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Alberta approves Cenovus Narrows Lake oil sands project with demo and phase-in of solvent aided process to improve steam-oil ratio and production rate

31 May 2012

The Alberta Energy Resources Conservation Board (ERCB) has given approval to Cenovus Energy Inc. to proceed with its Narrows Lake oil sands project, with an ultimate gross production capacity of 130,000 barrels per day. The company plans to demonstrate solvent aided process (SAP) on 25% of the wells there and eventually phase in SAP across the entire Narrows Lake operation. SAP combines steam injection with solvents, such as butane, to help bring the oil to the surface. (Earlier post.)

Sap
Solvent-aided process. Source: Cenovus. Click to enlarge.

This would be the industry’s first use of SAP with butane on a commercial scale. Based on test results at other locations, Cenovus anticipates SAP may improve the steam to oil ratio (SOR) and oil production rate by as much as 30% when compared to SAGD alone. Cenovus also anticipates that SAP may increase total oil recovery by as much as 15%.

The company expects the quality of the reservoir, combined with improvements it has made to technology and processes, will enable the Narrows Lake project to achieve industry-leading SORs as low as 1.6 with the full addition of SAP. SOR is a measure of efficiency for in-situ oil sands operations, with a low SOR meaning less water is needed and less natural gas is required, resulting in fewer emissions.

Project approval from Cenovus and its partner, ConocoPhillips, is expected by the end of this year. First production at Narrows Lake is anticipated in 2017, with the possibility of production starting in 2016, depending on industry activity and the associated demand for labor and materials. The Narrows Lake project has an expected life of four decades.

Narrows Lake is just north of Cenovus’s currently operating Christina Lake facility, near Conklin in northern Alberta. The project will be developed in three phases. Ground work for the initial phase of 45,000 bbls/d is expected to begin this fall.

Compared to SAGD focused projects, Cenovus anticipates its SAP projects will have 10% to 20% higher initial capital costs. The company also anticipates higher capital costs for Narrows Lake since it is a new project with no existing infrastructure in place. The additional capital costs are expected to be offset by increased production volumes, increased oil recovery and lower operating costs due to SAP.

Preparations for the Narrows Lake development are already well under way with a Cenovus team in place, initial equipment ordered and engineering work in progress. More than 200 stratigraphic test wells have been drilled at the project in support of the regulatory application and development plan. As the company gets further into its detailed engineering later this year, it plans to provide more detailed cost estimates for the project.

The company’s 2011 independent contingent resources evaluation estimated the gross best estimate bitumen economic contingent resources for Narrows Lake at 888 million barrels (444 million barrels net to Cenovus). Sanctioning of Narrows Lake phase A by Cenovus and the project partner, ConocoPhillips, is expected to lead to the conversion of a portion of the contingent resource to proved reserves in the independent reserves evaluation to be prepared for year-end 2012.

Narrows Lake will be the third in-situ oil sands project operated by Cenovus. The Foster Creek operation is now producing about 120,000 bbls/d gross and Christina Lake is producing about 58,000 bbls/d gross with expansions continuing at both of those projects. Cenovus has a 50% ownership of the Narrows Lake, Foster Creek and Christina Lake projects with its partner ConocoPhillips.

In addition, regulatory applications are under review for the Grand Rapids and Telephone Lake oil sands projects. Both of those projects are 100% owned by Cenovus and have planned production capacities of 180,000 bbls/d and 90,000 bbls/d respectively. Cenovus continues to assess other oil sands opportunities within its portfolio for future development. In addition to the 178,000 bbls/d gross of oil sands capacity already built at Foster Creek and Christina Lake, Cenovus now has 435,000 bbls/d of gross oil sands production capacity under construction or with regulatory approval.

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Comments

Two different studies on the value of Oil sands operation for Canada were published yesterday.

1. The Study by Pembina Institute concluded that Oil Sands benefit mostly (94%) Alberta and that all other provinces are losing due to the huge increase in value (from $0.62 to $1.02) of the Canadian dollar, i.e. the Dutch Syndrome for 87.5% of Canada and a major blow to the manufacturing sector.

2. The Study by MacDonald-Laurier Institute (probably financed by Oil) concluded that Oil Sands operations are good for all Canadians and Americans, even if it will permanently pollute a vast area.....????

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