Petrobank seeks to commercialize innovative oilsands technology

Petrobank Energy and Resources (PBG-T) has pioneered what is probably one of the most innovative technologies in the oilsands: it recovers bitumen from deep oilsands by igniting fires underground. And while the technology is only being used on a pilot project on one site, the company is now seeking to take it to commercial production on a new site.

“It’s a great example of technology solving problems,” says Gregg Smith, senior vice-president and chief operating officer – Canada.

Open-pit mining of oilsands is only economic when the sands are near surface. With deeper deposits, in-situ recovery methods are needed, and steam-assisted gravity drainage (SAGD) is commonly used. This involves injecting steam into the sands, heating the bitumen and turning it into liquid which flows to surface.

Petrobank’s THAI (toe to heel air injection) technology is a drastic departure from the conventional SAGD process. Instead of using steam to heat the bitumen, THAI ignites the bitumen underground in order to produce heat, which liquefies the bitumen nearby, allowing it to flow to surface.

A production field consists of injection wells, where air is pumped to keep the fire going underground, and production wells, where the liquid bitumen flows to surface. A production well has a horizontal section and a vertical section, intersecting at the heel. The injection well is drilled close to the toe, which is the edge of the horizontal section of the production well.

The reaction is far more violent than a SAGD process, since the THAI process reaches high temperatures, between 400-600 degrees centigrade.

At these temperatures, the light fraction of the bitumen flow away from the fire, down the production well, and some of it cracks, producing even lighter oil, as well as methane and hydrogen. But the heavier oil is less mobile, so it adheres to the sand and undergoes coking. The hot gases push the lighter oil to surface through the production well.

Petrobank started the first pilot field using THAI two years ago. The project, Whitesands, is near Conklin, Alta. Since then the company has solved a number of engineering issues that arose during the pilot phase, and the field is now in production, with 248 barrels of oil per day (bpd) produced in March, and 256 bpd in April, equal to about one third of Whitesands’ production capacity.

Oil gravity is 12 degrees API – sufficiently light to be saleable to a refinery, with the oil not requiring any upgrading prior to refining. The oil is low in the heavier asphaltene fraction, since most of the heavier fraction burns underground.

Petrobank plans to use another technology, known as CAPRI, to produce an even lighter oil. The technology involves the installation of slotted liners packed with a catalyst on the production well. The catalyst cracks the bitumen to a lighter oil. Under laboratory conditions, oil as light as 20-24 degrees API can be produced by CAPRI.

Petrobank now intends to use THAI in a new commercial-scale project at May River, near Whitesands. Petrobank has applied to the Alberta government for a permit for a project which would start at a 10,000 bpd production rate, scalable in stages to 100,000 bpd. Capital expenditure is estimated at $22,000 per one bpd.

Having demonstrated the process on the oilsands, the company believes that THAI can also be used in conventional heavy oil reservoirs. To prove this, it plans to embark on two pilot projects, Kerrobert and Dawson. Kerrobert sits on a heavy oil reservoir near Kindersley, Sask. Dawson is near Peace River, Alta., and has oilsands with some heavy oil. Petrobank has applied for government permits for both pilot projects.

Smith says that THAI has a number of distinct advantages over conventional in-situ recovery technologies. He estimates that between 70-80% of bitumen can be recovered by THAI, while SAGD can only recover an estimated 35-40%. Another big advantage is the fact that the process requires no, or minimal, natural gas or water, as opposed to SAGD, which requires prodigious quantities of both.

The economics of THAI is superior, since capital expenditures, as well as operating costs, are lower than those for SAGD, and it produces a more expensive, or higher netback, product. The process also produces methane, which can be used to generate power. In addition, project execution is faster than for SAGD. The process is also more efficient, because heat is applied directly to bitumen, instead of heating water to produce steam.

This translates to environmental advantages, because THAI produces 50% less greenhouse gases than SAGD. And the carbon dioxide produced is capture-ready, since it is pressurized.

Smith reports considerable interest in THAI from countries with heavy oil and oilsands reserves, including Venezuela and Colombia.

Beside its THAI projects, Petrobank also holds other oil and gas projects. The company owns about 67% of Petrominerales (PMG-T).

Petrobank produced about 44,000 barrels oil equivalent per day (boepd) during the first quarter of 2009 on its operations in Canada and Latin America. It lost $1.5 million on revenues of about $191 million for the first quarter. For the year to December 31 Petrobank produced about 29,000 boepd. It earned net income of about $244 million on revenues of $950 million for the year.

Petrobank has about 84 million shares outstanding. At presstime the shares were trading at $31.80. The shares have been trading in a $16.26-61.72 range over the past 12 months.