Project breathes new life into old oilfield

It seems unlikely to consider an out-of-the-way oilfield that is approaching 60 years old with rising costs and declining production a strategic asset for a dynamic and fast-growing company like Cenovus Energy, but the Weyburn oilfield in southeastern Saskatchewan is precisely that.

As rival oilsands producers are planning expensive carbon capture and storage projects to offset their greenhouse gas emissions, Cenovus has a decided advantage with its longlife enhanced oil recovery project at Weyburn, where carbon dioxide is injected underground to produce more oil.

The difference between carbon capture and storage and enhanced oil recovery is that EOR provides a way to reduce greenhouse gas emissions and also boost oil production.

For producers the difference shows up in cash flow — EOR generates it and CCS doesn’t.

Shell Canada, for example, is leading the $1.35-billion Quest CCS project — with $865 million in funding from the federal and Alberta governments — that will sequester one million tonnes of greenhouse gases per year from its oilsands operations.

Cenovus, meanwhile, is paying an undisclosed price to SaskPower to take one million tonnes of carbon dioxide per year from its coal-fired Boundary Dam power plant for 10 years and pump it underground to extend the life of a field that produces close to 27,000 barrels of oil a day.

“It’s important as (a greenhouse gas) offset, but it’s also important as a producing asset,” Cenovus spokeswoman Jessica Wilkinson said Wednesday.

In 2011, the Saskatchewan government, SaskPower’s owner, approved a $1.24-billion project to rebuild a unit at its Boundary Dam coal-fired power plant near Estevan to include C02 capture.

It will be one of the first commercial-scale CCS facilities in the world.

The SaskPower-Cenovus announcement came the same day as the American Department of Energy released a report which said underground aging oil reservoirs in the United States and Canada have the capacity to hold 225 billion tonnes of carbon dioxide.

“The more we learn about (CO2) enhanced oil recovery,” Kurt Waltzer of the U.S.-based Clean Air Task Force told Bloomberg, “the better it looks as a technology.”

Critics say sequestering greenhouse gas requires expensive technology and the money would be better spent on renewable energy such as solar or wind projects.

The Boundary Dam Project got $240 million in funding from the federal government.

Alberta had agreed to spend $2 billion on four CCS projects, but that was scaled back to $1.5 billion after one project — TransAlta’s coal-fired power plant — was cancelled in April over economic issues. Shell’s Quest project is part of that initiative.

Investments in CCS and EOR make economic sense in the context of the expected reductions in carbon dioxide emissions in the next decade.

The federal government has set a target to cut emissions across Canada by 17 per cent from 2005 levels by 2020.

For the fast-growing oilsands sector — which generates about six per cent of greenhouse gases in Canada — concern over its contribution to climate change is a major environmental and public relations issue for the industry.

In 2011, Cenovus generated slightly more than four million tonnes of greenhouse gas emissions.

Between its existing contract to buy 1.8 million tonnes of CO2 a year from a coal gasification plant in North Dakota and one million tonnes it will buy from SaskPower beginning in 2014, the company will offset more than two-thirds of its growing greenhouse gas emissions.

Sequestering one million

The more we learn... the better it looks as a technology KURT WALTZER

tonnes of carbon dioxide is the equivalent of taking more than 250,000 vehicles off the roads each year.

When it was discovered in 1954, the Weyburn field contained one of the largest medium-sour crude oil reservoirs in Canada, with approximately 1.4 billion barrels of oil in place.

After a decade of operation, water injection was introduced to stimulate more production and in 2000 the CO2 floods began to increase reservoir pressure.

The CO2 is expected to extend the producing life of the Weyburn field by another 30 years and possibly longer than that.

The International Energy Agency has said the Weyburn and nearby Midale oil reservoirs could store up to 55 million tonnes of carbon dioxide.

To date, 17 million tonnes of CO2 have been injected at Weyburn.

Without it, the field would produce about 8,000 barrels a day.

Cenovus, which has a 62 per cent interest in Weyburn, and its partners have invested more than $1 billion to upgrade the facility to accommodate the CO2 floods.

From a production, environmental and, especially, a PR stand point, it made a lot of sense when Cenovus insisted during the 2009 breakup of Encana Corp. that it retain a decades-old oilfield some 1,100 kilometres from its new oilsands assets.