2012-1-Jan-LR - Canadian Association of Drilling Engineers

The offi cial publication of the Canadian Association of Drilling Engineers

JANUARY/FEBRUARY • 2012

PLUSTo Market, To Market: Finding a home for heavy crudeSAGD: Innovation is just getting startedWaste Not: Leaving a smaller environmental footprint

PM#40020055

For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry. As you look to build your business and launch new technologies, new products and services in the drilling industry, a CADE Sponsorship offers you a cost effective way to deliver your message directly to the entire membership of the leading industry association for Well Construction Professionals in Canada.

Support CADE by sponsoring our technical lunches, our website and the well construction journal.

YOUR SPONSORSHIP INCLUDES:

industry news and articles, presented in a high quality, well-read magazine

on the CADE website and in every issue of Well

in marketing materials

Connect with Canada’s Drilling IndustryBecome a CADE Sponsor

2012 SPONSORSHIP PACKAGES ARE NOW AVAILABLE

SIGN UP NOW!Contact Scott H. Payne at 403-400-4032 or by email [email protected]

www.cade.ca

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FOR MORE INFORMATION:www.rogersoilandgas.ca1 877 336 1333

CANADA’S RELIABLE NETWORK

TMRogers and the Mobius design are trademarks of Rogers Communications Inc. used under license or an affiliate. All other brand names are trademarks of their respective owners. ©2011 Rogers Communications.

Rogers has the industry’s latest productivity tools for the oil and gas industryto keep you connected to your customers, suppliers and to one another.

Your people: SafeYour job site: SecureYour operations costs: Streamlined

Expanded network coverage across Alberta– You’re covered in the field and office.

Minimize fuel, repair and insurancecosts – Fleet Management

Prevent injury to field workers and increaseworker safety – GPS Lone Worker tools

Protect critical data and ensure uninterruptednetwork access – Critical Network Access

Increase data collection accuracy andreduce human error – Well Metering

Prevent theft and secure your jobsites – Security & Asset Management

000PSN.Rogers_FP.indd 1 4/28/11 3:57:48 PMWCJ_JanFeb12_p02-03.indd 2 1/27/12 3:21:16 PM

The mandate of the Canadian Association of Drilling Engineers is to provide high-quality technical meetings and to promote awareness on behalf of the drilling and well servicing industry. With more than 500 members from more than 300 companies, CADE represents a broad spectrum of experience in all areas of operations and technologies. Through CADE, members and the public can learn about the tech-nical challenges and the in-depth experience of our members that continue to drive the industry forward. For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry.

CANADIAN ASSOCIATION OF DRILLING ENGINEERS560, 400 – 5 Avenue SW

Calgary, AB T2P 0L2Phone: 403-532-0220

Fax: 403-263-2722www.cade.ca

PRESIDENT: Eric SchmelzlPAST PRESIDENT: John Garden

VICE PRESIDENT: Robert JacksonWELL CONSTRUCTION JOURNAL EDITOR: Christian Gillis

WELL CONSTRUCTION JOURNAL IS PUBLISHED FOR CADE BY VENTURE PUBLISHING INC.

10259 105 StreetEdmonton, AB T5J 1E3Phone: 780-990-0839

Fax: 780-425-4921Toll Free: 1-866-227-4276

[email protected]

PUBLISHER: Ruth KellyASSOCIATE PUBLISHER: Joyce Byrne

MANAGING EDITOR: Steve MacleodART DIRECTOR: Charles Burke

ASSOCIATE ART DIRECTOR: Andrea deBoerASSISTANT ART DIRECTOR: Colin SpencePRODUCTION MANAGER: Vanlee Robblee

PRODUCTION COORDINATOR: Betty-Lou SmithCIRCULATION COORDINATOR: Jennifer King

CONTRIBUTING WRITERS: Michelle Lindstrom, Jacqueline Louie, Jesse Snyder

PRINTED IN CANADA BY ION PRINT SOLUTIONS. RETURN UNDELIVERABLE MAIL TO 10259 105 ST.

EDMONTON AB T5J [email protected]

PUBLICATION MAIL AGREEMENT #40020055 CONTENTS © 2012 CADE. NOT TO BE REPRINTED OR

REPRODUCED WITHOUT PERMISSION.

The offi cial publication of the Canadian Association of Drilling Engineers JANUARY/FEBRUARY • 2012

DEPARTMENTS

4 PRESIDENT’S MESSAGE

7 THE DRAWING BOARD

11 MEMBER PROFILEFrom coalbed methane to SAGD, Kim Cazes has been at the forefront of new technology

12 STUDENT PROFILES

14 BY THE NUMBERSWhat’s in store for 2012? More of the same from 2011

30 DRILLING DEEPERMore production from the oil sands isn’t an issue. Finding markets and getting it there is another story

FEATURES

19 DRILLING IN THE OIL SANDSMaking oil sands production economically viable has been decades in the making and the ability to drill in the region will be the real pay off

25 TECHNICALLY SPEAKINGSAGD is a fairly new technology, but some companies are already tinkering with the process

28 GREENER PASTURESEnvironmental stewardship is just part of doing business in the oil sands

25

19

Well Construction Journal JANUARY/FEBRUARY 2012 3

FOR MORE INFORMATION:www.rogersoilandgas.ca1 877 336 1333

CANADA’S RELIABLE NETWORK

TMRogers and the Mobius design are trademarks of Rogers Communications Inc. used under license or an affiliate. All other brand names are trademarks of their respective owners. ©2011 Rogers Communications.

Rogers has the industry’s latest productivity tools for the oil and gas industryto keep you connected to your customers, suppliers and to one another.

Your people: SafeYour job site: SecureYour operations costs: Streamlined

Expanded network coverage across Alberta– You’re covered in the field and office.

Minimize fuel, repair and insurancecosts – Fleet Management

Prevent injury to field workers and increaseworker safety – GPS Lone Worker tools

Protect critical data and ensure uninterruptednetwork access – Critical Network Access

Increase data collection accuracy andreduce human error – Well Metering

Prevent theft and secure your jobsites – Security & Asset Management

000PSN.Rogers_FP.indd 1 4/28/11 3:57:48 PM WCJ_JanFeb12_p02-03.indd 3 2/2/12 8:39:28 AM

4 JANUARY/FEBRUARY 2012 Well Construction Journal

E LIVE IN INTERESTING TIMES. MORE and more, each of us is being stretched further than ever before in both our personal and professional lives.

Financial pressures escalate along with taxes from multiple layers of government, while infl a-tion erodes our remaining purchasing power and user fees spring up like weeds for services that were historically covered by that burgeoning tax bill. Despite consuming the vast majority of all public spending, health care and education appear to be completely overwhelmed and unable to cope with their current mandates, never mind the coming reckoning embodied by the baby boomers as they age and retire.

It’s apparent that during the past 30 to 40 years, despite the windfall of revenues from Canada’s many natural resources – and despite the dispro-portionate surge in tax paid by the demographic “bump” represented by the baby boomers – our gov-ernments at all levels have not only been unable to manage their spending within these unsustainable periods, but they have spent far, far more than that, racking up defi cits our grandchildren will likely still be burdened with when they retire. Governments do it because we, the Canadian public, insist they do so. We have somehow come to believe that by paying more for policing we will get safe streets, by paying more for health care we will be healthy and by paying for more teachers we will produce bright,

W

MESSAGEPresident’s

Question PeriodGovernment and its role in society are heading for a crossroads. That means some tough questions will need answers

Eric SchmelzlCADE President

well-adjusted and prosperous children. Of course, none of that is true.

Affordable health care will come when we live healthy lifestyles and refuse to support those who choose to live otherwise. Well educated and confi -dent children will be the product of active parental involvement during a child’s formative years. Safe streets will come when we are willing to step up and get involved when criminal acts take place. I applaud the Canadian government’s latest steps to address crime prevention. It is an excellent fi rst step in what will surely be a long, self-sacrifi cing road back to a sustainable and responsible future.

Eventually there will be no shirking from it: we will all need to look in the mirror and ask ourselves if we are part of the problem or part of the solution. Taking responsibility for all aspects of one’s own ac-tions and lifestyle is the only possible cure. We can take that medicine early, while there is still hope for a recovery, or wait until there is no recourse. As al-ways, the choice is ours to make. The next time we get asked by our political leaders whether we want “more” or whether we want “less,” we need to re-examine the real question: sustainable or folly?

Eric Schmelzl

Private Company Serviceswww.pwc.com/ca/dbia

© 2011 PricewaterhouseCoopers LLP. All rights reserved. “PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member fi rm of PricewaterhouseCoopers International Limited, each member fi rm of which is a separate legal entity. 2032-11

Building lasting value

Private company owners know that business success brings new personal and professional challenges. We can help you create lasting value for your business, for yourself and for future generations.

Contact: Ian GunnBusiness Advisor1 866 750 4 [email protected]

© 2012 PricewaterhouseCoopers LLP. All rights reserved. “PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member fi rm of PricewaterhouseCoopers International Limited, each member fi rm of which is a separate legal entity. 2032-13 0112

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Question PeriodGovernment and its role in society are heading for a crossroads. That means some tough questions will need answers

Private Company Serviceswww.pwc.com/ca/dbia

© 2011 PricewaterhouseCoopers LLP. All rights reserved. “PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member fi rm of PricewaterhouseCoopers International Limited, each member fi rm of which is a separate legal entity. 2032-11

Building lasting value

Private company owners know that business success brings new personal and professional challenges. We can help you create lasting value for your business, for yourself and for future generations.

Contact: Ian GunnBusiness Advisor1 866 750 4 [email protected]

© 2012 PricewaterhouseCoopers LLP. All rights reserved. “PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member fi rm of PricewaterhouseCoopers International Limited, each member fi rm of which is a separate legal entity. 2032-13 0112

000WCJ.PWC_FP.indd 1 1/23/12 3:09:03 PMWCJ_JanFeb12_p04-05.indd 5 1/27/12 3:29:13 PM

ERS has put safety and environment at the top of their list. This system is truly innovative and, quite frankly, is the Best Available Practice I have encountered.

S. Hanelt, CFEI, CVFI SCO Fire Investigator/InspectorSafety BOSS Inc.

EnvironmEntal rEfuElling SyStEmS inc. presents...

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JANUARY/FEBRUARY 2012 7 Well Construction Journal

BOARDThe Drawing

Changing TimesERE WE ARE AND IT’S 2012 ALREADY. Winter is upon us, everyone is ramping up and it’s going to be a mad dash to break up. It amazes me how each year the

quarters seem to be going by much faster. It seems we were just wrapping up the summer season and talking about the arrival of fall – now break up is just around the corner.

This is our fi rst issue with the new Journal format and the association is very excited. It has been half a year of planning and we are hoping that every-one is going to enjoy it. The theme for this fi rst relaunched issue is Alberta’s oil sands. The oil sands are a big part of the Canadian oil and gas sector and this is our opportunity to take a look at what we are doing as an industry, and highlight what advance-ments have been made to make it a safer, cleaner and more environmentally friendly industry. As Canadians we pride ourselves in looking after our own backyards and developing technologies that allow us to do it better. It also gives us a chance to take a look at the places we still need to improve.

We are continuing to look for ideas for the 2012 Technical Luncheon presentations. Please

don’t hesitate to contact us if you have any ideas for upcoming topics or issues you’d like to see presented at the luncheons or in Well Construction Journal. We are also looking for topics that tie into our Journal’s focus for each month. We hope to see more of this over the course of the year. We hope you, the membership, will participate and continue to make these events interesting and successful. If you have any issues you’d like to see covered, please email me and we will do our best to get the story covered.

Don’t forget, we would like to include any of your information and announcements on new products, new technologies and senior personnel changes in the publication each month. Please forward any announcements to us, as we would be excited to run them in our new feature section.

We appreciate your continued support and look forward to seeing you at the upcoming luncheons.

CHRISTIAN GILLIS, EditorWell Construction [email protected]

H

CADE Executive Team 2011/2012President Eric Schmelzl 403-862-0870Past President John Garden 403-265-4973Vice President Robert Jackson 403-274-2718Secretary Tammy Todd 403 613-8844Treasurer Cecil Conaghan 403-667-9812Membership Chairman John Burnell 403-265-4973Education Chairman Mike Buker 403-930-9015Social Chairman Dan Schlosser 403-531-5284WCJ Editor Christian Gillis 403-265-4973Technical Chairman Jeff Arvidson 403-232-7100IT Chairman Graham Evans 403-991-2066Drilling Conf. Liaison Jeff Orita 403-693-7563Executive Member John Pahl 403-292-7966Sponsorship & Marketing Scott Payne 403-400-4032

E D I T O R ’ S N O T E

E X E C U T I V E T E A M

ERS has put safety and environment at the top of their list. This system is truly innovative and, quite frankly, is the Best Available Practice I have encountered.

S. Hanelt, CFEI, CVFI SCO Fire Investigator/InspectorSafety BOSS Inc.

EnvironmEntal rEfuElling SyStEmS inc. presents...

000PSN.ERS_FP.indd 1 10/25/11 12:55:53 PM WCJ_JanFeb12_p06-09.indd 7 1/27/12 3:41:43 PM


BOARDThe Drawing

CADE Unveils New MagazineYOUR ARE HOLDING IN YOUR HANDS THE NEWLY redesigned Well Construction Journal, with its new for-mat and editorial structure. The new publication will be published six times annually and will essentially double in size in order to bring a more in-depth look at both drilling and completions issues, technolo-gies and trends from across Canada. The new age of multi-stage horizontal completions has ushered in an era where completions and drilling are cohesive and integrated parts of well construction. As a result of these changes, our focus as an association is being broadened to include all aspects of both well drilling and well completions.

The CADE executive is pleased to announce the new CADE Well Construction Journal is being published in partnership with Venture Publishing Inc., a highly respected and successful publisher of several energy-related publications pertinent to our industry. For the fi rst time, we will also be allowing external advertising into the magazine; if you’d like more information on that, send an email to [email protected]. We hope our members will enjoy the new format and content of the Journal, and we look forward to hearing feedback from both our members and our sponsors to help us further

refi ne and improve our bi-monthly issues throughout the coming year.

The next year stretches ahead of our industry with a tangible sense of excitement, promise and opportunity that is unmatched in recent memory. Many CADE members are fi rmly in place at the wheel guiding their companies as the industry travels down these new roads. Together we will cover a tremendous amount of ground in 2012, moving into ever more diverse plays with new challenges and rewards. For those who are not yet CADE members, it’s a great time to climb on board and come along for the ride.

Members and Future Members Come Together

FOLLOWING THE SUCCESS OF LAST YEAR’S STUDENT Industry night, the Canadian Association of Drill-ing Engineers (CADE) is fi nalizing details for its second annual event.

This year’s event will be held on February 9, 2012 at the Westin in downtown Calgary. CADE is plan-ning to bring together 50 students each from the University of Calgary and SAIT, as well as 50 industry representatives for the evening mixer.

Last year’s event was held on January 27 and eight presentations were made by industry professionals. Terry Elliott, Darryl Firmaniuk and Leslie May from Baker Hughes; Luisine Jatem from Suncor; Glenn Leroux from BOS Solutions; Carol Crowfoot from the Energy Resources Conservation Board; Hassan Malik from ConocoPhillips Canada; and Ron Bietz

from Encana; made presentations that served as an introduction to students and new graduates about drilling, completions, regulatory issues, marketing and facilities.

The Student Industry night was organized by the students and brought together industry leaders and academia, and this year’s event is looking to do the same.

“What I discovered is this: there is a young crop of engineers and technologists coming out of our institu-tions that are well worth our time,” wrote John Garden, past president of CADE, in a subsequent column about the event. “They are smart, quick to learn, business savvy individuals who thrive in a team atmosphere. Long and short, our industry is in great hands and I can’t wait to see where they take us.”

CADE prepares for second annual Student Industry night

N E W S A N D N O T E S

The official publication of the Canadian Association of Drilling Engineers

2012 WINTER ISSUE

PLUSTo Market, To Market:

finding a home for heavy crude

SAGD: innovation is just getting started

Waste Not: leaving a smaller

environmental footprint

WCJ_JanFeb12_p06-09.indd 8 1/27/12 3:42:15 PM


WHY BECOME A CADE MEMBER?As of 2011, the Canadian Association of Drilling Engineers (CADE) has been active for 37 years. With more than 500 members from more than 300 com-panies, CADE represents a large spectrum of experi-ence in all areas of operations and technologies. For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry. The skills and knowledge obtained by your participation in CADE will benefi t you and your em-ployer, with direct application to your professional career.

CADE offers various means for members to con-nect and share their insights. Monthly technical luncheons are held with topical industry presen-tations. Other membership benefi ts include our monthly publication Well Construction Journal and a membership directory, which is the who’s who of the Canadian drilling industry. Our website – www.cade.ca – is an excellent focal point for industry events, blogs and other news. We are also active on LinkedIn and Twitter.

WHO CAN BECOME A CADE MEMBER?CADE members can be anyone with an interest or merely employed in the drilling and comple-tions industry. Typical members include drilling and completions engineers, geologists, technical personnel, sales personnel and students. Student memberships are available to any post-secondary student interested in learning more about drilling

M E M B E R ’ S C O R N E Rand completions. Please feel free to share infor-mation about CADE with all the people in your organization who are interested in the drilling and completions industry.

CADE MEMBERSHIP CHANGESLog on to www.cade.ca to become a member or to update your contact information.

CADE MEMBERSHIP RENEWALSCADE’s membership year is from September to September. During the summer, CADE members receive an email with the link for the renewal pro-cess on our website. Please remember the benefi ts of being a CADE member include APEGGA’s profes-sional development hour, the opportunity to stay abreast of technological and industry advances, access to drilling conferences and a great opportu-nity to network. Thank you for your support.

WELCOME NEW MEMBERSASH CHUGHEpic [email protected]

CRAIG JOYCEXI Technologies [email protected]

NICOLE MCDONALDNewpark Drilling [email protected]

WHY BECOME A CADE MEMBER?

WHO CAN BECOME A CADE MEMBER?

CADE MEMBERSHIP CHANGES

CADE MEMBERSHIP RENEWALS

WELCOME NEW MEMBERS

SCOTT HARRIS, COMEDIANJanuary 11, 2012The Westin - Calgary320 4th Avenue SW 11:30 a.m. Reception 12:00 p.m. Lunch 12:30 p.m. Presentation

Scott Harris has worked in all forms of entertainment. He has written and performed in television commercials, acted in fi lms and spent 15 years as a radio broadcaster. For 10 of

T E C H N I C A L L U N C H E O N S

those years – between 1977 and 1987 – he held down the 6:00 p.m. to 9:00 p.m. time slot on Hamilton, Ontario’s Top 40 rock station CKOC. While there, Har-ris released three comedy albums: Rapper’s Delight, Beach Bum and Low Budget Breakdance. Harris is recognized for his remarkable ability to connect with audiences and he’s spent 18 years on stage honing his quick wit, glib manor, and improvisational skills.

SAVE THE DATECADE TECHNICAL LUNCHEONFebruary 8, 2012The Westin - Calgary

CADE TECHNICAL LUNCHEONMarch 7, 2012The Westin - Calgary

SCOTT HARRIS, COMEDIAN SAVE THE DATE

TECHNICAL LUNCHEON TICKETSMEMBERS: $45.00 (plus GST)NON-MEMBERS: $55.00 (plus GST)FULL TABLES OF 10: $450.00 (plus GST)STUDENT: $15.00 (plus GST)WALK-UP: $55.00 (plus GST)GST REGISTRATION #R123175036Visit cade.ca for all ticket purchases

TECHNICAL LUNCHEON TICKETS

WCJ_JanFeb12_p06-09.indd 9 2/2/12 8:57:04 AM

Looking to relocate or expand your operation?Consider Balzac – home of the world-class CrossIron Mills shopping centre, and one of Alberta’s most dynamic areas of commercial and industrial development.

Minutes from Calgary, Balzac offers the perfect environment for a thriving enterprise of any size: direct access to the Queen Elizabeth II Highway and Calgary Ring-Road; close proximity to the Calgary International Airport; a readily available talent pool, an expansive consumer base, and no business tax.

Cultivate your company’s success in Balzac. Discover Alberta. Reap the rewards of relocating to Rocky View County.

www.thinkingalberta.com

Sowing the Seeds of Success

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IM CAZES WAS BORN WITH THE OIL AND gas industry in his blood. His father worked as a tool push for 35 years and Cazes, 58, has been hanging around oil rigs since the

age of six. Born in Melfort, Saskatchewan, Cazes grew up in the western Canadian oil patch. “Any place that was the latest hot spot in the industry was where we were,” he says. “That’s the way it was in those days.”

Given his familiarity with the oil patch, it was a natural choice for Cazes to study engineering. He worked his way through university on rig crews in Alberta, B.C., N.W.T. and the Arctic Islands, and graduated from the University of Alberta in 1976. Cazes obtained his bachelor of science degree in engineering, majoring in mining and metallurgy, and minoring in petroleum. Cazes soon realized, though, he could earn more money working on the rigs, than as an engineer-in-training. His plan was to become a derrickhand, work abroad and see the world. It didn’t really work out that way. “Every time I got to the point where I was ready to go over-seas, they promoted me,” he recalls.

In 1980, when he had been pushing tools for about six months, Cazes decided to move into con-sulting and joined a small fi rm – Cal-can Systems and Engineering – as a drilling and production en-gineer. “That work really appealed to me,” he says. “I was able to design the well, then go out into the fi eld and actually drill it the way I had planned it. There was a lot of ownership in those programs.”

In 1987, Cazes struck out on his own as an in-dependent consultant. In 1996, he went to work for Morrison Petroleum, which – after a number of mergers and acquisitions – turned into a drilling en-gineer specialist position with Devon Energy Corp. Cazes specializes in new technology and is also re-sponsible for reviewing and introducing new tech-

K

PROFILEMember

On the Edge of InnovationKim Cazes has spent his career dabbling in new technology. Now at Devon Energy, he’s on the verge of something big

Kim CazesDevon Energy

nology to the other drilling engineers at Devon.Over the years, Cazes has been involved in many

innovations in the oil and gas industry. “I was in early on coalbed methane, I was an early user of coil drilling rigs, and did some of the earliest SAGD drilling projects,” he says.

Currently, he is a senior technical adviser look-ing after unusual wells and represents Devon in a variety of roles, including as a member of the In-dustry Recommended Practices (IRP) 3 drilling and completions committee for in situ heavy oil. He has been involved with a number of joint industry projects including best practices for SAGD and the Canadian Heavy Oil Association.

Cazes has also been hard at work making techni-cal improvements to the way industry does things. “The latest thing we’re working on is improving ce-ment effectiveness for SAGD. The entire industry has been co-operating on this,” he says. “However, at Devon Energy, Bryan Hnatiuk and myself have uncovered a process that addresses the core issues. We believe it is worth patent protection. The tech-nology addresses cement bond, wellbore isolation, gas migration, casing vent fl ow issues and may have application to other problem wells.”

Once the patent is initiated, Cazes and Hnatiuk plan to release the technology to the industry for general use. “There are social license benefi ts; if Devon can improve on these issues, it will re-fl ect well for the entire industry,” explains Cazes, who will be working on further refi nements to the project.

For Cazes, who has been a CADE member since the mid-1980s, the technical luncheons are the main draw of membership, together with the net-working opportunities that CADE offers. “It’s one of the best ways of keeping in touch with what’s going on in our industry these days,” he says.

Jackfi sh Project Devon Energy’s SAGD operation

located near Conklin, Alberta

By Jacqueline Louie

Looking to relocate or expand your operation?Consider Balzac – home of the world-class CrossIron Mills shopping centre, and one of Alberta’s most dynamic areas of commercial and industrial development.

Minutes from Calgary, Balzac offers the perfect environment for a thriving enterprise of any size: direct access to the Queen Elizabeth II Highway and Calgary Ring-Road; close proximity to the Calgary International Airport; a readily available talent pool, an expansive consumer base, and no business tax.

Cultivate your company’s success in Balzac. Discover Alberta. Reap the rewards of relocating to Rocky View County.

www.thinkingalberta.com

Sowing the Seeds of Success

000AV.RockyView_FP.indd 1 5/17/11 9:03:53 AM WCJ_JanFeb12_p10-13.indd 11 1/27/12 4:06:55 PM

Well Construction Journal

MAR MOUSSA RECENTLY COMPLETED HIS THIRD YEAR as a mechanical engineering student at the University Of Calgary Schulich School Of Engineering. Before entering his fourth year, Moussa decided to take an internship position with

Devon Canada.He is currently working on the Jackfi sh project at Devon’s steam-as-

sisted gravity drainage (SAGD) plant in Alberta’s oil sands. At the end of August, Moussa will return to southern Alberta and work in Devon’s production department from the company’s head offi ce in Calgary. Moussa also had previous work experience with Devon Canada, work-ing in operations and focusing on both gas and tight oil.

Following graduation, Moussa has energy and project management on the top of his job list pursuits.

O

PROFILESStudent

Omar MoussaMechanical Engineering

University of Calgary

Keith SawyerPetroleum Engineering Technology

Southern Alberta Institite of Technology

EITH SAWYER’S GOALS ARE SIMPLE: ACHIEVE SUCCESS through hard work and provide a better life for his family. The 28-year-old is enrolled in SAIT’s Petroleum Engineering Tech-nology program in an effort to do just that.

As a former golf professional, Sawyer often interacted with oil and gas professionals on the links and became interested in the industry through this initial introduction. He received fi rst-hand experience working on a Triple D/E about 50 kilometres north of Hinton, Alberta for three months and enrolled in SAIT shortly thereafter.

At this point, Sawyer is not sure what specifi c sector he will pur-sue, but he says he would like to spend his fi rst few years out in the fi eld gaining valuable experience. “I have a passion for working with people and the outdoors,” he says. Eventually, Sawyer would like to work his way into a more technical position.

K

Young TalentHighlighting tomorrow’s best and brightest

12 JANUARY/FEBRUARY 2012

HELP WANTED: Career Department

ON THE MOVE

There are many communities across Canada located near oil-fi eld activity. Relocating to a new community for work is a major decision that requires careful planning, research and discussion with family.

After receiving a job offer in another community, it’s important to do some research to fi nd out about the location, housing, schools, transportation, culture, weather, cost of living and other aspects that will affect your lifestyle and your family’s lifestyle. Don’t forget to check if there are employment options for your spouse.

Accommodation in smaller, more remote communities can be dif-fi cult to fi nd and expensive, so pay particular attention to fi nding a place to live. For some jobs – like those offering fl y-in, fl y-out options – you may not even have to move. You may be offered on-site accommodation in a camp, which is more common in the oil sands sector. For other jobs, you may have to live in one place and work in another. Make sure you ask your potential employer about all the possibilities and fi nd out if there is any relocation assistance available.


ENGINEERING A CAREER

Engineers work in all parts of the upstream petroleum industry, including exploration, extraction, production and transportation. Ac-cording to the Petroleum Human Resources Council of Canada, the common denominator for engineers is that work typically involves the professional design, construction, operation, maintenance, qual-ity control and optimization of systems critical to the exploration, production, processing and transportation of petroleum.

In the conventional oil and gas sector, companies hire from three

main engineering disciplines: chemical, mechanical and petroleum. The training received during education can be built upon for a variety of jobs in the industry. For example, a reservoir engineer may actu-ally hold a degree in chemical, mechanical or petroleum engineeringand receive on the job training in reservoir engineering. In the oil sands sector, job titles are more true to their discipline. For example, chemical engineers are chemical or process engineers, while mechanical engineers require a mechanical engineering degree.

The Decade AheadIn 2011, people born in the baby boomer generation will begin turning 65. This will begin a trend where more workers leave than enter the workforce. According to the Petroleum Human Resources Council of Canada’s Council’s latest long-term labour market report, more than 30 per cent of the industry’s core workforce is expected to retire within the next decade.

Labour Market Projections and Analysis for Canada’s Oil and Gas Industry to 2020, predicts that in a growth scenario:

105,000 workers will be needed to support new industry activity

65,000 workers will be needed in core occupations

Core occupations represent approximately 68% of the services sector workforce

Core occupations represent approximately 56% of E&P’s workforce

Core occupations represent approximately 74% of oil sand’s workforce

Core occupations represent approximately 39% of pipeline employment

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HIS YEAR’S FORECAST FOR DRILLING activity isn’t dramatically different from the patterns that were established in 2011 re-garding oil prices, labour shortages and hot

drilling spots within Western Canada. Although the trends will be similar, economic volatility will also be similar and assessing energy prices still remains a challenge. “Where oil prices are supportive and going up, and gas prices are non-supportive and go-ing down, that’s a diffi cult issue to grapple with,” says Andrew Bradford, head of energy research with Raymond James Ltd.

That scenario also leads some producers to in-crease their rate of capital spending, while others are expected to decrease their rate of capital spending, theoretically cancelling each other out. “It’s very rare to see capital spending or the fi eld activity stay-ing fl at – that’s not something we usually see in the oil patch,” says Bradford. “It’s usually increasing or decreasing and usually by fairly good margins.”

Mark Scholz, president of the Canadian Associa-tion of Oilwell Drilling Contractors (CAODC), notes the drilling industry’s biggest upcoming dilemma will be the shortage of skilled labour for both the short- and long-term. “Fortunately and unfortu-nately in Western Canada, we have some great job opportunities, which are going unfi lled because we don’t have enough bodies to go around,” Scholz says. The biggest “pinch,” which has already been felt, is in the senior level posts – such as drillers, derrickhands and motor hands. While the labour shortage might not affect the price of oil, the lack of skilled labourers may hurt Western Canada’s competitiveness. “When you struggle for people, it places a high demand and a focus on raising wages,” Scholz says. “And certainly when you raise wages, it increases the cost of business overall and we already operate in a very high cost basin.”

Areas expected to entertain the most drilling ac-tivity next year are those focusing in crude oil, says Scholz, therefore Alberta, Saskatchewan and Mani-toba. “I would say for sure, at least 70 per cent (of resources) are going to be on oil or liquid-rich gas,” he says. The CAODC is also forecasting, on aver-age throughout 2012, 49 per cent utilization across Western Canada.

Bradford agrees that since oil currently has high returns, the industry is going to keep its focus aimed wherever the high-dollar returns are. Ray-mond James Ltd.’s high-activity predictions point towards the Pembina oil fi eld in western Alberta, in particular the Cardium formation. Also for 2012, Bradford says a potential surprise area for bustling activity is the Alberta Bakken in the southern re-gion of the province. The Duvernay shale area, southeast of Grande Prairie, is also worth noting. “Activity on that given play (simple driven, high-liquids content) is very low right now, but I expect it will ramp up fairly quickly over the next couple of years,” he says.

Securing equipment in an effort to ramp up ac-tivity shouldn’t be a constraint facing operators. Scholz says 35 rigs will be added to Western Can-ada’s fl eet in 2012, so the real issue comes back to labour and whether or not there are enough crews to man the drilling rigs.

Managing the time of drilling crews will be a driving factor and Bradford notes that average operating days and the length of the average horizontal well will play a fairly important role during 2012. Scholz sees operators’ ability to raise capital as a major factor in well operating days. “We have to realize that a happy operator is a happy driller,” he says. “So if we have operators (i.e. producers) willing to spend capital to get projects moving, that in turn affects us.”

T

What Lies AheadIf the experts are right, drilling trends in 2012 will look similar to the previous year

NUMBERSBy the

By Michelle Lindstrom


Well Construction Journal JANUARY/FEBRUARY 2012 15

Alberta Rig Counts December 1, 2011

Drilling Down Total Utilization

Northern Alberta 72 50 122 59%

Central Alberta 215 147 362 59%

Southern Alberta 43 40 83 52%

Totals 330 239 569 58%Source: Divestco

Historical UtilizationDrilling Utilization Wells

2008 351 40% 16,844

2009 209 24% 8,278

2010 346 43% 11,587

2011 405 51% 12,555Source: Canadian Association of Oilwell Drilling Contractors

Canadian Rig Counts December 1, 2011

Drilling Down Total Utilization

Alberta 330 239 569 58%

B.C. 49 26 75 65%

Manitoba 21 3 24 88%

New Brunswick 0 2 2 --

Newfoundland 0 1 1 --

Saskatchewan 92 44 136 68%

Totals 492 315 807 61%Source: Divestco

2011 Total Numbers Wells Completed in Western Canada during 2011: 12,555

Active Rigs Fleet Utilization Operating Days

First Quarter 534 788 68% 47,495

Second Quarter 190 791 24% 16,339

Third Quarter 454 798 57% 40,754

Fourth Quarter 443 805 55% 39,767

Average 2011 405 796 51% 144,355Source: Canadian Association of Oilwell Drilling Contractors

2012 Forecasted Numbers Estimated Wells Completed in Western Canada during 2012: 12,672

Active Rigs Fleet Utilization Operating Days

First Quarter 558 821 68% 50,090

Second Quarter 165 827 20% 14,811

Third Quarter 441 833 53% 39,587

Fourth Quarter 462 840 55% 41,472

Average 2012 407 830 49% 145,730Source: Canadian Association of Oilwell Drilling Contractors



NUMBERSBy the

Price PointEnergy and Market PricesDecember 1, 2011

Oil: WTI - $100.20 / Brent - $109.35

Natural Gas: Henry Hub - $3.49

2012 Energy Market Prices ForecastFirstEnergy Capital

Oil: 2012 average estimate for WTI - $90.25 / Brent - $110.75

Natural Gas: 2012 average estimate for Henry Hub - $5.15

CIBC World Markets

Oil: 2012 average estimate for WTI - $95


BMO Capital Markets

Oil: 2012 average estimate for WTI - $92


GLJ Petroleum Consultants

Oil: 2012 average estimate for WTI - $90 / Brent - $105


Alberta Land SalesYear Parcels Sold Total Bonus Total Hectares Average $/Hectare

2011 5,815 $3,323,693,043.74 3,791,858.3700 $876.53

2010 6,392 $2,387,812,738.41 3,853,300.4712 $619.68

2009 4,564 $731,762,723.29 1,740,609.0232 $420.41

2008 6,139 $937,598,856.47 2,022,576.1877 $463.57

2007 6,561 $710,685,624.99 1,871,920.6340 $379.66

2006 8,473 $1,471,853,475.66 2,692,912.3020 $546.57

2005 8,796 $1,827,239,438.48 2,888,212.1560 $632.65

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1817 10th Avenue SW Calgary, AB T3C 0K2 Telephone (403) 266-4094 Fax (403) 269-1140

Docket: 33656 Due Date: Nov.10.10 Client: ATB Description: Corporate Financial Services Ad: SanjelSize: 8.25"x10.75" (8.75" x 11.25" bleed) Insertion Date: Winter Issue Publication: PSCA News Colour: cmykAccount Ex: N.Moe Designer: S.Shymko Production: B.Pfleger

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STORYFeature

By Steve Macleod

HE OIL SANDS HAVE COME INTO FOCUS AS A SIGNIFICANT CONTRIBUTOR to the global energy supply mix. The proven reserves are now coupled with the demonstrated ability to access the bitumen with a variety of cost-effective meth-ods. The combined region of the Athabasca oil sands, the Cold Lake oil sands and

the Peace River oil sands holds 173 billion barrels of recoverable bitumen and there could be as much as 2.5 trillion barrels. The amount of contingent resource in the oil sands accounts for 97 per cent of the oil found inside Canada’s borders and puts Canada third on the list of largest reserves by country. Only Saudi Arabia and Venezuela hold more, which makes Canada’s reserve the largest that isn’t state-owned or controlled. The vast majority of the resource can only be accessed through drilling operations and in 2011, for the fi rst time, in situ production outpaced mining production in Alberta’s oil sands.

T

Oil Sands at a GlanceOil Sands at a Glance

LOCATION: Northeast Alberta

AREA: 142,200 square kilometres

RESOURCE: Bitumen

PRODUCTION: 1.76 million bbl/d in 2011

ESTIMATED RESERVES: 173 billion barrels of oil

MAJOR PRODUCERS: Canadian Natural Resources Ltd., Syncrude Canada Ltd., Shell Canada, Suncor Energy Inc., Imperial Oil, Cenvous, Nexen Inc.

1817 10th Avenue SW Calgary, AB T3C 0K2 Telephone (403) 266-4094 Fax (403) 269-1140

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COMPANIES THAT RESPOND NEED COMPANIES THAT RESPONDLike Sanjel, more and more of Alberta’s top companies want ATB as their financial partner. ATBresponds.com

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HEN A FEW EXPLORATION AND PRO-duction companies started experiment-ing with extracting bitumen from the ground in northern Alberta, they were

literally and fi guratively just scratching the surface. Mining the area north of Fort McMurray began more than 40 years ago, but as recently as the 1990s the oil sands industry was still viewed as a strange experiment in the hinterland.

All the decades of innovation eventually paid off. Shortly after the turn of the century, as the price of a barrel of oil started to rise and mining operations became more effi cient, production of bitumen ramped up and the world started to notice. “The Oil and Gas Journal came asking about how much resource we had,” says Travis Davies, spokes-man with the Canadian Association of Petroleum Producers (CAPP). “That’s when the oil sands became a large part of the global supply mix.”

The combined region of the Athabasca oil sands, the Cold Lake oil sands and the Peace River oil sands holds 173 billion barrels of recoverable bitumen and there could be as much as 2.5 trillion barrels. The amount of contingent resource in the oil sands accounts for 97 per cent of the oil found inside Canada’s borders and puts Canada third on the list of largest reserves by country. Only Saudi Arabia and Venezuela hold more, which makes Canada’s reserve the largest that isn’t state-owned or controlled.

The only problem is about 80 per cent of that reserve is beyond the depth that mining operations can access it. So, while companies were busy trying to make mining economically effi cient, research and development was already under way on tech-niques that would allow drilling operations to reach deep below the surface and produce bitumen.

After a couple of decades of research and devel-opment, in situ operations in the oil sands fi nally became the prominent production procedure in 2011, outpacing production from mining opera-tions for the fi rst time. Of the 1.76 million barrels per day produced from Alberta’s oil sands, 797,000 came from in situ and 779,000 came from mining.

With Imperial Oil’s Kearl mining project expected to begin production this year, mining will once again be the top producing technique in the oil sands for 2012, but it’s a trend that won’t last long. “We project that by about 2015, in situ breaks out ahead and never looks back,” says CAPP’s Davies.

OIL SAND IS MADE UP OF GRAINS OF QUARTZ SAND,surrounded by a layer of water and clay, which is covered in bitumen. The heavy oil is currently recov-ered from the oil sand using one of two methods: mining or in situ.

A number of initiatives were implemented during the 20th century in an effort to separate bitumen from the clay-packed landscape near Fort McMurray in northeastern Alberta. Earlier mining techniques utilized a bucketwheel, dragline and conveyor system to transport the exposed oil sands to the processing facility. Those systems were completely phased out by 2006 as hydraulic power shovels and 400-ton hauling trucks proved to be more eco-nomically effi cient. The trucks transport the oil sand to a crusher to break up the resource before a conveyor transports the debris to the extraction plant. At the processing facility, hot water is used to separate the bitumen from the sands. In the separa-tion vessels, injected air forms tiny bubbles, which are then trapped in the bitumen as it separates from the sand granules. The air bubbles fl oat the bitumen to the surface where it forms a thick froth that is

W

Drilling Finds a Home in the Oil SandsFor the fi rst time ever, the majority of oil sands production came from in situ operations. Further advancements aim to keep it that way

STORYFeature

In Situ: is a latin term, which means in the natural or

original position or place

Suncor’s Firebag site came online in in 2004 and a second phase went live in 2006. Stages three to six at the SAGD operation are part of Suncor’s growth plan.



skimmed off, mixed with a hydrocarbon mix and spun in a centrifuge to remove the remaining solids, water and dissolved salts from the bitumen. Approximately two tonnes of oil sands must be dug up, moved and processed to produce one barrel of oil.

Suncor was one of the pioneering companies in Alberta’s oil sands and the company’s fi rst 45,000 barrel per day project offi cially opened on Septem-ber 30, 1967. The total area of mineable reserves in the oil sands is about 4,800 square kilometres, which ac-counts for about 20 per cent of the estimated reserves in the region. To access the vast majority of the bitu-men, companies like Suncor would have to dig deeper and begin drilling. In 2002, Suncor began production at its fi rst in situ project – MacKay River. The company’s Firebag in situ project came online in two phases – in 2004 and 2006 – and like MacKay River utilizes the steam-assisted gravity drainage (SAGD) technique. SAGD consists of two parallel horizontal wells, one above the other. Steam is injected into the upper well to heat and release the bitumen so that it can fl ow to the lower well, where it is pumped to the surface.

The in situ projects are much smaller in scale than mining. The smaller surface footprint and fewer infrastructure requirements have reduced the barri-ers of entry to operating in the oil sands and have brought more producers into the region. Although in situ operations will help the various producers ac-cess the 80 per cent of bitumen reserves that are too deep for mining, drilling in the oil sands has only been developed during the past 20 years, which

makes it a relatively young technology.“SAGD was invented to recover bitumen from the

Athabasca reservoir,” says Brij Maini, professor in the department of petroleum and chemical engineering at the University of Calgary. Maini worked for sever-al years at the Petroleum Recovery Institute after re-ceiving his PhD from the University of Washington. “None of the techniques from the ‘80s worked. Most of those techniques were developed for California’s

heavy oil fi elds,” he says. And while gravity-drain-

age was a known technique, when applied to vertical wells there wasn’t enough production to make it an economical option in

Alberta’s oil sands. “Then horizontal drilling came along and the need for a horizontal drain hole was fi lled,” Maini explains.

While researchers and innovative companies fi gured out a way to make in situ operations economically viable, there are still challenges to drilling in the oil sands. “There are still issues when it comes to SAGD. It’s not a sure shot thing because it doesn’t work everywhere,” Maini says. “That’s where research is going, to fi nd a way to make it work.”

One of the challenges facing drilling and comple-tions specialists is the geology. Low vertical perme-ability or horizontal permeability, shale streaks, gas streaks or bottom water can all cause problems and severely reduce a well’s effi ciency. “Having a clear picture of the geology you’re dealing with is impor-tant because the Athabasca reservoir can be quite complex,” Maini says.

“We project that by about 2015 in situ breaks out ahead and never looks back.”

– Travis Davies, spokesman with the Canadian Association of

Petroleum Producers.

At the Suncor oil sands mine, huge 240 to 380 tonne trucks deliver about 500,000 tonnes of oil sand per day to the ore preparation plants.



STORYFeature

With SAGD, there’s also the amount of water that needs to be turned to steam and the natural gas pre-dominantly used as the energy source to cause the transformation. Maini says the target ratio of steam to produce a barrel of oil is three or four to one. “If you’re under three then you’re in good shape,” he says.

It’s no surprise then completions specialists are fo-cused on reducing the amount of water and natural gas during the SAGD process. One recent solution has been smart wells, which helps control the injec-tion rates into the reservoir. “Now there are some service companies that provide a system where wells are placed along the tubing and valves can be opened and closed at the surface to control the steam,” notes Maini.

OTHER SYSTEMS AIM TO ELIMINATE THE NEED for water and steam all together. Petrobank Energy and Resources Ltd. developed a toe-to-heel air injec-tion (THAI) process and set up a pilot at the company’s May River site in the Athabasca oil sands, which holds 624 million barrels of contingent resource. Petrobank started to put serious research and development be-hind THAI in 2005 and began production in May River at the Conklin Demonstration Project in 2006.

Similar to SAGD, THAI technology uses heat to reduce the viscosity of the bitumen; however, the heat is generated underground by the combustion of a small portion of the bitumen in the ore body. Also, rather than a pair of horizontal wells, the

injector well in the THAI process is a vertical air in-jection well. Instead of injecting steam to cause fl u-idity in the heavy oil, the THAI process injects air and relies on underground combustion of a portion of the oil in the ground to generate the heat required to melt the remainder of the bitumen and allow it to fl ow into the production well.

Air is injected into an injection well where the process ignites oil in the reservoir where it smolders like the embers of a campfi re and creates a verti-cal wall of hot embers. This fi rewall moves from the injection well (the toe) to the production well (the heel), pushed forward by the pressure of the injected air, causing the heavier oil components to burn and softening the lighter components caus-ing them to fl ow ahead of the fi rewall and into the production well where they can be pumped to the surface. “We’re just using atmospheric air to get a reaction underground,” McLellan says. He also says there are changes to the injection rate, but that’s a trade secret.

The heat used during the THAI process “cokes” the bitumen underground, leaving heavy carbon molecules behind as it moves through the ground towards the production well. This results in a lighter, partially upgraded oil product being brought to the surface. But the real benefi t is the reduction of natu-ral gas and water.

“When you bring in a clean fuel and turn water into steam to inject it downhole there are environ-mental and economic issues,” McLellan says. While the currently low natural gas prices make SAGD cost-effective at this point, the plans for costal LNG plants and expanded export markets does suggest prices could be headed back to the $12 mcf range in the foreseeable future.

University professor Maini agrees. “Natural gas makes it expensive and there’s a threshold where this option might not be profi table,” he says.

While Petrobank’s Conklin pilot operation hit pro-duction rates in excess of 400 barrels of oil per day,

“When you bring in a clean fuel and turn water into steam to inject it

downhole there are environmental and economic issues.”

– Dave McLellan, manager of intellectual property with Petrobank Energy and

Resources Ltd.

Cenovus Energy Ltd.’s Foster Creek project began in 1996

and in 2002 the SAGD operation started commercial

production. It has grown in fi ve phases to its current size

of over 185 wells producing more than 120,000 gross

barrels per day.



Continuing Along the Path of InnovationLooking for innovative completions solutions through research and development in the oil sands has a much broader focus than improving the economics of operating in the Athabasca oil sands region. “Now that the producers have made it economic, there are challenges on environmental areas. The goal is to improve cost reductions and gain effi ciencies that make the industry sustainable,” says CAPP’s Davies. “The steam to oil ratio is the key landmark that needs to be driven down. It will increase the bottom line and reduce the amount of greenhouse gas emitted into the atmosphere.”

Another research area that Maini fi gures the industry will continue to chase down the proverbial rabbit hole is in situ upgrading of bitumen. “The goal is to fi nd a process that will help with recovery, but convert it to a lighter synthetic crude oil at the same time,” he says. “We’re already heating it up with steam, so we need to fi nd a catalyst to inject with the steam that might be able to upgrade the bitumen before it comes to the surface.”

As well as preventing bitumen from being double cooked – when it’s coaxed up the well and again during upgrading – upgrading bitumen in situ would also conserve energy, Maini says. “If you can leave behind the sulphur and heavy metals underground, and just recover the key parts of the barrel, it should be more economic,” he adds.

Petrobank’s McLellan agrees that increasing the recovery factor – THAI offers between 60 and 70 per cent – is the industry’s next goal and upgrading in situ to pipeline spec would be monumental. And the Alberta oil sands today, like they have for decades, tend to inspire innovation. “It’s soaked in sand and clay; and the 40-below climate demands and commands you pay attention to innovation,” McLellan says. “Sitting on top of a great big pile of poor quality resource is a great factor for innovation.”

Toe to Heel Air Injection (THAI) gets heavy oil out of the ground in a new and interesting way. Unlike Steam-Assisted Gravity Drainage (SAGD), the current oil sands industry standard for sucking up deep bitumen, THAI uses compressed air instead of vaporized water. Here’s how it works:

the company shut down the project during 2011. A second generation of the THAI process was in pro-duction at Kerrobert in Saskatchewan’s heavy oil belt and the thinner pay zones of the original project continued to hamper Conklin. “Could we produce enough oil to make it a commercial project? That was in doubt,” McLellan says. “We had Kerrobert up and running, so we could focus our efforts there.”

Kerrobert was expanded from a two well-pair demonstration project to 10 well-pairs and will be the company’s fi rst commercial THAI project. In ret-rospect, one of the downfalls of THAI at Conklin was that it was overbuilt, despite having only about two-thirds the size of the footprint of a typical SAGD fa-cility. The experience translated into improvements at Kerrobert.

Without the need for facilities and infrastruc-ture to handle natural gas and water, as well as the horsepower to inject the heating element, the sur-face footprint is reduced with THAI. The well con-struction itself at Kerrobert was also improved to integrate more mesh inside the well for better sand control. But that doesn’t mean Petrobank has any plans to abandon its oil sands operations. “We’d like to get back there with THAI 3.0,” McLellan notes. “Like any innovation you don’t stop, you just move the ball forward incrementally.”

1 Vertical injection wells force compressed air down towards one end of a bitumen deposit.

2 When the air hits the bitumen, it spontaneously ignites. Combustion continues as long as injection goes on.

3 As the combustion front moves over the deposit, the heat makes the bitumen fl ow more easily and partially refi nes the hydrocarbons.

4 The liquefi ed bitumen, along with water produced by the combustion, gets collected by horizontal wells drilled along the bottom of the deposit.

5 Plant facilities treat the bitumen and send it to market.

2011 Archon Technologies Ltd.


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The oil and gas industry is always changing. That’s why you need strategic business advice from professionals who put their energy into knowing your business and the market in which you operate.

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Diane Nordhagen, CEO - TOG Systems Ltd.

At MNP, our teams of consultants, taxation advisors and oil and gas service specialists deliver premium solutions to resolve your most complex issues and keep your business opportunities flowing.

Think FWD. To find out how we can put our energy to work for you, contact Dustin Sundby, CA, Oilfield Services Leader at 1.877.500.0779 or [email protected].

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TOG Systems Ltd.: A Satisfied Client

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By Steve Macleod

TEAM-ASSISTED GRAVITY DRAINAGE (SAGD)changed the landscape of Alberta’s oil sands. The ability to pull bitumen from depths be-yond the reach of mining operations has

unlocked about 80 per cent of the bitumen in the northeastern Alberta oil sands region that was pre-viously out of reach.

In 1974, the Alberta government created a crown corporation to work with researchers and industry to develop new oil sands technologies. According to the Oil Sands Developers Group, this corpora-tion – known as the Alberta Oil Sands Technol-ogy and Research Authority (AOSTRA) – set out to examine areas of the Athabasca oil sands that held reserves deeper than 70 metres below surface. Four years later, Dr. Roger Butler introduced the concept of steam-assisted gravity drainage and be-came commonly known as the “father of SAGD.” With industry and government support, AOSTRA developed an underground test facility for SAGD technology. The site was just north of Fort McMur-

ray and was owned and operated by 10 industry partners and received government funding. It was here that the SAGD process was confi rmed to be commercially viable. The underground test facil-ity was conducted in three phases: The fi rst phase consisted of drilling two horizontal well pairs sep-arated by 25 metres and 60 metres in length; the second phase used three well pairs about 600 me-tres in length that were horizontally and vertically separated by 70 metres and four metres, these wells operated for approximately 10 years; and the third phase involved a slant-drilling rig used to drill two horizontal well pairs 650 metres in length and six metres in vertical separation.

The fi rst commercial in situ operation began at Imperial Oil’s Cold Lake property in 1985. Al-though SAGD is viewed as a fairly new technology, producers in the oil sands are already tinkering with the process in an effort to improve production rates and apply the technology in a broader range of geological formations.

S

A Tale of Two TechnologiesTweaking SAGD techniques could help a couple of companies improve production rates

STORYFeature

STEAM-ASSISTED GRAVITY DRAINAGE (SAGD) – SAGD consists of two parallel horizontal wells, one above the other. Steam is injected into the upper well to heat and release the bitumen so that it can fl ow to the lower well, where it is pumped to the surface.

ACCOUNTING CONSULTING TAX MNP.ca

The oil and gas industry is always changing. That’s why you need strategic business advice from professionals who put their energy into knowing your business and the market in which you operate.

Here’s what TOG Systems, an oilfield telecommunications company and MNP client, had to say:

“We engaged MNP’s services about three years ago and we couldn’t be happier with our decision. The expertise and level of service we experienced from MNP’s business advisors have surpassed our expectations and have proven to be invaluable. Not only do we take all our accounting and tax questions to them but have turned to them for advice on a number of different issues as they seem to have an infinite pool of people and resources within their organization to call upon. It is incredibly valuable to me as a business owner to know that I can trust and depend on the people at MNP to give me advice and provide the experts we need to succeed. MNP has not just saved us money, they’ve proven their value by making us money.”

Diane Nordhagen, CEO - TOG Systems Ltd.

At MNP, our teams of consultants, taxation advisors and oil and gas service specialists deliver premium solutions to resolve your most complex issues and keep your business opportunities flowing.

Think FWD. To find out how we can put our energy to work for you, contact Dustin Sundby, CA, Oilfield Services Leader at 1.877.500.0779 or [email protected].

We put our energy into knowing your business.

TOG Systems Ltd.: A Satisfied Client

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LARICINA ENERGY LTD.Ever since Laricina Energy launched in 2005, the company has been experimenting with SC-SAGD. The SC attached to the steam-assisted gravity drain-age technique the Calgary-based company is tweak-ing doesn’t stand for super charged, although that’s ultimately what Laricina is trying to do to increase production rates. So far, fi eld tests are indicating the exploration and production company is on the right track with a 30 per cent increase in production rates.

Solvents are the key, hence the SC, but it’s not an area Laricina’s vice-president of enhanced oil recovery Neil Edmunds says the company is neces-sarily pioneering. Edmunds says PanCanadian was experimenting with solvents at the Senlac fi eld in Saskatchewan. “By the time we started they had fi eld results and they were as good as expected, quite spectacular actually,” Edmunds says. “They in-creased oil recovery rates by 30 to 40 per cent with-out increasing the steam rate.”

The PanCanadian tests, which became property of Encana and then Cenovus, used butane to help stim-ulate the reservoir. Laricina, meanwhile, will be test-ing the effectiveness of a handful of hydrocarbons, including propane, pentane, hexane and heptane.

Laricina lit up its pilot project just over a year ago at the company’s Saleski site. Saleski is located within the Athabasca oil sands region, but sits above the carbon-ate Grosmont Formation. The Saleski pilot originally started in 2009 as a typical SAGD operation, so Lar-icina could gain a greater understanding of the forma-tion. Testing of the addition of solvents to the SAGD process to help lower the steam requirements and im-prove recovery rates will begin in 2012. “Because it’s a new formation, we started with just a steam-based line before adding solvent,” Edmunds says.

In the meantime, Edmunds and his team have been performing extensive computer modelling in an effort to fi gured out how to apply the solvent. “We have the type fi gured out, but not the ratio,” he says. “A big part of the issue is not the choice of solvent; but how you manage it, the amount you use and when you use it.”

In an effort to expedite the trial and error process, Laricina has developed an in-house software system using a genetic algorithm. “The number of combi-nations is equal to the number of atoms in the uni-verse – there’s an infi nite number,” Edmunds says. “In the old fashioned way of getting an engineer to do a run and then try something better, it could take years and years. With the genetics algorithm it can be done in a couple of weeks.”

As well as speeding up the completions develop-ment process, it also allows the engineers on the project to re-optimize the process on the fl y and save years of research and development capital.

While Laricina tinkers with the completion of its SAGD wells, the actual well design isn’t expected to be altered from a typical SAGD operation. That means the company can focus on the recovery rates from the solvent reaction. “We’re expecting a 30 per cent increase in the productivity of the wells,” Ed-munds says. “If it works as expected, we could imag-ine increases in profi tability of 50 per cent.”

ATHABASCA OIL SANDS CORP.The Leduc carbonate formation also resides inside Alberta’s oil sands region and for the past couple of years Athabasca Oil Sands Corp. has been acquir-ing leaseholds in the Dover West asset. The private company developed a system based on SAGD to ex-tract bitumen from the reservoir and began a test run in April 2011.

Similar to SAGD, AOSC’s thermal-assisted gravity drainage (TAGD) process utilizes horizontal wells, but the big difference is TAGD doesn’t use steam to heat the reservoir. Instead, AOSC places electric heaters in the upper horizontal well. “They are re-sistive heaters, much like a stove top or a toaster,” says Bruce Roberts, chief reservoir engineer with AOSC. “Steam follows the path of least resistance and could bypass oil in the process. TAGD heats the reserve more evenly.”

AOSC began drawing up its initial concept for TAGD in early 2010. The idea of using electric heat-ers for oil recovery wasn’t entirely new. Roberts says strides were made in Sweden during the 1940s and more recently, companies such as Shell and E-T En-ergy have been testing the use of electricity in the oil sands region. AOSC is currently conducting a two-well fi eld test at Dover West with potential oil production of up to 6,000 barrels per day.

Part of the key in making the TAGD operation economically viable is the reduction in temperature of the process compared to SAGD, which reaches temperatures of about 240 degrees Celsius. “We are typically between 140 and 150 degrees Celsius,” Roberts says. “Some advantages of a lower tempera-ture are it reduces energy requirements and a lower cost is a bit of an economic driver.”

For AOSC’s pilot project the electricity needed to power the heaters in the upper well is produced by on-site generation. For a larger full-scale commercial application, Roberts fi gures they’ll have to tap into

STORYFeature

Laricina Energy Ltd.

Athabasca Oil Sands Corp.


the power grid or use a standalone power plant.As well as reducing the operating temperature,

TAGD also eliminates the need for steam in the up-per well, which means no water and no natural gas to transform the water into steam. On the ground surface, this requires less infrastructure for process facilities, but there is a need for more upper hori-zontal wells.

While construction and drilling of the produc-er well is the same as in a SAGD operation, there could be a few more upper wells in AOSC’s system. “The number of wells depends on the thickness of the reservoir,” Roberts says. “We’re still looking at confi gurations, but it could be anywhere from four to seven.”

AOSC plans to continue running its pilot project throughout 2012 and the decision on when the company can begin commercial production using TAGD will follow shortly after.

“A decision will be largely based on the pilot, but we’ve done quite a bit of modelling,” Roberts says. “If everything goes according to plan, we’ll have it in the Leduc carbonate.”

THERMAL-ASSISTED GRAVITY DRAINAGE (TAGD) – TAGD consists of several horizontal wells. Electric heaters are placed inside the upper horizontal wells and the heat generated allows the bitumen to fl ow down into the producer well below, where it is pumped to the surface.

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HEN IT COMES TO THE WORLD’Senergy supply, Canada’s oil and gas sector is fast becoming the centerpiece of political debate. Heavy opposition to

oil sands development, in particular, has both the Albertan and Canadian governments defending the industry’s reputation in the U.S. and Canada.

Efforts even stretched across the Atlantic Ocean, after the European Union proposed amendments to its Fuel Quality Directive (FQD) in November. The European Commission proposed a number of initiatives to drastically reduce the EU’s emissions. According to media reports, among the amendments was a proposal to assign a default greenhouse gas emission value of 107 grams of carbon per megajoule to Alberta’s oil sands, com-pared to 87.5 grams for conventional crude.

Despite the fact Europe isn’t a big market for cur-rent oil sands production, the provincial and federal governments were disappointed with the message the default value would send about the industry. Accord-ing to Environment Canada, the oil sands industry accounts for 6.5 per cent of Canada’s GHG emissions and just over 0.1 per cent of global GHG emissions.

News of the amendment to the FQD was espe-cially disheartening considering the efforts oil sands producers are undertaking in trying to improve the industry’s environmental stewardship through in-novative projects in both bitumen extraction and land reclamation. The Canadian Association of Petroleum Producers reports that since 1990, GHG emissions associated with every barrel of oil sands crude produced have been reduced by 29 per cent.

One of the industry’s main focuses in reduces emis-

sions is reducing the amount of steam used during the steam-assisted gravity drainage (SAGD) process in in situ operations. Using natural gas to turn water into steam for SAGD is the most common process, so reducing the steam to oil ratio essentially reduces the amount of natural gas burned in the process.

Many producers target a ratio between three and four to one, but at Cenovus Energy Ltd.’s Foster Creek and Christina Lake in situ projects, the com-pany has worked to cut the steam-to-oil ratio down to two and a half to one.

The reduction was made possible through a num-ber of innovations, chief among them Cenovus’s wedge well system. In this construction, an ad-ditional horizontal well is drilled between the SAGD well pairs. The wedge well

collects the remaining oil without sharply in-creasing the steam needed for extraction. As well, Cenovus is looking at the prospect of adding a re-useable solvent to its steam that can further enhance the oil’s liquefaction process. The com-pany predicts that the addition of solvent in the process will reduce the steam-to-oil ratio even further for their SAGD process.

Reclaiming developed land is another main goal of industry leaders. Companies like Devon Energy put much emphasis on leaving the land as close to its original state as possible. In 2010, Devon con-tributed $50,000 to the New Mexico Association of Conservation Districts for the restoration of a 4,000-acre tract northeast of Artesia. The money went toward controlling the growth of mesquite in the area, which chokes off the grazing land for animals like prairie chickens and deer.

W

Greener PasturesInnovation and environment go hand-in-hand in Alberta’s oil sands

STORYFeature

“There are a lot of areas where we can improve, and we’re going to continue to

try to reduce our impact.”

– Drew Zieglgansberger, senior vice-president of Cenovus’s

Christina Lake project

By Jesse Snyder



Devon Energy won the U.S. Bureau of Land Management’s One Million Acre Award for its reclamation work in 2009. Vicky Sanchez, Devon’s regulatory advisor for New Mexico, said in a press release Devon Energy focuses on reclamation for the “opportunities to reduce our temporary surface disturbance.” Since 2006, the company has given $200,000 towards the federal agency’s Restore New Mexico Program.

Though even as industry leaders look to reduce

their emissions and reclaim land after developing it, public perception remains divided. Plenty of work needs to be done, says Drew Zieglgansberger, Cenovus’s senior vice-president of the Christina Lake project. That means working with industry innovators to use the smartest technologies and cut overall on-site emissions. “By no means are we perfect,” he says. “There are a lot of areas where we can improve, and we’re going to continue to try to reduce our impact.”

A NUMBER OF ENVIRONMENTAL IMPROVEMENTS

AIR Total GHG emissions in the oil sands in 2009 was 45 million tonnes

Oil sands account for 6.5% of Canada’s GHG emissions and just over 0.1% of global GHG emissions

Since 1990, GHG emissions associated with every barrel of oil sands crude produced have been reduced by 29%

The Government of Alberta implemented GHG regulations in 2007 (the fi rst jurisdiction in North America to do so) requiring a mandatory 12% reduction in GHG emissions intensity for all large industrial sectors including existing oil sands facilities or a payment in lieu with a current carbon price of $15 per tonne

WATERIn 2009, the oil sands industry withdrew 21 barrels of water per second – total of 670 million barrels – from the Athabasca River. This is 0.5% of average total river fl ows and about 3.4% of the lowest weekly winter fl ow

Drilling in oil sands currently requires an average 0.5 barrels of fresh water for every barrel of oil produced

Mining currently requires between 2 – 4 barrels of fresh water for every barrel of oil producedOil sands fresh water use in 2009 was approximately 1.1 billion barrels. This water was used to produce half of Canada’s oil supply

LANDAn Alberta Biodiversity Monitoring Institute (ABMI) report states that the Lower Athabasca region’s living resources are 94% intact

0.02% of Canada’s boreal forest has been disturbed by oil sands mining operations over the past 40 years

Since operations began in the 1960s, approximately 10% of the active mining footprint has been or is being reclaimed by industry. Reclaimed land will be certifi ed by government when it can be returned to public use

In Alberta alone, approximately 34,750 sq. miles (or about 24%) of the boreal forest is protected from development

AIR

WATER

LAND



DEEPERDrilling

EGARDLESS OF HOW REVOLUTIONARY OF A product a company is selling, if it can’t make it into the marketplace for consum-ers to buy it or use it, then the product is

pretty much worthless. Or, in the case of bitumen from Alberta’s oil sands, trading at a pretty signifi -cant discount. The low point in the price spread on the commodity market between the West Tex-as Intermediate (WTI) benchmark price attached to Canadian crude and the Brent benchmark at-tached to European crude was reached September 22, 2011. The gap closed to less than $10 per bar-rel in November when Enbridge purchased a stake in the Seaway pipeline with plans to reverse the line, which would allow crude to fl ow from Cush-ing, Oklahoma to the U.S. Gulf Coast. To maintain those gains, further efforts to reduce the bottle-neck of supply in the U.S. Midwest will need to be achieved and producers in Alberta’s oil sands will need outlets for their product. “It wouldn’t get produced if there wasn’t demand,” says Travis Davies, spokesman with the Canadian Association of Petroleum Producers (CAPP). As global demand for oil and gas grows, so could demand for Cana-dian resources. Sitting behind Saudi Arabia and Venezuela, Canada has the third largest reserve by country at 178 billion barrels – 173 billion of which is in the oil sands – Canada holds the larg-est world reserve that is not state-owned or con-trolled. “It’s not constrained currently, but it will get pretty tight over the next few years if we don’t get Keystone,” Davies says. “There is some pretty imaginative thinking with folks like Enbridge and the Seaway reversal, and there could be a focus on feeding the east coast and the west coast.”

Demand, Meet SupplyEven if environmentalists and regulators accept oil sands bitumen as a part of the global supply mix, there’s still the matter of infrastructure

R

Supply & DemandCurrent oil sands production:1.76 million barrels/day

Projected oil sands production by 2025:3.7 million barrels/day

Global oil and gas consumption in 2010:86.7 million barrels/day

Projected global oil demand by 2035:99 million barrels/day

Top oil consuming country, U.S. in 2009:18.8 million barrels/day

Top U.S. crude oil supplier, Canada:1.97 million barrels/day

Total U.S. crude oil imports:9.2 million barrels/day

ExportCanadian exports via pipeline: 1.73 million barrels/day

Canadian exports via tanker: 240,000 barrels/day

Canadian exports via rail: between 10,000 – 20,000 barrels/day

Pipeline ProjectsNorthern Gateway: Petroleum from Edmonton to Kitimat – planned capacity of 525,000 barrels/day

Keystone XL: From Hardisty, Alberta to the U.S. Gulf Coast – when completed capacity will be increased from 591,000 barrels/day to 1.1 million barrels/day

Trans Mountain Expansion: From Edmonton to Vancouver – current capacity 300,000 barrels/day, full expansion to 700,000 barrels/day

Upgrading60% of crude oil produced in Alberta is upgraded in the province

Trusted Advisers to Canada’s Energy Services Sector

© 2011 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

kpmg.ca

Michael McKerracherNational Energy Leader(403) 691 [email protected]

Rhys RenoufNational Leader, Energy Services(403) 691 [email protected]

Dan AdamsKPMG Enterprise Leader, Calgary(403) 691 [email protected]

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Supply & DemandCurrent oil sands production:1.76 million barrels/day

Projected oil sands production by 2025:3.7 million barrels/day

Global oil and gas consumption in 2010:86.7 million barrels/day

Projected global oil demand by 2035:99 million barrels/day

Top oil consuming country, U.S. in 2009:18.8 million barrels/day

Top U.S. crude oil supplier, Canada:1.97 million barrels/day

Total U.S. crude oil imports:9.2 million barrels/day

ExportCanadian exports via pipeline: 1.73 million barrels/day

Canadian exports via tanker: 240,000 barrels/day

Canadian exports via rail: between 10,000 – 20,000 barrels/day

Pipeline ProjectsNorthern Gateway: Petroleum from Edmonton to Kitimat – planned capacity of 525,000 barrels/day

Keystone XL: From Hardisty, Alberta to the U.S. Gulf Coast – when completed capacity will be increased from 591,000 barrels/day to 1.1 million barrels/day

Trans Mountain Expansion: From Edmonton to Vancouver – current capacity 300,000 barrels/day, full expansion to 700,000 barrels/day

Upgrading60% of crude oil produced in Alberta is upgraded in the province

Trusted Advisers to Canada’s Energy Services Sector

© 2011 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

kpmg.ca

Michael McKerracherNational Energy Leader(403) 691 [email protected]

Rhys RenoufNational Leader, Energy Services(403) 691 [email protected]

Dan AdamsKPMG Enterprise Leader, Calgary(403) 691 [email protected]

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Documents

2012-1-Jan-LR - Canadian Association of Drilling Engineers