Cold Lake Profitability Improvement

Abstract

Abstract For over 30 years, Imperial Oil Limited has been pioneering the extraction of a very heavy grade of oil known as bitumen from the Alberta oil sands in the Cold Lake area. For close to 10 years, a world scale commercial project has operated, employing a thermal recovery process known as "cyclic steam stimulation" (CSS). This process involves alternating periods of steam injection and production, both through the same wellbore. The Cold Lake operation faces two challenges not typically experienced by conventional operations. First, substantial costs are incurred to generate steam, and treat water. Also, bitumen sells for less than light Sweet crude. Consequently, margins are tight, and continuous unit cost improvements essential. This paper describes the Cold Lake operation along with many of the innovations that have led to a one-third reduction in operating costs over the past decade. Introduction Bitumen produced in the Cold Lake area is both very heavy and very viscous (11 API and 75,000 cp). Furthermore, Cold Lake's oil sands deposits are 1,500 feet below the surface and cannot be developed using the open pit mines found further north in the Athabasca region of Alberta. Consequently, Imperial adopted a thermal recovery process known as cyclic steam stimulation (or simply CSS) as a means of in-situ recovery. This process involves periods of steaming (usually four to six weeks), followed by periods of "soaking" (four to eight weeks), followed by increasingly long periods of production. The same wellbore is used for both production and steaming. The objective is to pressure up the reservoir and fracture into new sand with each steam cycle in order to contact and mobilize new bitumen. Effective as this process is, it results in a number of costs being incurred that aren't part of a typical conventional operation. Furthermore, Cold Lake bitumen, because of its high viscosity, must be blended with a diluent so that it meets pipeline specifications. Although this blended product is a highly prized refinery feedstock, its properties cause it to sell at a discount relative to conventional light sweet crude as well as to the diluent by itself. In six of the last ten years, this discount has averaged between $4 and 6 (US) per barrel but at times it has been close to $10 US. This discount and the unique operating costs incurred result in Cold Lake bitumen being a tighter margin product that feels the pinch more quickly and more acutely than light sweet crudes when prices fall. The result is that the operation has, of necessity, moved sooner and more aggressively than many other operations to improve its cost structure. P. 53