Change comes slow for oilpatch
STARTUP FACES DAUNTING TASK IN ATTEMPT TO CLEAN UP THE WAY CRUDE IS EXTRACTED
Joseph Kuhach faces a daunting task. For his company to grow, he will need to convince oilsands producers to change the way they extract oil from northeastern Alberta.
“The industry has historically been shy about taking dramatic steps to change things,” Kuhach said. “They want to be first to be second.”
Kuhach is chief executive of Calgary- based Nsolv, which operates a 300- barrel- a- day pilot project on a Suncor Energy Inc. oilsands lease and is actively looking for an energy company to partner with on a new, full-scale commercial facility.
Any such partner would need to be comfortable that Nsolv’s process would work in a 5,000 bpd facility — despite the fact other new oilsands extraction technologies have had difficulty operating on a commercial scale.
“Getting across the valley of death for companies, from technically demonstrated to commercially demonstrated, that’s the big challenge,” Kuhach said.
In 2011, Petrobank Energy and Resources Ltd. tried to commercialize a lab-tested oilsands extraction technology called “toe-to-heel air injection,” or THAI, which the company said could increase the amount of oil produced from deeper-lying bitumen deposits.
Petrobank promoted THAI as a superior process to the two main techniques used in the oilsands called “steam assisted gravity drainage,” or SAGD, and “cyclic steam stimulation,” or CCS, which both use large quantities of water to produce oil.
Petrobank was never able to demonstrate that THAI worked at a commercial scale in the oilsands, and the company eventually merged with Touchstone Exploration Inc., which is primarily focused on operations in Trinidad and Tobago.
Kuhach is well aware other companies have been unable to demonstrate commercial viability, but he contends Nsolv’s process can work and that it can save energy producers money while helping reduce greenhouse gas emissions.
He said the process, named “bitumen extraction solvent technology,” or BEST, can live up to its acronym.
On March 4, Nsolv secured a $ 13 million grant from Sustainable Development Technology Canada, which gives the company a boost but not enough to build a commercial- scale plant. But Kuhach still needs a partner in the oilsands.
On Friday, Imperial Oil Ltd. announced it had filed an application to build a new 50,000-bpd facility using its own solvent- based process, signalling that commercial- scale solvent extraction tech- niques are getting closer to reality in the oilsands.
Where SAGD and CCS operators pump large volumes of steam at high pressures and high temperatures into oilsands reservoirs, Nsolv’s process pumps solvents down a well into the reservoir at both lower temperature and lower pressures.
Nsolv’s solvents dissolve the bitumen in the reservoir, allowing that heavy oil to flow to the surface while leaving the sulphurs, heavy metals and other undesirable products in the ground, Kuhach said.
“That’s really what makes the oil that we have in the oilsands so heavy. When you pull that out, you’ve got something that’s more along the lines of conventional oil,” he added.
The operation uses less energy and produces higher quality oil with far fewer unwanted byproducts than the techniques in use across the oilsands now, Kuhach said.
“We think we’ve got at least a three- quarters improvement and we would generate somewhere around a quarter of the greenhouse gases that would be generated by a SAGD project on an apples- to- apples basis,” he said.
Some oilsands operators are struggling to produce oil economically with prices hovering around US$ 30 a barrel, and virtually every player in the industry has pared back their growth plans.
But now, under the provincial NDP government’s climate change legislation, oilsands producers face an upper limit on how much carbon they are cumulatively allowed to emit. In addition, companies with higher emissions will need to pay more in carbon taxes than companies with lower emissions.
“I think folks are starting to realize that carbon is going to cost more,” Kuhach said, adding he believes the new policies could provide a boost to Nsolv and companies like it, that seek to reduce the emissions in the oilsands.
He is also hopeful companies will take a longer look at his company’s pilot project while oil prices remain low. “You can’t do SAGD, you can’t even think about it at $35 oil. We believe, with our technology, at the commercial scale of 5,000 to 10,000 barrels a day, you can still make money at $ 40,” he said.
Nsolv is operating its pilot project in northern Alberta and looking to grow. Kuhach said the company has been in talks with a number of large oilsands producers but wouldn’t give details on how close he is to signing a deal to build a larger facility.
GETTING ACROSS THE VALLEY OF DEATH … THAT’S THE CHALLENGE.