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Western technology spurs BRICs to join heavy oil rush

07th November 2012

OGT reports on the technological advancements in heavy crude processing as BRIC countries join the promising heavy oil bandwagon

Western tech spurs BRICs to join heavy oil rush
Almost two thirds of the world’s remaining oil reserves consist of heavy, high sulphur “sour” crude, more than twice those of conventional light crude oil, according to the International Energy Agency (IEA)

With energy demand on the rise, particularly in the world’s emerging economies and conventional oil supplies continuously decreasing, heavy oil has arguably become a strategic global hydrocarbon resource for the 21st century. As BRIC countries seek to adapt to this increasingly prevalent piece in the global energy chessboard, OGT reports on some of the technological developments in heavy crude processing whilst contemplating their potential effect in BRIC countries.

The US Geological Survey (USGS) defines heavy oil as a type of dense crude oil characterised by a viscous texture, as well as its asphaltene content. The standard upper limit for heavy oil is 22 API gravity, with a viscosity of 100 centipoise.

Although cheaper, heavy oils were often overtaken by their light- and medium-gravity counterparts due to their high refining costs. Now, however, heavier crudes are stepping to the limelight. And rightly so, as 70 per cent of the world’s remaining oil reserves consist of heavy, high sulphur “sour” crude, more than twice those of conventional light crude oil, according to the International Energy Agency (IEA).

It is estimated that 69 per cent of the world's technically recoverable heavy oil and 82 per cent of the technically recoverable natural bitumen are located in the western hemisphere.

The region’s heavy crude hotspots are located primarily in Venezuela and Canada. Venezuela’s non-conventional oil deposits in the Orinoco Belt are estimated to hold up to 1,200 billion barrels, which almost equals the world's current proven reserves of conventional oil, according to data released by OPEC. Orinoco is second only to Canada’s Athabasca oil sands in Alberta, the largest known reservoir of crude bitumen in the world.

However, recovery rates for heavy oil are often confined to 5-30 per cent of the oil in place. As a result, refining the resource requires constant technological development to increase efficiency, as it contains impurities such as waxes and carbon residue that must be removed before the refining process.

Steam assisted

One way of maximising the resource return potential of heavy crude has been furthered by the reincorporation of steam assisted gravity drainage (SAGD) technology. Long considered an unpractical process due to its costs, price rises in crude and recent advancements in technology have rendered SAGD a much more economically palpable alternative to oil production.

The SAGD process includes the injection of high pressure steam into the reservoir in order to heat the heavy crude and then release its more liquid form through a second pipe.

Modelling technologies have played an important role in the implementation of SAGD, as the coupling of pipeline and reservoir simulators renders the modelling of the entire SAGD process possible. However, experts have stressed the importance of adapting these simulators to heavier crude, as the majority of commercial simulators are designed for conventional light, sweet crudes.

Characterising heavier oils

Invensys Operations Management has over the years developed methods for modelling heavy oil which can be detailed for liquid viscosity and liquid thermal conductivity.

For the purpose of furthering research and development in this area, Invensys in 2007 created a consortium which included such sector majors as Shell, Chevron, BP, Petrobras, Total and Eni – which pays testament to the resource’s prevalence as a top gear in the global oil and gas sector.

Through its SimSci-Esscor technologies, Invensys was able to more accurately characterize heavier oils, leading to improved accuracy in process design and operation. These new refining capabilities may greatly enhance US refineries as they open their doors to additional sources of crude from the Western Canadian Sedimentary Basin, experts say.

The SAGD process has been revived namely by Canadian independent oil and gas tech firm Ivanhoe Energy in the Western Canadian Sedimentary Basin for the development of resources at its Tamarack Project, a heavy oil development project northeast of energy rich Fort McMurray.

An SAGD field production for bitumen, Ivanhoe’s Tamarack Project is integrated with the first commercial scale heavy-to-light (HTL) plant. HTL is another heavy oil upgrading process which converts heavy, viscous oil and bitumen into a lighter, transportable and more valuable synthetic crude oil (SCO).

Patented by Ivanhoe, the firm says HTL is similar to Fluid Catalytic Cracking (FCC). FCC produces transport fuels mainly from vacuum gas oils and by circulating a catalyst, while HTL circulates common sand as a heat transfer agent to convert heavy oil, including pure vacuum residues, to upgraded light oil.

This year, Ivanhoe commissioned a formal evaluation of the economic feasibility of its HTL projects, and concluded that HTL creates great opportunities for “enhanced cash flows, superior economic returns and reduced financing risk due to the reduced capital intensity of constructing HTL facilities”.

At the same time, in May 2012 Ivanhoe signed a memorandum of understanding with Guatemalan energy firm Coban Oil and Gas to analyse the feasibility of building an HTL facility in the Republic of Guatemala for domestic consumption and international export. Guatemala produces 10,000 barrels of oil per day and consumes 80,000 bpd.

Guatemala’s heavy crude aspirations reflect how the heavy oil rush, made possible through the use of advanced and economically advantageous technology, has spread to less conventional destinations, altering the global heavy crude resource map.

As market conditions change, prospects are quickly opening up in the BRICs as well, with Brazil’s offshore Campos Basin, Russia’s Volga-Ural Basin and China’s Luda field in the Bohay Bay becoming attractive epicentres for heavy crude extraction.
In particular, energy hungry China and India, two of the world’s top consumers of oil, have been vying a stake in heavy oil riches as part of Beijing’s and New Delhi’s plans to increase their nations’ refining capacities in order to feed an increasing domestic demand.

China has been focused on expanding its capacity to process heavy oil from Canada, currently compromised by the fact that only 15 per cent of Chinese refineries have coking capacity, Xingyi Wang, vice-president of China National Petroleum Corp (CNPC) America Ltd said in July. China currently produces 300,000 barrels per day of heavy oil domestically, making up 5 per cent of total refinery feedstock in the country, Wang said while addressing China’s plans regarding heavy oil at the Oil Sands & Heavy Oil Technologies conference in Calgary.

In neighbouring India, energy major Essar Oil has aimed to increase its refining margin by betting on the Vadinar refinery’s capability to process heavy to ultra-heavy crude oil. Over the last two years, the Gujarat-based refinery has been undergoing expansion. Currently, it has a refining capacity of 20 million tonnes per annum.