Monday, April 22, 2013

The Quiet Sister

Retired Imperial Oil VP Howie Dingle on the years of research and development it took to open up the potential of the Cold Lake oil sands deposit.
This article appears in the May issue of Oilsands Review 
 By Peter McKenzie-Brown
“Research is to oil sands development what exploration is to conventional oil” says retired Imperial Oil VP Howard (Howie) Dingle. “We know where the oil sands are. We don’t necessarily know how to get the oil out of the ground. That involves research. Conventional guys don’t necessarily know where the oil is but once they find it they’ve got a lot of technologies for developing it. That’s why I long supported Imperial Oil’s involvement in research, just to figure out what we need to use to get the oil out of the ground economically.” A great deal of Dingle’s career involved working on Cold Lake leases Esso had acquired in the late 1950s. “In 1965 I took my second summer job at a research centre in Calgary. I was measuring the viscosity of Cold Lake bitumen under the effects of various surfactants.”
A pioneer at Imperial Oil’s Cold Lake project, Dingle notes with satisfaction that “a year after I retired (in 2005) we produced our billionth barrel of production from that project. Even Redwater (a large conventional reservoir) never produced that much. Cold Lake’s been the quiet sister behind the scene.”
The Background
If you want to go back in the history of Canada’s oil industry, you can’t do much better than talk to Howie Dingle. He was born in Norman Wells, NWT, during the Second World War; his father was helping develop the Norman Wells field to feed the Canol pipeline, which was part of the war effort. Dingle’s mother and siblings moved to Norman Wells in 1945 because family housing wasn’t available until then. Dingle was born in 1946, and the family was then transferred to Peru for a year. “I was a second-generation Imperial Oil employee,” he says, “and my brother also worked for Imperial. Together, my dad, my brother and I have more than 105 years with the company.”
A chemist by training, Dingle spent his first years as an Imperial employee with its refining group in Sarnia, Ontario; La Jolla, California with Exxon; and another 12 months in Montreal. But in 1976 he was transferred to Calgary, where he began his long association with Imperial’s upstream. His first assignment was to help design the control system for the Taglu Gas Plant – a plant for the Mackenzie Delta gas fields that has yet to be built.
This column refers to both Imperial Oil and Esso Resources – a situation that requires clarification. Today’s Imperial once had three subsidiary companies to manage different parts of it business, all named Esso. Esso Resources Canada once operated the Cold Lake project, and many old-timers still call it Esso Cold Lake. The three subsidiaries were dissolved into Imperial Oil in 1992, however, so Esso Resources no longer exists as a company.
The earliest operations at the Esso Cold Lake project – the May and Ethel pilot projects – involved vertical wells for injecting steam into the ground, then pumping bitumen out. “They ran for a number of years but got shut down” because of low prices. “We restarted the pilots at Leming in the late 70s, early 80s. That’s where we started experimenting with wells drilled directionally from a single surface location. That really sped up the development of the cyclic steam stimulation (CSS) process.”
Imperial drilled Canada’s first thermal horizontal well at Cold Lake in the late 1970s – a period when Dingle was working elsewhere within the company. In the early 1980s Esso began seeking approval for a mega project – a multi-billion dollar processing facility and upgrader for Cold Lake bitumen, and assigned Dingle to head up Cold Lake operations. Eventually, the company dropped the upgrader, deciding instead to produce bitumen, dilute it with condensate and then pipe it to refiners with upgrading capacity.
Why does Cold Lake use CSS rather than SAGD? It certainly isn’t for want of knowledge. “Imperial invented SAGD,” says Dingle with a certain amount of pride. In addition to inventing CSS, Esso had the original patents on SAGD, and “the whole issue of who owned the intellectual property rights came up time and time again,” but the company didn’t want to “apply it at Cold Lake….As long as our rights were not encumbered, we were happy to see other people spend the money to prove it up.”

However, “it was our company’s determination that CSS was better for Cold Lake than SAGD would have been.” At Cold Lake “you spend a long time getting a lot of steam in the ground to form your steam chamber and that is time when you’re not producing anything. Cyclic steam gets you production faster in a Cold Lake-type environment. (The Cold Lake project) involves a very thick, rich reservoir (which is) particularly amenable to CSS. It’s the approach to use at Cold Lake. SAGD is an approach to use elsewhere.”
The logistics of operating a SAGD project are simpler than for CSS. Consider that CSS involves nothing more than injecting steam in the reservoir to heat up the oil, then pumping it to the surface.
That isn’t as easy as it sounds. “There were around 2,000 wells at the project when I left the company,” says Dingle. “Now, you’ve got to manage 2,000 wells where every well is in a different part of the process of receiving steam, pumping oil and so on. So operations involve a gigantic logistics management process. Where do you put the steam so you’re not adversely affecting existing wells? How do you produce the optimum amount of oil? Management of natural gas to make steam and management of acquiring condensate to dilute bitumen are also concerns. A lot of people in the company spent a lot of time making sure that we had both in the quantities we wanted at the time we needed them to move the oil.” And they still do.
Biblical Thinking
February 14 1986 was a grim day in Cold Lake, according to Dingle: “We called it the St. Valentine’s Day Massacre.” World oil prices had collapsed because of an oversupply of production. Dingle was at the project, which was drilling up the wells for phases seven and eight. “We literally shut off spending money in mid-well. I remember phoning the drilling manager and saying, ‘Stop drilling right now’ because the financial impact was so great. My boss in Calgary had phoned and said, ‘You can have X number of people.’ My managers and I got into a smoke-filled room and figured out, starting from zero, how to restructure our organization” – how to make it work with the number of people they’d been allotted.  
His team didn’t have to cut back at all; they just got out of hiring mode. “We were actually in the throes of building up staff for phases seven and eight, so it was a matter of asking, ‘How are we going to manage development with the numbers we have?’”
During those bleak years Imperial cut back on development, but not on production. “When prices collapsed we could have stopped pumping, but why would you do that? You sell it for the best price you can get to minimize your losses, and you look carefully at what you’re doing to do in terms of injecting more steam in the ground. (Steam injection) is an engine that can’t be turned on and off. You can’t just flip the switch and stop producing. I used to tell my folks that ‘You can’t be faint of heart in the oil sands. You’ve got to think in biblical terms. You’ve got seven fat years and seven lean years. And, that’s the way you’re going to run your business.’
“We never stopped drilling productivity maintenance wells – new wells to maintain the facilities that we already had,” he adds. “We just got very careful about doing it, and we invested in steam in the most prudent fashion, but we never stopped. We suspended or slowed down new phase development, but we never stopped developing Cold Lake. If you take a look at the production plot you will see some ups and downs but it never came to a grinding halt.”
From Idea to Invention
Given the importance of research to oil sands development, it is noteworthy that Esso first developed research facilities in Calgary in the 1950s, moving to a facility at the university in the early 1980s.
Dingle was in charge of the U of C facility at one time. “Our conventional oil research and all our oil sands research was focused there. That group also managed the direction of the pilots that were undertaken out of Cold Lake. It also managed any research that we did collaboratively with other industry partners though outfits like CONRAD.” Along with Thane Waldie of Syncrude, Dingle was the co-founder of CONRAD – an acronym for the Canadian Oil Sands Network for Research and Development.
“The whole focus on CONRAD is to get industry collaboration on what we call ‘pre-competitive research.’ Because, the whole business of research is as I said, essential to oil sands. It’s very expensive. I did an estimate ten years ago. To develop a new process different than SAGD or CSS for the oil sands would have probably cost multiple billions of dollars. That’s not something you want to do without figuring out the alternatives early on.” As this article was going to press, though, Conrad’s board voted to end that organization, which will cease to exist by the end of this year.
Production at the Cold Lake project peaked at around 150,000 barrels a day, and has stayed near that rate for quite a number of years. That’s because reservoir quality is in decline, according to Dingle. “We’ve hit all the sweet spots. We’re now moving into less and less attractive reservoir and it’s harder. You cannot grow the production but you can maintain the production with new investment. But the development-sweet part of the reservoir” has already been produced. Dingle doesn’t expect a turn-up in Cold Lake production. Rather, the company can “develop different oil sands” since it has “lots of other leases.”
The impact of Cold Lake on Imperial Oil brilliantly illustrates the impact of research on companies that conduct it. When Esso’s conventional production was approximately 250,000 BOE, bitumen production from Cold Lake was 2,000 barrels a day. To put that in context, Cold Lake produces about 140,000 barrels a day while the company’s conventional production is 82,000 BOE. Bitumen production from Cold Lake has almost offset the natural decline from the company’s conventional reservoirs.
From Dingle’s perspective, the story is much more personal. “I had 38 years with the company, loved every second of it. Probably the best job I ever had was being the Cold Lake operations manager. It was something that I would willingly do again. It was a lot of work but a lot of fun as well.”
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