It is common knowledge that the green movement has targeted the oil sands. What is somewhat less well publicized is the fact that the Canadian government has targeted the oil sands as well – as an area for technology investment that will improve the environmental footprint of development operations and increase the amount of oil produced. According to Chris Holly, who heads the Research and Technology branch of the Alberta Department of Energy, there have been approximately 50 industry projects funded over the past five years. Holly talked to Hart Energy about some of the research efforts being funded by the Canadian government and the potential gains those efforts represent for the industry.

What has Alberta done to match production to changing demand?

Canada has no national oil company, so essentially the process that is used is that we regulate in a market environment. We regulate environmentally in a market environment, and we also regulate, I would say, in terms of resource development by our use of fiscal policies, royalties, and taxes.

When oil spiked in 2007/2008, we saw a lot of reinvestment. That’s just normal corporate behavior. You have a lot of cash flow, you don’t want to pay taxes, you reinvest. This created a period of capital inflation. After a while, companies found they couldn’t afford the capital inflation, and they backed off.

The profits also got involved very actively with developing better labor policies in terms of labor training and relaxing immigration policies so we can bring in a lot of people, for example, from Venezuela.

The government certainly did all sorts of things to address some of the social infrastructure concerns, but the reality is the industry ended up taking a look at price and said, “I can’t afford to build in this capital and this cost environment.”

Christopher Holly

Christopher Holly (Image courtesy of the Government of Canada)

Oil prices are on the rise again. Has the fluctuation in oil price affected investment in technology in your group in the last couple of years?

The nature of our heavy oil and oil sands is such that if you’re putting in the capital expenditure, you’re not responding to short-term business cycles. You’re responding to long-term expectations. So actually, in the last few years, we have continued to see the sort of same production growth rates that we’ve been seeing here in the last 10 years. Now we’re producing, if I recall, out of what’s deemed the oil sands deposits of about 1.5 or 1.6 MMbbl/d, and we’re producing about 500,000 or 600,000 b/d of conventional oil.

I should point out that there really isn’t any distinction between oil and oil sands. We have heavy oil deposits. We are producing oil sands through primary technology. We can pump it cold.

And we’re using polymers in the process. It’s been stated that Alberta may be one of the leading jurisdictions in the world in the use and invention of polymers for heavy oil production.

We’re seeing some very interesting successes. We’ve seen projects go from 1,000 b/d as pilots to 50,000 b/d commercial.

There are four polymer projects that have been publicly announced. We fund some of these technologies in terms of what we would call “First Pilots,” so a lot of the investment actually is industry money. We potentially come in somewhere in the order of 30%, somewhere in that range.

What initiated polymer development?

It had much more to do with industry expressing interest. Some of the earlier projects have a Chinese connection. The Chinese have been quite heavily involved in the use of oilfield chemicals in their heavy oil production. If you follow at all the World Heavy Oil Congress, you’ll recognize that Canada, China, Venezuela, and others are members of it. So we actually saw a technology interest possibly coming from that aspect into Alberta.

Polymers have been around for years, but now a new generation of polymers is being looked at. We’re seeing a lot of use of polymers in tailing management in oil sands mines, being able to take the water out and de-water the tailing streams. So, a very fascinating area of technology is developing with some very interesting commercial results.

We’re doing some in-house work right now to get a better understanding of what has happened in the dynamics of the polymer markets.

What are some of the environmental advances in oil sands development?

On the mining side, there has been continuous improvement in operations to reduce the amount of energy that is used in the extraction process. We’ve reduced the temperature from hot water to a warm-water extraction process, and that has had a huge impact on reducing energy costs.

Because the oil sands are water wet, you can extract the oil from the sand with the use of caustics, soaps, and hot water/warm water. Improvements in technology, both from a mechanical process and from an oilfield chemical process, have sped up the oil separation process using less heat and less water. Less water means a lower pumping requirement, so you have an environmental benefit.

What we’re also seeing on the tailing side now is much faster opportunities to perform reclamation and to dewater the tailing streams. And as you do that, you have the opportunity of bringing back the land and more productive capability quicker.

On the in situ side, you’re seeing an advancement of technologies for the use of polymers for heavy oil production. On the thermal in situ side, we’re seeing some real improvements in terms of understanding how the hole chambers – the steam chambers – are developed and how oil can be produced. So now you hear about things like “Fast SAGD” (fast steam-assisted gravity drainage) where after the chamber has been heated, we actually have the ability to put it in horizontal wells without a steamer to produce the oil because the chamber is hot.

We’re looking at solvent addition that is facilitating the ability to keep a well in productive capability. One of the recent milestones is the advancement of metering and monitoring technology. We’re getting better and better at controlling what we’re doing, but you have to see what is happening downhole. So whether you do that using new seismic technologies, new drilling technologies, or new monitoring and metering technologies, it’s a critical component of the process.

What are some of the steps being taken to execute faster reclamation?

The fact is that 80% of reclamation involves replacement of material back in the hole, and it is the final 20% that has to do with the topping, the putting on of the organic material – the topsoil and the vegetation. Part of the mining process, as in coal mining, is filling in behind the operations. We do have to have some tailings ponds because of the extraction process, but that does not represent the majority of the area. The majority of the area can actually be refilled.

The other thing that people have forgotten is that what is being reclaimed today (and very close to having final certificate) are areas that were disturbed 20 years ago when mining levels were in the range of 65,000 to 70,000 b/d. Today, we’re probably producing 800,000 b/d of mining, but people are looking at it and saying, “Well, why haven’t you reclaimed at the same rate?”

There is a lot of government policy directed toward speeding up the reclamation cycle. We’re funding different technologies to improve upon the reclamation and separation of materials. And we’re looking at some interesting success that’s coming forward.