Quantcast

Jim Letourneau's Blog

Investing, Technology, Travel, Geology, Music, Golf. I think that covers it.

Osum drawing attention to Alberta’s untapped carbonate resources

CALGARY, AB, Troy Media/ - It’s not exactly a secret - although astonishing news to many - but Alberta has a massive, untapped bitumen carbonate resource sitting in the province’s northern Wabasca region and estimated at 406 billion barrels of oil.

Osum Oil Sands Corp. is one of the major players in this nascent carbonate opportunity, with 170,000 net acres of carbonate holdings in the Saleski region in the southern part of the Grosmont trend, about 100 km south of Fort McMurray. Osum, a privately-held Alberta-based company focused on unlocking heavy oil resources in Alberta, is one of the fast-moving early-stage producers setting the stage for the next wave of economic development in Alberta.

It was back in 2006 that Dr. Peter Putnam - Osum’s Senior Vice President, Geoscience and an early believer in the bitumen carbonates - encouraged the company to invest in and acquire its bitumen leases in the Grosmont. A geologist, Putnam had spent six years with Husky Oil’s heavy oil department and then worked 23 years for Petrel Robertson Consulting Ltd. (PRCL), a prominent petroleum geoscience firm, where he is still Chairman.

All about carbonates

Why are  carbonates - which are also found elsewhere in the world, including the Middle East - important and why do they hold so much promise?

First, Putnam said, “Carbonates are a result of a chemical process, which creates sedimentary rock, such as limestone - formed from decayed organisms like coral and plankton.” He said that if exposed to appropriate chemical conditions over sufficient periods of time, limestone transforms into dolomite, and dolomite reservoirs typically offer more porosity and permeability, providing superior conditions for oil extraction.

Putnam then added that “the Grosmont is the world’s last giant accumulation of oil that remains unexploited,” with the three major players being Shell, Husky and Osum.

Commercialization of the Saleski region is underway with a carbonate pilot project currently in operation using Steam Assisted Gravity Drainage (SAGD) - an enhanced oil recovery technology for producing heavy crude oil and bitumen. Osum’s partner, Laricina Energy, is operating the project while both companies monitor it closely. In addition to this partnership, Osum has a 100 per cent interest in an additional 156,800 acres of oil sand leases in the Saleski area.

The first signs of interest in the commercial viability of carbonates occurred in 2006, according to Andrew Squires, Osum’s Senior Vice-President, Saleski Technology and Business Development. Squires has 20 years of experience in the oil industry and began his career at Amoco. He was also a consultant to numerous major oil companies.

“We were looking at the bitumen carbonates play at the same time Shell International entered it with the largest land oil rights sale in Alberta history,” noted Squires.

He said that when Shell paid more than $500 million for the huge parcel of contiguous land in Saleski, “they shocked the industry as no-one was looking at the carbonates.” In Alberta, sand deposits had been the major source for extracting oil. Squires initially had his own doubts about extracting oil from carbonates, “(b)ut when you took the time to examine the core samples you could see it (the rock formation) was highly fractured and had the right characteristics ( good vertical permeability) for  thermal recovery.”

Unlike other oil sands, the Grosmont is a vast sheet around 200 km in size. The Saleski pilot, using a couple of wells, is the first SAGD pilot for carbonates and has been in production for just under a year. “We’ve been testing the SAGD process and the results are encouraging - it’s producing oil,” Squires said. He said the pilot is a way of testing reservoir and well performance, operating and production practices on a small scale before branching out commercially. “We flush out all the performance issues - it’s a huge learning experience.”

While forging ahead with commercial development plans, Squires admits they must raise significant capital to continue with their commercial demonstration project, noting that it will cost in the range of $500 to $600 million to expand production to 12,500 bbl / day.

“There are minimum thresholds for commercial viability for the different reservoir qualities, such as oil saturation, porosity and permeability,” Squires explained. “Within our land holding we have been assigned 3.36 billion barrels of P50 best estimate contingent recoverable resource, out of the estimated total of 12 billion barrels of oil that is in place. This is the number respected in the industry of being representative of what is potentially commercially viable.” The steam-to-oil ratio also dictates the economics, he said.

Bottlenecks are the norm during the application to government process, since it’s the province’s resource. However, the demonstration project (12,500 bpd) comes online in late 2014 and commercial Phase 1 of 30,000 bpd is anticipated for mid 2016.

“People can’t wrap their heads around the fact this has been sitting in our backyard,” Squires mused.

Economic impact

Putnam agrees with the potential magnitude of the carbonates industry.

“When we talk about the 406 billion barrels, people don’t appreciate the significance of the carbonates, not just to Canada but also to the world. Canada currently has 176 billion barrels of oil that is commercially extractable. Of that number, not one barrel of reserves has been assigned to the carbonates up to today. So, if the Grosmont carbonate is capable of delivering 30 per cent of the barrels in place and converting those to reserves, Canada will absolutely be the number one oil reserves country in the world, and that matters. And it’s all in the province of Alberta, and that matters.”

The bottom line, though, is that the future of carbonates depends on technological results more than any other factor. Andrew Leach, Associate Professor, Natural Resources, Energy, and Environment at the Alberta School of Business, University of Alberta, explained why technology is key.

“If you can bring those carbonates in at a low cost, if the Osum pilot reveals this is extractable in the $15 to $20 per barrel range all in, then that would be very valuable.” He said that, for now, “carbonates are not considered technically and economically viable at current prices. That’s where the pilot comes in and can change that.”

In terms of oil sands trends and issues, Osum’s pilot is among the top five to watch to appreciate the future of the oil sands. “It’s one of the major developments I’ll be tracking,” he said.

Osum is on the cusp of the emerging carbonate industry and expects nothing but favourable reports from its “encouraging” SAGD carbonate pilot. Since Osum is anticipating a better steam-to-oil ratio with carbonates over the more conventional sandstone reservoirs, that gives cause for more optimism.

As a comparison, oil fields in Ghawar, Saudi Arabia, hold 90 billion of recoverable barrels and in Kirkuk, Iraq hold 17 billion recoverable barrels - all from carbonates. If the Grosmont carbonates can deliver 30 per cent of the 406 billion barrels in place and successfully convert them to reserves, Canada will be in a formidable position in the oil industry.

source www.troymedia.com