In-situ Step-change

Two Norwest supervisors checking equipment in Alberta's Underground Test Facility;
photo courtesy of Gerry Stephenson

How underground shafts and tunnels changed the future of the oilsands

This article appears in the December issue of Oilsands Review

By Peter McKenzie-Brown

The year was 1976 and the place was a small town called Yarega – about 600 miles northeast of Moscow, near the Arctic Circle. A group of Albertans had gone there to observe a Soviet “oil mine.”

The Soviets had constructed shafts and tunnels into a heavy oil reservoir. Local workers were pumping steam into the reservoir through angled drill holes and production was taking place within the mine. A mining engineer among the Canadians, Gerry Stephenson, describes the project: “The wells that were injecting steam were drilled from an upper level of tunnel, which was above the heavy oil reservoir. So the injection wells were drilled from above but from tunnels. The recovery wells were drilled from tunnels below.”

According to Maurice Carrigy, vice-chair of the Alberta Oil Sands Technology and Research Agency (AOSTRA), “They had a tap, you know like a tap you would see in plumbing, a bathroom tap, and they would turn that on and off to get the oil out.”

Chronically short of cash, the USSR was hoping to sell the technology to the Canadian oil industry. The visit in part reflected a 1972 technology-sharing agreement between Canada and the USSR – one that collapsed in ‘78 when Canada expelled 13 Soviet officials for trying to infiltrate national security services.

The Canadians were not impressed with the oil mine, but they were intrigued. According to Carrigy, it led to a “total revolution in the concept of what you could do with bitumen that you couldn’t do in a traditional reservoir.… You got (the bitumen) into a form where it was either emulsified or liquefied so that you could produce it.”

At least one other group of Canadians had visited a Soviet oil mine. Hugh Lieper, who chaired Canada’s petroleum committee for the technology sharing agreement, also visited one in 1976. He describes being hoisted 800 feet into the mine in an elevator that swung wildly from side to side. At the bottom of the shaft, he found the oil being collected in a large open pit on the operations floor. “When I asked whether the electrical motors on the site were explosion-proof, no one knew what I was talking about.”

AOSTRA’s Carrigy puts the impact of his group’s visit to the Yarega oil mine in perspective. While Canada didn’t use the primitive Soviet technology, it gave credibility to “the idea that we could go below (an oilsands reservoir) instead of working from above.” That way “we could use gravity as the driver in getting the oil out. That would be natural. It would come down and flow in and then we’d take it from below rather than pulling it up to the surface.”

Adds Stephenson, “the system was definitely working, but the mine was very, very primitive. The tunnels were tiny. They weren’t mechanized at all. The piping systems were not much better than you would find in your garden. But it demonstrated that if you heat heavy oil, it will mobilize, it will be possible then to drain it, and if you put in wellheads below the reservoir, you will get production without pumping.”

The Mac of SAGD
A few years after the Canadian expeditions to the USSR, the legendary Roger Butler began developing the two-well SAGD concept, which eventually took the form in use today: injecting steam into a horizontal well and collecting oil through a parallel well below. Clem Bowman, who worked at Imperial Oil with Butler, says he actually developed the theoretical model for SAGD in the early 1970s. However Chi-Tak Yee, who was Butler’s first graduate student at the University of Calgary, says he once saw a document dated 1969 in which Butler had sketched out his preliminary ideas.

Whatever the facts of the matter, in the early 1980s the time was ripe for radical experimentation.

The AOSTRA’s first chairman, Bowman picks up the story. According to him, one day Gerry Stephenson came into his office and said “The oil companies have got it all wrong. The idea of drilling vertical wells into the oilsands and only contacting the pay zone for the few metres where there’s bitumen and having to put multiple wells down in these grid patterns just doesn’t make sense. I’m a mining man and the logical thing to do in a mine is to put down a shaft and to drill horizontal wells from that shaft and then every foot of well that’s drilled is in the pay zone.” Stephenson added that he had gone to the oil companies with this idea without success.

“And so he came to my office and sat there and made his plea that we should build a facility, put down a shaft and he had worked out what the costs would be,” Bowman continued. “According to his numbers, drilling a shaft into the deposit is not an expensive operation and the coal companies know how to handle methane in spades. So we put together a concept called the Underground Test Facility. No oil company would put any money into it but (petroleum executives on AOSTRA’s board) said they would support it technically and they’d have people help us on it.” For the only time in its history, the government agency paid full fare – and for what seemed a most speculative idea. Total budget for shafts, tunnels and infrastructure was about $30 million.

As Bowman continues, “It seemed this was the obvious time to test (Roger Butler’s) principle of gravity drainage.” Butler had left Imperial oil to become part of AOSTRA, and he became a member of the technical team. Maurice Carrigy was the project executive. Today a vice president of MEG Energy, Chi-Tak Yee says that “one of the most fortunate things that I was involved with was the Underground Test Facility project that was essentially the birthplace of SAGD. Think of (the UTF) as the Mac of SAGD development.”

First photo taken under the oilsands;
Stephenson in centre

According to Carrigy, “although we did contemplate going right into the oil sands, we thought it would be better to go down below the oil sands, put the tunnels in a secure and safe place” – a layer of limestone – “and then drill upwards” into the reservoir.

The magnitude of the UTF is hard to imagine. Sinking the shafts was done with a drill bit almost four metres in diameter weighing 230 tonnes. The two shafts were 223 metres deep and neither one deviated from the vertical by more than an inch. As a safety measure, AOSTRA constructed two parallel tunnels through the limestone. More than a kilometre in length, the tunnels were five metres wide by four metres high.

A Subway to the Wellhead

At the UTF’s official opening on June 29th 1987, a senior executive at Shell Canada – up to that time he had been a critic of the project – went to Stephenson and said, “It’s really not a mine, Gerry, is it? This is really impressive. It’s like a subway to the wellhead.”

Then came the tests. The Phase A pilot involved three well pairs 70 metres in length, each with 40-50 metres of exposure to the McMurray formation. According to Stephenson, “steam was injected and the first experiment with SAGD wells began. After a year or so, it was obvious the system was working.”

That was the beginning of a turnaround within the industry, which soon decided to get financially involved. Ten companies each contributed $16 million to the project. That funding enabled the test crew to complete Phase A and to move on to Phase B. It also funded several years of additional experimentation.

Phase B involved another three well pairs, 70 metres apart. According to Stephenson, “the effective length in the reservoir was 500 or 550 metres. They resembled a commercial development” despite having only three producing well pairs. Project engineers expected production to reach about 1,800 barrels a day.

What was the result? “AOSTRA’s staff had estimated that the recovery might be somewhere between 30 percent and 45 percent of the bitumen in place,” he says. “We actually got 65 percent recovery. The steam chambers formed by mobilization of the bitumen spread way beyond the area that we’d expected, so obviously we didn’t need to drill the well pairs as close together on Phase B as we did on Phase A, so we opened them up. Anyway, on Phase A the figures were 65 percent recovery – way beyond what we’d estimated. Over the 10-year life of the well pairs, Phase B got a steam/oil ratio, the most critical figure of all, of 2.3 to one.”

The petroleum industry soon began to develop SAGD projects from well pads. According to Stephenson, however, there are many reasons why SAGD is better done from tunnels underground. “You don’t disturb the surface to the same extent. You can use gravity to your full advantage.” And, he adds, surface schemes require a high-capacity, expensive pump for each producing well. They cost a lot to buy and a lot to service.

Also, he says, “it costs more to pump through a multitude of  8-inch pipelines than it does through a single 18-inch pipeline in a shaft. Another advantage is that you can drill more accurately from underground, and you get better recovery because you can use lower steam pressures. Your production might not be quite as high, but your recovery of the bitumen is going to be better, because you’re allowing a slow process of heat soaking upwards by thermal conductivity.”

He claims still other advantages for the system. “You’re operating in an underground climate in a tunnel. You're doing all your drilling and completion of wells as well as your process manipulation work in a safe working environment at a temperature of 58 F year round and with no snow and ice to hinder and delay your work. You can operate 24 hours a day, 365 days a year, instead of being confined with your drilling and your completions to those periods when you can drill on the muskeg and so on. You can do all these things in a safe environment that allows you to work all year long.”

A visionary but not a dreamer, Stephenson acknowledges that the system also has disadvantages. One is the need for upfront capital: until you’ve constructed the shafts and tunnels you can’t do any drilling at all. Also, of course, some reservoirs simply don’t have the geological features needed to make the system work.

In the latter 1990s the UTF was acquired by Devon Energy, which then sold it to Petro-Canada. When Suncor Energy acquired Petro-Canada, it also acquired the UTF – now known internally as its “Devon Project.” Petro-Canada developed abandonment plans for the facility, and unconfirmed reports say the ERCB approved them. It’s still intact, ‘though its future is in question. 

People Power

Calgary ranks high on the national United Way scale, but it's the people behind the campaign that make a difference.

This article appears in the December issue of Oilweek; photo with permission of Nexen.

By Peter McKenzie-Brown

“While the world is getting better, the disparity between the top and the bottom is getting greater,” according to Talisman CEO John Manzoni. “Those of us at the top who have benefitted from an astounding couple of decades of prosperity often forget that the things that have contributed to that prosperity have actually made things worse for some people.”

“Calgary itself plays a role in that,” he continues. “It’s an oil town, a hydrocarbon city. As the price of oil goes up so do costs…the cost of food, the cost of accommodation, the cost of fuel. As a result, people get left behind. All that’s happening in the financial sector is just exacerbating the situation. I am increasingly of the view that business has a moral obligation and responsibility to help to bridge those gaps.”

Those comments represent the windup to Manzoni’s reply to my question, “Why did you agree to co-chair this year’s United Way campaign?” Now comes the pitch. “If you can do something locally, that’s all the better. Based on that perspective, (the United Way) is a great opportunity to do something that helps.”

A relative newcomer to Calgary – he assumed Talisman’s top job from Britain four years ago – Manzoni also acknowledges business reasons to become involved. “From a selfish perspective, I’m new to the city and it’s a great way to get to know more people. There are many advantages to doing this in addition to the fact that you can do some good.”

Manzoni’s co-chair this year is Sue Riddell Rose – the CEO of Perpetual Energy, which has about 180 employees locally. A native of the city, Rose says she’s “involved in the program because it aligns perfectly with my goals and my husband’s goals and my family’s goals, and our vision of what we want the city of Calgary to be.”

She adds that “The United Way has been a presence in the community for quite a long time. It’s often been said that every dollar given to the United Way contributes six dollars of benefit to the community. That’s because the United Way helps fund high-impact programs that help the city avoid certain kinds of outcomes down the road. If you do that, you can save the system quite a bit of money.”

Campaign co-chairs “come from every part of the spectrum of the Calgary community – sports figures, small business, technology. It just happened that this year they’re both executives from the energy industry,” according to Ruth Ramsden-Wood, who has been the CEO of the Calgary and Area United Way organization for the last 14 years. On average each co-chair dedicates 46 hours to the annual campaign. “They lead a cabinet of 50 people who represent every segment of our society, from major energy companies to universities to unions,” she says. They “work with those people and they meet with people throughout the community for the whole year leading up to the campaign. It’s a pretty hefty role. They become very visible in the community.”

“We put a lot of time into developing our cabinet and they develop additional cabinets in their own sectors,” adds Susan Rose. “That enables our efforts to trickle down and into the community.”

Fun

Manzoni, Ramsden-Wood and Rose give the big-picture look at the United Way. If you narrow your focus to the workplace campaign, matters get much more interesting.

“Every company has its own fun events” says Susan Rose. “It’s part of the intrigue that you can use these events to express your own creativity. Something like 1,200 United Way campaigns will take place this year, and they will all be different. Lots of creativity comes into play, and that can be defining for companies’ cultures.”

What kind of fun? Ask Melanie Swanson, an integrity analyst at Nexen and chair of that company’s 2011 United Way campaign. Nexen’s theme is “Be a superhero,” and that theme led to a public relations home run for the company.

As the United Way season kicked off, hordes of company employees donned superhero costumes to test the previous world record for “most superheroes in a single place.” According to Swanson, “It was a lot of fun to organize the event, but the purpose was to breathe life into the campaign. There was an adjudicator from the Guinness Book of World Records present, and we had to meet particular criteria.” When the adjudicator announced that Nexen’s 437 superheroes had blown away the previous world record, a jubilant crowd went wild. The event got wide-eyed publicity across the full spectrum of media – from TV to Twitter.

The superhero stunt reflects a corporate culture that strongly supports the charity. A year ago Nexen and its 1900 Calgary-area employees contributed a jaw-dropping $1.4 million to the United Way. Half the total was a corporate contribution.

Nexen’s media success was the envy of other companies. According to Peter Ingle, Imperial’s surplus property manager and co-chair of the company’s campaign, “We have fun events, but I have to admit I’m a bit jealous of what Nexen did. I’d like to do something like that. Our events have tended to be more internal. For example, we have large-scale Wii competitions among our employees.”

Ruth Ramsden-Wood never tires of telling stories about corporate fun. For example, “a few years ago a law firm auctioned a goat for its chairman, and I can’t tell you how many e-mails came in from around the country making pledges.” She adds that many companies find imaginative ways to raise money. For example, for three months each year Esso markets $25 United Way gift cards at its service stations – while supplies last, of course. From each sale, two dollars go to the charity.

When it comes to individual campaigns, companies can do anything. According to Manzoni, “to kick off our campaign we had a breakfast for our employees, and about 300 or 400 came. We need events like that to tell people the stories out there – for example, to tell them about the children who go to school without breakfast. The number in Calgary is stunning – I think it’s 20,000. People need to know that, and we need to find ways to fix it.”

Corporate Support

The high level of corporate support within Calgary has helped make the city a champion within Canada’s United Way network. Last year’s campaign raised about $52 million. In terms of total funds raised, that amount put the city in Canada’s number three spot. However, at $39.20 the city was fifth in terms of per capita giving. Fort McMurray was tops, with contributions of $64.78 per head.

Corporate support involves much more than cash, of course. First and foremost, it involves the work and commitment of individual volunteers. “If employees want to take time to work on the campaign, we let them have it,” says Manzoni, “and we find ways to make them feel special.”

Some companies lend people from their staff to the United Way. “We usually get them involved at the beginning of fall, and they work throughout the campaign,” according to Ramsden-Wood. “They become our arms and legs. I believe we have 35 this year, but in previous years we’ve sometimes had more. Companies do this to some extent because they see it as a leadership development opportunity for their employees.”

Nexen’s Melanie Swanson worked as a loaned rep with the United Way last year, and says she got a great deal out of the experience. “It gave me a sense of how much the United Way actually does. So this year I wanted to contribute again by chairing our corporate campaign.” Swanson and Peter Ingles are two good examples of how the system works, and how much effort is involved.

“I’m a big believer in the United Way and I have been ever since I joined the company 27 years ago,” according to Peter Ingle. “I think it’s a good way to be involved. The United Way targets funds in a very focused way.”

“At Esso we have two campaign chairs, and there is an overlap,” he says. “The lead co-chair is putting in maybe 20% of her time during the peak period of our campaign; I’m putting in about 10%. Next year I will do the bulk of the work while we train somebody else for the year after that. We have a really active cabinet, and we have floor leaders” whose job is to see whether their colleagues will open their hearts and wallets to the charity.

While Esso has a notional target of $1.2 million in contributions from Calgary-area employees, Ingle stresses that this is strictly an internal number. “Philanthropy is a very personal thing,” he says, “and we don’t do anything to influence where people direct their gifts. We designed the campaign to help people learn more about United Way and how it can help in our community, but we also send out a really clear message that (giving) is up to the individual.”

Nexen’s Swanson says that during this year’s peak campaign period she invested half of her time in the company’s campaign. A lot of that time went into the superhero event, which she says was designed to “increase participation in and awareness of the event.” Like Ingle, she was assisted by people on each floor who went from office to office talking up United Way giving.

In her case, they were called “Floor Superheroes,” and most of them trotted around with brochures in their Guinness-adjudicated superhero outfits. Asked how much time she and the other volunteers in her company have given to the cause this year, all she could say was “hundreds of hours.” She estimates that the cash cost of the campaign represented 1-2% of the total money raised.

Virtually all the larger companies in the energy industry make direct contributions to the United Way, but they follow quite different models. According to Ramsden-Wood, gift-matching is “really driven by the philosophy within the company.” The most common approach is gift-matching, by which companies match employees’ and often annuitants’ contributions. Gift-matching is usually dollar for dollar, but some companies match at even higher levels – in at least one case, three dollars for every dollar given by the employee.

Gift-matching can be a powerful motivator – especially since there is often no limit to the size of your gift, and you can actually direct your gift to a specific charity along those the United Way serves. Thus, whether you donate $10 or $10,000, matching funds will double the amount the charity receives. As Susan Rose explains it, gift-matching is a way “to show that the corporation is passionate about what our employees are passionate about. The United Way is not the only area where we match employee giving.”

Gift-matching can also cost a company dear. According to Ramsden-Wood, “Some years ago a retiree from Shell was giving huge amounts to the community (through the United Way), and the company matched him for every dollar he gave.” Last year, Shell and its people contributed five percent of the total raised in Calgary. Between 2000 and 2010, their contributions exceeded $32 million – a vivid illustration of the energy industry’s impact on the city’s not-for-profit agencies.

Unlike most other companies, Imperial doesn’t use the gift-matching model. Its Esso Foundation treats corporate United Way funding as part of its nation-wide community investment program. According to the company’s Jon Harding, “the total budget is based on community need in the regions where we live and operate. Over 17 communities across Canada receive funding as part of our annual United Way grants.”

People Power

While workplace campaigns are an extremely important part of the United Way calendar, the organization’s volunteers are active throughout the year.

In United Way parlance, leaders are those who give from $1000-$10,000 in a year and major donors are those who give more. According to Susan Rose, “We have a Leaders initiative, but we also have a Major Donors initiative and I’m very involved in those relationships.” As John Manzoni elaborates, “The vast amount of money comes from Leader level giving, so we want to increase leadership giving.” That is one area of the organization’s focus.

The other is to bring new people into the United Way – “to engage the younger generation.” Organization insiders describe this effort as their BeCause initiative. According to Rose, it “originated 10 years ago to try to get the aged 23 to 35 demographic – people who often don’t have the means to actually give – to become ambassadors spreading the good word about what the United Way is doing in our community. Our company actually has two BeCause ambassadors – young, high-potential employees. They are leading our United Way campaign. Ambassadors focus on the idea that if we work as a village we can make the city a better place.” It’s all about people power.

According to Peter Ingle, Esso also focuses “on getting newer employees engaged in the United Way. We encourage them to just give their time through our Days of Caring, for example.” This is a program in which a team from the company will go out and work in the community – helping repair and repaint a shelter for street kids, for example. At Talisman, Manzoni says, “we dedicate a week to the idea of having (our working groups share) ‘A Day That Makes a Difference.’ Members of our executive team get involved in volunteering somewhere, and people get involved with them.”

“I am inspired by the amount of work the many people involved in the United Way campaign actually do,” says Ruth Ramsden-Wood, who will retire this winter. “We are a chronically understaffed not-for-profit organization, and it is these people who make possible what we do each year.”