave-front technology, solvent injection, electrical down-hole heating, steam flooding and the injection of solvent gases like carbon dioxide.

By no means is Lifeview alone in its efforts to find the holy grail of low-carbon recovery. One of the most important trends in bitumen recovery is the drive to produce the stuff with lower emission ratios. In the best of all possible worlds, this means better environmental credentials and lower cost of recovery. For environmental and economic reasons this is the wave of the future. Increasingly, production systems will have to respond to demands for reduced pollution – especially the emission of greenhouse gases (GHGs).

Nikipelo is one of a number of people combining and refining low-carbon recovery technologies in the interest of greener bitumen production. His company has developed a slick experimental production configuration that combines pulsing, thermal flooding, solvent gas injection and toe-to-heel injection. “For the thermal, we are injecting hot gas using a patent-pending three-stage process. The water or wet steam may be alone or combined with a catalyst. Our thermal unit is also generating electricity for our down-hole heating system, which pre-heats the hot gases to maximize potential. All emissions are being sent down-hole. The process greatly reduces both emissions and water usage.” His low-carbon alternative to SAGD begins with the idea of mitigating environmental problems but may also be a lower-cost solution for many producers.

“Our process is focused on using less water than SAGD. When we reduce water usage, we reduce the demand for fuel to generate steam, thus reducing fuel consummation. Our process is focused on zero emissions to atmosphere. All emissions are used in the process and are injected into the bitumen.” As Nikipelo tells the story, when he took his original concept to the Alberta Research Council, Dr. Alex Turta (team leader for enhanced oil recovery) said “You’ve got something important here….it may change the way we look at heavy oil recovery and possibly enhanced conventional recovery as well.” Turta in effect invented the THAI system, and the Lifeview approach is based on a number of his ideas.

According to Nikipelo, Lifeview’s tool injects steam and a scrubbing gas intermittently into the reservoir. This eliminates the requirement for continuous injection. This brings greater buoyancy into the reservoir, Nikipelo says. “It enables the steam to go into the proper part of the reservoir, creating a mobile oil front. At the end of the day, to justify the cost of a small SAGD operation you need a tool that can produce a small, cheap and portable tool – something small and inexpensive enough that can prevent smaller oilsands reservoirs from becoming stranded.”

Whether or not Nikipelo’s idea is an answer to the industry’s low-carbon prayer, it exemplifies a grail that an almost Arthurian roundtable of entrepreneurs and companies are seeking: ways to produce heavy oil and bitumen with lower carbon output.

In the field the smaller, leading edge companies include MEG Energy (Christina Lake in the Athabasca sands), OSUM Oil Sands (Cold Lake oilsands and Grosmont bitumen carbonates at Saleski) and Laricina Energy (also at Saleski and in the Athabasca at Germain). Private companies like Drakkar and Earth Energy Resources are, respectively, testing bitumen carbonate production in Peace country and oilsands in Utah. Also, of course, big, established players like Imperial, Shell, Husky and Cenovus Energy are making good progress in lowering per-unit emissions.

As these players successfully develop low-carbon production technologies, their efforts will simultaneously contribute to both the industry’s image and to its bottom line.

The Image Disaster
Part of the reason this development has become so important is that the oilsands business is now the ultimate whipping boy for petroleum industry critics. This year, things have reached what one can only hope is the bottom of a trough.

True, the year began on a high note. At their ballyhooed meeting in Ottawa, Prime Minister Harper and US president Barack Obama agreed to begin a “clean energy dialogue.” The focus of the talks would be “a cleaner, more secure energy future for both nations”, and it would involve immediate, big investments in energy research and development.

The two countries would collaborate on energy research related to advanced biofuels, clean engines, and energy efficiency, according to the Prime Minister’s website. “To address the energy and environmental challenges that we face together, the two nations agreed to expand collaboration in these and other key areas of energy science and technology.” Suddenly, it seemed, the green agenda had caught on in Ottawa.

Then things went awry, beginning with a devastating critique of the oilsands business in National Geographic. In the autumn, environmental activists staged highly publicized demonstrations at oilsands facilities.

As activist Jordan Poppenk described one such incident, “Activists from Greenpeace successfully broke into a tar sands operation in Alberta...and held up production for hours as they chained themselves to equipment and unveiled a banner reading “Tar Sands: Climate Crime” on a major access road....”

“American, Canadian and French activists broke into Shell Canada’s Albian Muskeg River oilsands mine north of Fort McMurray,” he happily continued, “and successfully halted production at the mine for six hours. The protest lasted for 30 hours and ended with a negotiated settlement between Greenpeace and Shell with the activists leaving peacefully and Shell agreeing not to press charges. The action was timed to coincide with the release of a report by Greenpeace condemning the tar sands as well as a visit by Prime Minister Stephen Harper to U.S. President Barrack Obama. The protest leaked into coverage of the U.S./Canada summit on major U.S. networks.”

At about the same time, environmental and aboriginal groups in the United States filed a federal suit against Enbridge’s proposed Alberta Clipper, on the grounds that recent approval for the bitumen pipeline goes against the public interest.

Smoke and Mirrors
Even such a knowledgeable and thoughtful observer as Jeff Rubin (formerly CIBC’s chief economist) claimed that oilsands facilities “leave an archipelago of tailings ponds – toxic by-products of oil-sand production and death-traps for migrating wildlife.”

Rubin’s tome on deglobalization – Why your world is about to get a whole lot smaller – delivers at least a few shock-jock ideas about the oilsands. “The production of a single barrel of oil pollutes 250 gallons of fresh water,” he said, “and emits over 220 (pounds) of carbon dioxide into the atmosphere.” To put the latter number in context, a barrel of bitumen weighs about 370 pounds.

Rubin does not cite the source of these figures, but they illustrate a second reason why low-carbon recovery has become so vital. The raw cost of eliminating carbon dioxide emissions from bitumen and heavy oil production is high and growing, especially because so much of those emissions are associated with increasingly expensive fuel consumption.

You can slice and dice Rubin’s numbers in many ways, especially since they make no reference to the industry’s mitigation efforts. For example, you might argue that at some point in time just about every volume of water on earth has been polluted by something or other. Natural systems have been purifying water since rain began falling in the pre-Cambrian. At oilsands plants the practice of recycling contaminated water, the use of deep-well injection and industrial evaporation are just some of the solutions that apply.

Carbon dioxide emissions, of course, are a different kind of cat. Once produced, they are devilishly costly to remove from industrial processes and inject into subterranean storage basins. Shell’s Quest carbon capture and storage project, for example, will sequester carbon dioxide from the upgrader at the company’s Scotford complex near Edmonton – an upgrader which receives bitumen from Shell’s Albian plant.

The Quest project will receive $865 million in grants from the governments of Alberta and Canada. In announcing the federal government’s $120 million contribution to the Shell project, Natural Resources Minister Lisa Raitt called carbon capture and storage “the most viable emission-reducing technology for fossil fuels.” She added, “These projects will reduce greenhouse gas emissions while creating high-quality jobs for Canadians now and benefitting our environment for future generations.”

True for mineable oilsands and bitumen upgrading processes, but the argument falls short when in situ production comes into play. Here, players like Lifeview’s Harold Nikipelo offer better, more viable solutions. Let’s begin with a look at the numbers. Under ideal conditions, Shell’s Quest project will have a lifetime cost of about $1.5 billion, including both capital costs and operating expenses. It will sequester about a million tonnes of carbon dioxide per year over its 40-year life. In nominal terms, and assuming excellent operating results, that means the cost of sequestration will be about $37.50 per tonne.

The Benchmark
Assuming these numbers are largely correct, an interesting number falls out of some simple math. If producing a barrel of oil from bitumen releases one tenth of a tonne of CO2 (Rubin’s number), then the nominal cost of eliminating greenhouse gases through carbon capture and storage would be about $3.75 per barrel. If you believe that regulators are going to get serious about eliminating emissions from bitumen production, then technologies that can reduce emissions for less than that $3.75 benchmark may be bargains.

The problem is in accountability. You can count the cost of sequestering carbon dioxide. How do you account for greenhouse gas emissions you don’t produce? This is a question environmental policy-makers can answer. The good news for industry is that as an economic question it can be good for the bottom line. For a lot less than $3.75 per barrel, clever engineers can find ways to forego the production of equivalent weights of greenhouse gases.

“Presently SAGD operations are running two to three barrels of steam to one barrel of oil. Our goal is to reduce that number (by using a different production system),” Nikipelo reiterates. “When we reduce the steam-oil ratio, we reduce both capital and operating costs for water treatment, steam generation and storage facilities. There can be huge savings.”

To calculate per barrel savings you need to plug such other factors as calendar day productivity, ultimate recovery rates and project life into your spreadsheet. Also, the system you employ must be robust (minimal downtime) and affordable. In a political climate deeply concerned about greenhouse gas emissions and water pollution, the oilsands industry’s best new mousetraps are going to trap GHGs in situ, so the industry later has less to capture and sequester.
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