Canadians must be scratching their heads in confusion as the turmoil in the US over the proposed Keystone XL pipeline shows no signs of letting up. After all, wouldn’t the US rather get its oil from its friendly northern neighbor than from countries with less stable regimes?

On a purely economic basis, it makes perfect sense. Canada has the third largest oil reserves in the world, and 97% of its reserves are in the oil sands, according to oilsandstoday.ca. And the country’s crude has been trading at a discount to West Texas Intermediate because export takeaway capacity cannot keep up with oil sands production, according to Barclays.

But rhetoric, it seems, trumps economics. A group known as the Tar Sands Blockade recently settled a lawsuit with TransCanada after the company alleged that the group’s “nonviolent direct action” against the Keystone XL pipeline had cost the company US $5 million. In a press release from Tar Sands Blockade, activist Tammie Carson was quoted as saying, “I took action for my grandkids’ future. I couldn’t sit idly by and watch as a multinational corporate bully abused eminent domain to build a dirty and dangerous tar sands pipeline right through Texans’ backyards.”

This sense that “tar sands” operations are dirty and harmful to the environment has many Americans up in arms. But Canadians paint a very different picture.

‘Tar’ sands

Oil sands do not contain tar but rather bitumen, a sticky substance from which oil is derived. Most of Canada’s oil sands are located in northern Alberta.

According to Travis Davies, manager of media and issues for the Canadian Association of Petroleum Producers (CAPP), what was once “a struggling experiment in a challenging geographic area” is now a thriving industry that has moved past most of its technical issues to focus on environmental performance. CAPP statistics show positive progress – freshwater use is dropping even as production is increasing in oil sands mining, and in situ production now uses less water per barrel produced than conventional oil production.

The industry also has reduced greenhouse gas (GHG) emissions per barrel by 26% since 1990, and in 2012 the emissions remained level while production levels increased. “Promising technology, regulation, and determination will help us continue this downward trend in per-barrel emissions,” Davies said.

He added that most Canadians see the value of oil sands development but expect continuous improvement in environmental performance.

And despite the rhetoric, many Americans see Canada as the preferred source for their oil. CAPP conducted a survey in 2012 of 2,406 Americans that indicated that almost three-quarters of those polled see Canada as the best choice among oil suppliers in terms of America’s economic interests. An even larger percentage indicated they believe pipelines are a safe way to move oil to market, and 89% believe that Canada is one of the more environmentally responsible oil producers in the world.

The Alberta government deserves at least partial credit for this environmental responsibility. In addition to regulating the oil industry, the government, through its Department of Energy and Innovate Corporations, helps facilitate R&D to help operators find more efficient ways to develop their reserves.

In Canada almost all of the mineral rights have been given to the provincial governments to manage, said Christopher Holly, branch head, research and technology

at the Resource Development Policy Division of the Department of Energy in Alberta. “We manage the mineral leases and collect royalties on behalf of all Albertans,” Holly said. “All lease rentals and royalties are paid to the province, which puts the money into a general revenue fund and then disburses it to government programs.

“The more effective we can get the industry in reducing its costs, the more profit we have to share with Albertans. And if the industry improves its bottom line, it invariably reduces energy input costs, which has a corresponding environmental benefit.”

Mining

Production from oil sands occurs in two primary methods: mining and in situ production (thermal and primary), of which steam-assisted gravity drainage (SAGD) is the emerging technology. The mining operations come under the most fire since SAGD operations look similar to conventional oil fields. While an oil sands mining operation is a heavy industrial process, oilsandstoday.ca notes that only .02% of Canada’s boreal forest has been disturbed by mining operations over the past 40 years.

Canadian Natural owns and operates leases covering 236,000 acres and containing more than 6 MMbbl of mineable bitumen. Its website describes the mining process as first removing and storing the “overburden” of muskeg, sand, gravel, and clay for later reclamation. Mining vehicles then dig up the sand, which is loaded into large trucks and taken to crushers.

The oil and sand are crushed, filtered, and then mixed with hot water. This slurry is then moved to an extraction plant, where it is “frothed” in a tank to force the sand and water to settle to the bottom while the bitumen bubbles to the top. The froth is mixed with a diluent while the sand and water go into a tailings pond. The bitumen then undergoes primary upgrading, which separates the diluent and heats the bitumen to crack it into smaller hydrocarbon chains. Refinery fuel gas, naphtha, diesel, gas oil, and coke are produced. The fuel gas powers the upgraders’ furnaces, the coke is recycled, and the remaining hydrocarbons go through the secondary upgrading process.

This process uses hydrogen to stabilize the hydrocarbons and remove impurities. The hydrocarbons are blended to make synthetic crude oil, which is sent to pipelines for transportation.

Oil sands mining sites can eventually be reclaimed, although the process takes several years. Their primary environmental issue involves the tailings ponds. Despite attempts to recycle the sand and water in these ponds, the tailings do contain residual oil, and seepage into groundwater is a concern. Also, according to oilsandstoday.ca, the bottom layer, called fine tailings, takes a long time to settle and solidify; the remaining water is too toxic to be released into lakes or rivers; and the residual oil that floats to the surface is a danger to waterfowl.

Oil sands operators have formed the Oil Sands Tailing Consortium (OSTC) to share the cost of R&D for advanced tailings management. In 2012 OSTC became part of Canada’s Oil Sands Innovation Alliance. Current research is examining ways to reduce the volume of fine tailings and the time it takes them to solidify.

At Shell’s Albian Sands Project, the company is using thickeners to recapture water from the fine tailings prior to their disposal in the ponds. This reduces the amount of water the project uses as well as the overall size of the pond.

Industry and the government of Alberta are exploring additional methods, Holly said. “The overall principle is to separate the components of the tailings stream – the water, the sand, the residual bitumen, the clays, and the heavy oil – into separate streams. While this adds complexity to operations, the resulting materials are easier to handle and have less environmental longevity.”

Groundwater monitoring is now required at tailings facilities, and even though no seepage has been detected, operators are building ditches to catch runoff water, walls to prevent migration, and groundwater interception wells.

Waterfowl protection is a simpler task – tailings ponds are outfitted with cannons, scarecrows, decoy predators, and radar or laser systems. Canadian Natural has installed a radar-controlled bird deterrent system that detects birds from a distance and activates deterrent systems.

To date only one tailings pond has been fully reclaimed. Suncor reclaimed its Wapisiw Lookout tailings pond in 2010 and is monitoring the growth of replanted trees and shrubs as well as conducting soil, water, and vegetation studies.

SAGD

Mining operations get most of the attention, but they actually only account for about 20% of the total oil sands reserves and less than half of current heavy oil production in Canada. In situ methods such as SAGD operations are required when the oil deposits are too deep to be commercially mined. According to Davies, by 2015 or so “in situ will be the lion’s share of production and won’t look back.”

SAGD uses a pair of horizontal wells, one drilled directly below the other. The top well injects steam over a period of time to heat the reservoir and create a steam “chamber.” This heats the bitumen and lowers its viscosity so that it can drain into the lower well.

Historically, production was facilitated by pressure drive mechanisms, but Holly said there is an increasing trend to use mechanical lift methods, which more readily maintain pressure balance in the reservoir.

Once the combined oil and water reach the surface, they are separated, and the water is recycled for future steam generation. Connacher’s facilities near Fort McMurray use nonpotable makeup water derived from a deep subsurface aquifer. The aquifer is about 400 m (1,300 ft) beneath the surface. Jesse Beaudry, vice president of sustainability and technical services, said that these facilities achieve as much as a 98% recycle rate. “We believe it is industry-leading,” Beaudry said. “Through the use of new technologies and efficient operating practices, Connacher continues to be successful in further reducing the amount of water used to extract bitumen.”

Another metric of importance to SAGD operations is the steam-to-oil ratio (SOR). Beaudry said part of the reason these ratios are decreasing is because of new technology. Technological improvements in SAGD operations tend to be incremental rather than revolutionary, he said, but companies constantly strive to improve their economics as well as their environmental performance.

One of Connacher’s approaches has been infill drilling, which it will begin in 2013. “It makes complete sense,” he said. “Other in situ companies have done it, and they’ve validated what we believe to be the positive aspects of infills.”

ConocoPhillips also is using new technology in its SAGD operations. Mike Scribner, manager of technology and optimization for oil sands, said the company is using what it calls “e-SAGD,” with the “e” standing for “enhanced.” In this method, a light hydrocarbon stream is coinjected with the steam to further reduce the viscosity of the bitumen. Scribner said the company is hoping to reduce its SOR by about 20% through this process.

“That has knock-on effects for the environmental side,” he said. “It means we’ll be using less energy, meaning fewer GHGs and less water.”

Another pilot involves the use of a gas turbine once-through steam generator aimed at both economic and environmental improvements. The addition of the gas turbine means the process also generates electricity, possibly enabling the company to run its facilities exclusively off of the power of these onsite generators.

“It’s a bit different from a standard cogeneration system in that the energy balance between the gas turbine’s electricity output and the once-through steam generator power requirements are very similar,” he said. “So it works very nicely.”

It also is expected to reduce nitrogen oxide emissions by up to 28%, according to the company’s website.

Scribner added that these two innovations are not necessarily required to be used in conjunction, but if both pilots prove successful, both technologies will be used in future development.

Cenovus has installed a blowdown boiler at its facilities to improve its water recycling percentage. According to the company’s website, typical steam generation leaves behind about 20% of the water because of solids. The company challenged the belief that only recycled water could be used to generate steam by developing a second boiler to reboil the leftover water without treatment. The company now recycles more than 90% of its original input water.

These types of improvements help reduce public concern over oil sands development, and operators in the region are careful to keep the public well informed. “While our industry is certainly under the microscope, it’s important to emphasize that we also put ourselves under that same microscope,” said Tami Hutchinson, team lead, oil sands communications for ConocoPhillips. “We are actively researching ways to minimize our land, air, and water footprint. We believe technology is the key to enhancing long-term sustainable development of the oil sands, and we’re driving its advancement.”

Added Beaudry, “I believe the industry has taken public feedback very seriously and continues to develop and implement processes with results that people can see and touch. I also believe the Canadian government has been significantly engaged and has helped with the message. People understand the supply chain, and they understand that many of the businesses located across North America have significant opportunities associated with the oil sands.”

Contributing factors to casing deformation in heavy oil wells

Investigation seeks to mitigate the effects on current and subsequent wells.

Blair Neil and David Cuthil, Weatherford

Steam-assisted gravity drainage (SAGD) is a commonly used technique to produce heavy oil. SAGD entails drilling a pair of horizontal wells into an oil reservoir, one a few meters above the other, and then injecting high-pressure steam into the upper well. The presence of high-pressure steam can, in some cases, have adverse effects on the wellbore, which may prematurely end the life of the well.

Weatherford recently conducted a study during the workover of a five-well SAGD pad to identify whether the drilling techniques, casing and cement design, or geomechanical effects inadvertently led to a steam-induced casing deformation.

To identify the extent of casing deformation, wellbore integrity logs were run in each of the five wells under investigation: a multisensor caliper (MSC) log to detect pipe deformation and a cement sector bond log for cement quality evaluation and location of cement top. These logs identified the location and extent of the deformation but not the contributing factors.

For geomechanics evaluation, the operating company provided openhole formation bulk density and full-wave sonic logs, in situ stress data, lab rock mechanical results, drilling reports, casing and cementing details, and steam injection records.

All available data were carefully reviewed, and log data were methodically analyzed using specialized software: TVision software to analyze casing deformation and StabView software for geomechanics analysis. The collective analysis identified multiple specific factors that likely contributed to casing deformation, for example, cement quality and type of casing. Operating pressures and operating parameters also were identified as potential factors.

To gain more specific insight, the operator commissioned Weatherford Petroleum Consulting to do further evaluation of the casing selection criteria and cement bond quality.

Getting work forces to the job on time

Work force logistics management relies on creative solutions.

“Half of success is just showing up.” This famous quote – loosely attributed to movie director Woody Allen – sums up what every COO, HR director, and project manager knows: Work force transportation plays an extremely important role in the profitable and timely completion of any given project. Nowhere is this more applicable than in the oil and gas industry, where remote projects demand fresh crews on a predictable schedule to keep processes running at maximum efficiency.

“C-level project managers realize that any disruption in a billion dollar project has a significant effect, as even a 1% loss in productivity because of work force travel disruptions quickly decelerates into a multimillion dollar cost overrun and/or completion delay,” said Wendy Yates, whose company, CREW Logistix, consults companies on their work force logistics to maximize productivity, maintain controls, and contain costs.

The logistics of getting crews to remote work sites can be staggering, yet work force transportation is far from the core competence of most energy industry executives. They rely on firms that provide complete transportation solutions to wherever they need to go.

Fort McMurray, Canada, has long been known for its oil sands. Used by the Cree Indians for hundreds of years to waterproof their canoes, the oil sands were first officially recorded by European explorer Alexander MacKenzie in 1790. Under development since 1967 and due to advancing technology, the oil sands are now a viable resource.

One of the major players there is Shell Oil. With a significant work force in the area, transportation logistics became a major issue, with thousands of flights from a small airport annually.

For its Albian Sands Expansion Project, Shell selected Flair Air, a Canadian large-aircraft charter carrier, for supporting its project, which involved 130,000 passenger flights in and out of Albian Airport per year from up to 24 different airport locations across the continent.
The planning of moving work forces needs to be started as part of the initial project planning phase and labor contract negotiations before contracts are signed, not as an afterthought, particularly when isolated sites are involved.

“From my experience, logistics is often the last item to be discussed, with dire consequences,” said Yates. “If the morning flight doesn’t arrive until 10 a.m., by the time the people deboard, get their bags, and get bused to the work site, a half day of work is gone. If you lose a half day off of every rotation, that’s 10% of your 14/7 crew rotation, even more on a 10/4, wasted.”

A prime benefit of a dedicated charter air partner is responsiveness. The carrier should be able to customize all facets of the operation, from modifying seating layouts to departure times and flight routings to flexibility for customer travel and even additional baggage capacity.

Overall, Yates is satisfied with the Flair Air arrangement. “I examine three pillars of success for the profitable completion of any large industrial project: on time, within budget, and safety,” she said. “If you can carry those pillars to the work force logistics plan and make sure your air carrier will work with you to match them, then you increase your odds of achieving a successful result.”