| Imperial Oil -- A Leader in Thermal In-situ Production
Remarks by E.L. (Eddie) Lui, vice-president, oil sands development and
research, Imperial Oil Limited to the Edmonton CFA Society Conference:
Investing in Alberta's Oil Sands
| | Edmonton, Alberta |
June 8, 2006
| Download Eddie
Lui's remarks and slides in Adobe PDF format.
Good morning. I'd like to thank the Edmonton Society of Financial Analysts for
the opportunity to speak to you today and to share with you Imperial Oil's
current development and future opportunities for thermal in-situ oil sands
production.
Before we begin, I want to remind you that the presentation this morning
contains forward-looking information and actual results could be different as
a result of many factors -- which are noted on this slide.
Imperial's oil sands assets are enormous in size and scope, and offer
long-term growth opportunities for the company.
We have been
a pioneer in the development of Canada's vast oil sands resources since the
early 60's -- in both in-situ and mining projects.
This map
shows the three major oil sands deposits and shows our position in both
current oil sands production (red symbols) and in undeveloped oil sands leases
(gold symbols).
Imperial holds about 465,000 acres of oil
sands leases including Cold Lake -- the largest in-situ oil sands operation in
the world and the premier in-situ project in Canada. This asset is wholly
owned and operated by Imperial.
Imperial also has extensive
oil sands interests which are currently undeveloped -- mostly in the Athabasca
area of Alberta. The gold star northeast of Fort McMurray represents the Kearl
leases on which we propose to develop a 300,000 barrel a day mining project
with ExxonMobil Canada.
The gold star to the southeast of
Fort McMurray represents a number of leases which we are evaluating for
development using in-situ methods.
My comments today will
focus on our current in-situ operations and development at Cold Lake, but
first I'd like to address some of the common misconceptions regarding thermal
in-situ production methods.
In-situ production of the oil sands is made possible through two main thermal
recovery methods -- cyclic steam stimulation (or "CSS") and steam assisted
gravity drainage ("SAGD") -- both developed and patented by Imperial Oil.
The two drawings on the bottom of this slide show the main characteristics of
the two processes:
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CSS (shown in the bottom left) is a three-stage process in which high-pressure
"wet" steam (steam which includes both vapour and hot water) is injected into
the reservoir (stage 1), allowed to soak (stage 2) and then produced (stage 3)
-- all from the same wellbore. This cycle is repeated many times (upwards of
15 cycles) with the same well.
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SAGD (shown in the bottom right) is a continuous process using two horizontal
wells drilled about five metres (15 feet) apart. "Dry" steam is injected via
the top (injector) well, and bitumen is produced from the bottom (production)
well. If "wet" steam were to be used for SAGD, the hot water left in the steam
would fall via gravity directly to the lower production well, and impact the
efficiency and effectiveness of the process.
There are some common misconceptions about CSS versus SAGD -- and I'd like to
address some of these misconceptions.
First and foremost,
resource determines the recovery process used -- it is critical to match the
recovery process to the unique characteristics of the reservoir.
CSS is not a viable alternative for shallow reservoirs that don't have a thick
capping shale to manage the high steam injection pressure. But, the high
injection pressure and multiple recovery mechanisms enable CSS to work
effectively with a broader range of reservoir quality.
For
SAGD, the relatively lower steam injection pressure and continuous nature of
the process requires cleaner reservoirs with higher bitumen saturation to be
effective. But, SAGD has the potential to develop an oil sands resource that
is in contact with extensive top gas or bottom water zones, with the steam
chamber pressure being maintained in balance with the pressure of the top gas
or bottom water. Over the next few years field data from several competitor
SAGD projects will clarify this potential.
CSS and SAGD have
been tested in different oil sands basins in Alberta. In Cold Lake and Peace
River where the reservoirs are deeper, CSS has clearly been demonstrated to be
superior to SAGD. And over the years, we have observed operators in both of
these areas converting from low pressure processes to high pressure CSS.
In the Athabasca area, where the oil sands deposit is shallower and the
absence of a capping formation, SAGD is the only viable in-situ thermal
recovery alternative.
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The schematic on this slide shows the reservoir we produce from at Cold Lake
-- the Clearwater formation -- shown in black in the picture. Sitting above
the Grand Rapids formation (shown in brown) is the "capping shale" barrier
that I referenced, which is critical to our ability to use the high pressure
CSS process.
The high injection pressure, above horizontal
fracture pressure, facilitates three main drive mechanisms:
-
Re-compaction drive -- the high pressure steam used literally lifts up the
upper formations. Once the steam cycle is finished the re-compaction or
settling of the ground pushes bitumen back toward the wellbore enhancing
production.
-
Solution gas drive -- as the reservoir pressure declines during the production
phase, natural gas dissolved in the bitumen expands, pushing additional
bitumen toward the wellbore; and
-
gravity drainage.
Together, these recovery mechanisms make CSS a more robust recovery method
across a wider range of reservoirs with differing quality, and allow for
recovery of bitumen from a larger resource base. Let me illustrate this
further using the next chart.
The two black columns in the middle of the diagram are actual oil sands core.
Bitumen is present all through these cores but the more continuous thick black
area is the best "pay". The lighter colourations in the sample show shale
layers -- barriers that impede the flow of steam and ultimately bitumen
produced.
SAGD targets the thickest, best-quality portion of
a reservoir to create its steam chamber (shown as the yellow rectangle) and
recovery rates are quoted relative to this small area -- typically in the
order of approximately 50 percent.
For CSS, the high-pressure
steam can fracture through thin shale layers and thus contact more bitumen
resource -- in this example, resources shown in the blue rectangle. In the
portion of the reservoir being targeted by CSS, typical recovery rates are
about 35 to 45 percent. This translates to a recovery rate of 25 to 30 percent
of the gross pay -- the entire bitumen bearing zone, which is the basis
Imperial reports its recovery rates. In our mind, a more meaningful measure of
the true efficiency of a recovery process.
For a similar
quality resource and on a consistent basis, recovery rate for SAGD and CSS
would be very similar.
The other misconception that I want to
address relates to energy use.
Pacesetter CSS and SAGD
operations use about the same amount of natural gas to produce a barrel of
bitumen. This statement is not obvious from a comparison of steam-to-oil
ratios (or SOR's) for CSS and SAGD. The difference is that the quality -- or
heat content -- of the steam injected in CSS is different than SAGD.
Most CSS and SAGD projects generate steam using once-through steam generators.
The steam produced in these generators is typically 75 percent steam vapor and
25 percent hot water.
-
For reasons I mentioned earlier, the hot water from the steam has to be
removed before injection into the reservoir for SAGD operation. The heat from
the hot water is recovered in the plant -- reducing the amount of natural gas
that a SAGD producer needs to purchase.
-
For CSS, both the steam vapor and hot water -- also called "wet steam" are
injected into the reservoir.
It takes about 1.3 barrels of wet steam to create 1 barrel of dry steam -- or
put in another way, it takes about 30 percent more natural gas to create 1
barrel of dry steam. So to compare steam-to-oil ratios (SOR) for SAGD and CSS,
SAGD SOR's needs to be increased by about 30 percent to put the comparison on
a common energy basis.
Now I'd like to tell you about our
in-situ operation at Cold Lake.
|
Imperial has been a leader in the development of much of the technology that
has underpinned the commercial development of Canada's vast oil sands
resource.
The circles at the top of this chart
highlight the numerous technology advances that we have made at Cold Lake
since the 1960's. Imperial invested over $250 million on research and
technology development before the start-up of the Cold Lake commercial project
in 1985. As I mentioned before, Imperial invented and held patents on both
cyclic steam stimulation (CSS) and steam assisted gravity drainage
(SAGD). This sustained commitment to development of technology is a unique
competitive advantage for Imperial Oil.
Our ongoing
commitment to technology is unwavering. Our most recent invention late last
year was a patented process to enhance CSS recovery through the addition of a
small amount of diluent with the steam. We have piloted this since
2002. Results are encouraging and we have plans for larger-scale
implementation later this year. This technology will further increase recovery
in areas already developed, using existing wells, facilities and
infrastructure.
As you can see from the graph on the bottom
of this slide, bitumen production at Cold Lake has increased significantly
since our first pilots in the 1960s, to our current production level of over
150,000 barrels per day. We have taken a deliberate, phased approach to
developing this high-quality asset -- bringing production on in stages to
incorporate advances in technology into new production phases.
Across the top of the graph in red, I have listed the changes in bitumen
recovery factor over the last 20 years. The increase from 13 to 30+ percent is
a direct result of our continued focus in research and technology development
and our growing expertise in thermal operations.
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Looking forward ... near term development at Cold Lake is focused on
developing the "northern extension" of our approved development area.
The Cold Lake lease area (shown as the dashed black line on the map) is about
300 square miles. The approved development area shown as the solid black line
is about 140 square miles and we are currently active in about half of that.
Our efforts to the end of the decade are to develop the area shown in red, one
of the new areas which we received regulatory approval for in 2004. Over the
next five years, we plan to develop 10 new pads in this area. The first
investments were made in 2005 with the drilling of two new pads in the
southerly part of this area.
This development is another
example of our commitment to continuous improvement through application of new
technology at Cold Lake:
-
The well design and layout in this development has been customized to optimize
resource access.
-
Looking at the illustration in the bottom right of this slide, you can see
that these new 'mega' pads use horizontal as well as vertical wells. One pad
can now access the same resource as three standard Cold Lake pads, which
reduces the overall capital required for this development, as well as the
surface footprint.
-
For successful thermal operations, it is essential to control the steam
distribution in a horizontal well to achieve optimal production results.
Imperial has developed a patented completion technique with a special designed
wellbore assembly to achieve this objective.
Finally, I'll draw your attention to the black rectangle directly to the east
of our northern extension area. This is the next section of the Cold Lake
lease that we will develop. We have a team in place evaluating the most
economic options to bring this part of the Cold Lake lease into production.
Let me close with a summary of the key points that I feel distinguish Imperial
Oil as a leader in the development of oil sands.
We have been
a pioneer in the development of oil sands -- with extensive operating
experience and knowledge. Our continued commitment to research and technology
development will provide us with the key to continued economic and responsible
development of oil sands resources.
We hold a significant
position in the oil sands resource -- with high-quality assets like Cold Lake
-- and are well positioned for continued future growth in both in-situ
operations as well as mining, through our 25 percent ownership of Syncrude and
our Kearl mining project.
Thank you for your attention and I
will be happy to answer any questions later in the session.
For more information:
For more detailed investor information, or to receive annual and interim
reports, please contact:
Susan Swan
Manager, Investor
Relations
Imperial Oil Limited
237 Fourth Avenue S.W.
Calgary, Alberta T2P 3M9
Email: susan.b.swan@esso.ca
Phone: (403) 237-4537
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