SAGD history, theory, applications, economics.docx

History

SAGD which stand for Steam-Assisted Gravity Drainage was invented by Dr. Roger Butler during his time with imperial. Butler was born in October 14,1927 in England where he obtained his PhD in Chemical engineering and then moved to Canada in Ontarios Queens university until 1955. His next career transition was him joining Imperial Oil in Sarnia where he worked until his big idea came in the 1960s.

During the 1960s IMperial oil had discovered a large deposit of oil which they were planning to lease if they had an economic way of producing it and Butler came up with the solution. He proposed injecting steam underground into the reservoir and letting the heavy oil turn into a lighter oil and producing through a production well. He wrote his patent in 1969 and pursued his idea in 1975 when imperial moved him from Sarnia to Calgary. In 1978 Imperial were successful in establishing the first vertical steam-injection well at Cold Lake Alberta.http://imperialoil.ca/Canada-English/about_who_stories_rogerbutler.aspx

When Butler was initially testing the idea he went to the Alberta Oil Sands Technology and Research Authority (AOSTRA) for about a year, where he convinced them to test and refine the SAGD process at the organizations Underground Test Facility (UTF) near Fort McMurray. There the UTF engineers discovered that they could recover 60% of the bitumen in the reservoir with twin wells as well as made a very handsome profit due to the economics of the project producing approximately 2000 bpd of bitumen.

The UTF engineers also discovered that they needed to keep the pressure of the wells less than the fracture pressure as they did not want gas pockets in the formation to escape. Also another progression was that they came up with ways to control sand infiltration and prevent steam from entering the producing wellbore. during this time Schlumberger was producing directional which gave AOSTRA the ability to drill their wells precisely, efficiently, and most important, cheaply.

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Theory

The Basic theory for SAGD is that steam injected into the ground where the bitumen is, and it reduces the viscosity of the bitumen to a lighter fuel type so that it can be pumped back up through a production well. This process is repeated and it is forecasted that in-situ production will reach near 1.9 million barrels per day by the year 2022.

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The injection wells are horizontally drilled, with steam injection well being approximately 4-6 meters above the production well. Steam generators produce steam that is superheated vapor and is then pumped to the steam injection well. The wells are drilled down to depths of over 1300 meters because this is where the majority of the oil sands are. The produced steam emulsion is then sent to various treaters where the oil and water are separated and the sands are separated from the bitumen. http://www.energy.alberta.ca/OilSands/pdfs/FS_SAGD.pdf

The amount of steam and its pressure as well as temperature are very reservoir specific. The pressure needs to be kept below fracture pressure as mentioned earlier, due to the potential for gas leakage which is not only harmful environmentally but also wasteful economically. The amount of steam depends again on reservoir conditions as well as the rate of production desired by the owner company. This can be controlled by various simulation softwares designed by AOSTRA for individual company needs

The Steam-to-Oil Ratio is a measure of the efficiency of the plant. The lower the ratio, the more efficient the plant. This means that the less steam needed to produce a barrel of oil, the more efficient the plant is. The generation of steam is the biggest cause of Carbon emissions in SAGD as a huge amount of thermal energy is required to produce the right quality of steam as well as keeping it warm through the Canadian winters as this technology is specific to the Canadian oil sands. http://www.conocophillips.ca/technology-and-innovation/unconventional/Pages/sagd.aspx

Economics

The initial cost of a SAGD plant is the construction the plant. Most SAGD plants have two sections which it is divided into. Field Facilities (FF) and Central Processing Facility (CPF). The FF include the vast majority of the production related technology as well as steam-generators and needs a sturdy logistics network as well as a capable Drilling and Completions team. The costs of these facilities are mainly of construction contractors from the clients point of view, from a contractor's point of view the costs are mainly labour and equipment. These are the initial costs of field facilities. The operational costs include labour, energy for the steam generators, pumps needed to transport emulsion and steam through piping as well as the electric costs of running the various equipment.

The Central Processing Facility consists of the main separators, treaters and holding tanks in which the treated bitumen is held. The initial costs of the CPF will be the construction the facility as well as the labour involved. The equipment used for the various steps along the process are highly specialized and require modules for their construction. The equipment also needs very specific heat tolerances and need be insulated during the winter. these add additional costs to already highly specialized equipment such as boiler and other pressure vessels.

The Last step of the costs involved in a SAGD project is the Midstream facilities. These include the transportation of bitumen to the Downstream facilities (refineries) and the diluent required to make the bitumen less viscous in order to transport it. Most if the refineries are located in USA and the costs for the transportation of over thousands of miles need to accounted for.

The majority of the Canadian Oil Sands projects are in joint-partnership with another major company which makes the initial costs of the projects more bearable due to the extremely high startup costs of the plant. For Huskys Sunrise Phase 1 project alone costed approximately 2.7 billion dollars and it has multiple phases these kinds of the startup costs make it difficult for small scale SAGD operations to take place.