Sept/Oct 2009

Growth is in the cards

Current and proposed expansion will help Shell Canada increase production at its Athabasca and Peace River operations

By P. Caulfield


Peace River operation

Shell Canada has operations in all the three main oil sands deposits in Alberta — Athabasca, Peace River and Cold Lake. Shell’s Athabasca Oil Sands Project (AOSP) is the site of one of the largest oil and gas expansion projects in North America and the company is also planning another expansion project at its Peace River leases.

Building the future

AOSP Expansion 1, a fully integrated, 100,000 barrel-per-day expansion, is being undertaken by Shell and its joint-venture partners, Marathon Oil Sands LP and Chevron Canada Limited.

The main components of the project are the construction of mining and extraction facilities at the Albian Sands operation (for the future Jackpine mine); the expansion of froth treatment facilities at the Muskeg River mine; the expansion of the Scotford Upgrader; and the development of common infrastructure, such as power lines, roads, camps and pipelines to support future expansion.

Started in 2006 and slated for completion in 2010/2011, AOSP Expansion 1 will increase the bitumen output of the Albian Sands mining operation and the Scotford Upgrader by 100,000 barrels per day, of which Shell’s share will be 60,000 barrels per day.

“AOSP Expansion 1 is the future of Shell’s oil sands business,” says Laurieanne Lynne, Shell Canada’s corporate communication advisor. “It’s among the largest, most technologically advanced oil and gas construction projects underway in North America.”

A significant development opportunity

Shell Canada has held leases in the Peace River area since the 1950s. By 2004, Shell’s 100-employee Peace River Complex had produced 50 million barrels of bitumen. That year, Shell began to consider expanding its bitumen production. In 2006, it acquired the assets of another operator and added more leases and two cold production facilities to its Peace River holdings.

Later in 2006, the company submitted an application for the Carmon Creek project, a 100,000 barrels-per-day expansion plan. However, last year, following additional technical and review work, Shell withdrew its original Carmon Creek application and began work on a new one, which it is planning to submit to regulators later in 2009. Under the proposal, Shell will bump up daily production from the currently licensed cap of 12,500 barrels of bitumen to 80,000 barrels per day.

“The Peace River oil sands represent a significant development opportunity for Shell,” Lynne says. “The existing thermal facility is a relatively small operation that has been in operation for more than 20 years. The expansion project is designed to allow us to expand our production in the most cost-effective way and ensure the efficient long-term development of this resource.”
The Carmon Creek project is still only being contemplated. Shell’s decision to proceed or not will depend on several factors, according to Lynne. “They include the outcome of the regulatory review, market conditions and project costs,” she explains. “We are working to submit our new regulatory application in late 2009 and expect the review to take upwards of 18 months.”

Joined-up thinking

The proposed Carmon Creek project is a complex, everything-connects-to-everything-else example of sophisticated bitumen-recovery technology at work. It will use vertical well steam-drive technology in which vertical deviated wells are clustered into well pads. To minimize the number of wells and the resultant environmental footprint, the well arrangement patterns will be carefully designed before installation. With longer term productivity in mind, Shell proposes to construct and tie in new well pads as they become necessary so that production can be sustained over the project’s lifespan.

Next, the well pads will be connected to central processing facilities by a system of pipelines. The pipes will distribute steam to the well pads, gather produced fluids and route them to the processing facilities. The processing facilities will separate the fluids into oil, water and gas, each of which will receive further treatment.

A diluting agent will reduce the viscosity of the oil before it is piped to a terminal in Haig Lake, Alberta. The water will be reused to make steam after solids and residual hydrocarbons are removed. Finally, hydrogen sulphide (H2S) and carbon dioxide (CO2) will be removed from the gas, which will be used to fuel steam production. The H2S and CO2 will be re-injected into empty underground reservoirs.Most of the required steam will be generated by new, environmentally friendly cogeneration facilities, which simultaneously produce electricity and useful heat. The bitumen pumps will use power from the cogeneration units and surplus power will be exported to the provincial grid.

On the infrastructure front, Shell plans to either upgrade an existing municipal airstrip or build a new private airstrip; upgrade tankage facilities at the Haig Lake terminal; and erect several electrical transmission lines, including a connection to the provincial grid. While the project’s human resources requirement will vary, Lynne estimates it will peak at 1,400 during the construction phase.

Green thinking

Although the launch or the timing of the Carmon Creek project are uncertain, Shell is totally committed to environmentally and socially responsible design, construction and operations. This commitment is a natural extension of the company’s track record in the Peace River area.

Over more than 25 years, Shell’s Peace River operations have deployed numerous measures to protect the environment. Examples include the construction and monitoring of wildlife crossings; the use of existing disturbances to the environment, wherever practical, when building new facilities; conducting pre-disturbance assessments; aligning linear disturbances into a single right-of-way; and drilling multiple wells per pad to minimize surface impact.

Currently, Shell is working with other companies to assess the cumulative ecological effects of projects and to explore integrated, impact-minimizing land management strategies. The company also partners with other organizations to support research into wetland reclamation, wildlife crossing use and amphibian and reptilian habitats.

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