Sept/Oct 2009

Unconventionally unconventional

Nexen Inc. improves on SAGD yields and cuts production costs at Long Lake

By D. Zlotnikov

Long Lake skyline with well pad in foreground

As more and more conventional oil resources dry up, Alberta’s oil sands gain more attention and significance in the eyes of the world’s oil producers. Benefitting from over 40 years of continuous research, the vast oil sands resources have become ever more economical to mine. Today, a number of companies are reaping the benefits, and various operators are expected to develop many more projects in the near future.

With only 20 per cent of the vast bitumen reserves accessible via surface mining, the need for alternative approaches has long been recognized. Among the more promising approaches is steam-assisted gravity drainage (SAGD), in which operators drill horizontal well pairs deep underground, one a few metres above the other. The top well is pumped full of hot steam, decreasing the viscosity of the bitumen. The liquefied bitumen then seeps into the bottom well, and is pumped to the surface for processing.

SAGD has allowed for far greater access to the resource. Expectations are that within two decades, the majority of Alberta’s oil production will come from SAGD operations. But the method is not without its challenges.

Twin challenges

The two main challenges with SAGD pertain to its cost and direct usability. SAGD is comparatively expensive, mainly because it needs vast quantities of steam. The steam generators use natural gas, which is relatively costly. There are also concerns that its supplies may become constrained as more and more SAGD projects begin operations. Furthermore, the same natural gas is used for household heating and cooking. If the oil producers’ demand drives the price of this resource up, it may strain relations between operators and local residents.

The second issue with SAGD is that the bitumen produced from oil sands can not be used directly by refineries.  To be usable  the bitumen must be upgraded, that is, converted from bitumen into a synthetic crude oil. As part of this process, the bitumen is split into its component parts and the lighter distillates are chemically treated to produce sweet synthetic crude oil. However, the nature of the upgrading process is such that only half of all the bitumen can be easily made into synthetic crude. The remainder is generally processed through a coker where it is converted into additional distillate and solid coke.  The coke is sold to coal power plants or steel smelters, at a price far lower than that of oil.

A new solution

With such costly overheads, it is no wonder that companies like Nexen, Inc. are attempting to boost the efficiency of the upgrading process. Nexen has partnered with OPTI Canada to develop a process called OrCrude™ — a technique that promises to decrease waste, cut costs and improve the product quality, in concert with hydrocracking and gasification. The technology is being deployed at the jointly owned Long Lake oil sands facility, some 40 kilometres southeast of Fort McMurray, Alberta. Originally, Nexen operated the extraction side and OPTI ran the upgrader, but in January 2009, Nexen acquired an additional 15 per cent stake from OPTI. With a working interest of 65 per cent, Nexen is now the sole operator of Long Lake. “Most of the technical and operational expertise that OPTI had at the site was simply transferred to Nexen,” explains Nestor Zerpa, Nexen’s senior advisor of synthetic oil process technology. “Rather than having two groups,  we now have one. There was a lot of duplication, and we are now able to optimize our work more.”

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