Copyright of the Daily Oil Bulletin 2017
Cenovus Lifting Narrows Lake Target By 20,000 Bbls A Day, Adding Solvents Earlier At Foster, Christina
Cenovus Energy Inc. has increased the production target of its first greenfield solvent-aided process (SAP) project to 65,000 bbls a day, and plans earlier pad-by-pad solvent implementation at existing SAGD projects.
The planned Narrows Lake Phase A previously had a planned production capacity of 45,000 bbls a day. SAP adds a small amount of a natural gas liquid to the steam injected into SAGD reservoirs.
Cenovus is also adding 85 megawatts of cogeneration to Narrows Lake, which it expects will be the industry’s first commercial implementation of solvents at a greenfield project.
“With coal [-fired power generation in Alberta] going down to zero in the next 13 years, we feel that cogeneration is going to be a great opportunity in the oilsands,” said Harbir Chhina, the company’s executive vice-president and chief technology officer.
Cogeneration — simultaneous production of steam and electricity — helps lower greenhouse gas emissions because the fuel commonly used for cogen projects — natural gas — has significantly less carbon than coal.
Narrows Lake construction was deferred after world oil prices collapsed.
Explaining how the expected Narrows Lake output increased by 20,000 bbls a day, Chhina said: “When we deferred this project, we did not defer the pilot results that we’re working on. And so all the learnings from the pilots over the past couple of years have given us a lot of confidence to move ... the project at a faster pace.”
The increased production figure was disclosed this week at the company’s investor day conference in Toronto.
Previously, the plan for Narrows Lake was to implement SAP on a pad-by-pad basis, rather than putting everything on solvent injection at the outset. “Today we feel very comfortable we can put all the pads on solvents and get a higher rate,” said Chhina.
Pad-by-pad rollout at Foster, Christina
But Cenovus doesn’t plan to proceed with construction of any of its “growth” projects — including Narrows Lake — until it pays down some of the billions of dollars of debt incurred in its second-quarter purchase of oilsands and Deep Basin gas assets from ConocoPhillips Company. To do that, the company hopes to sell billions of dollars worth of assets by year’s end.
And before Narrows Lake proceeds, Cenovus plans to start work on its other deferred project, Phase H of its Foster Creek SAGD operations.
“Once we trigger Foster Creek H, [when] our balance sheet in good shape, then we’ll trigger Narrows Lake A,” Chhina said.
And while Cenovus plans commercial implementation of SAP across all its existing Foster Creek and Christina Lake operations, Chhina said this will take four or five years because it involves reengineering plants, getting approval, doing the construction and installing the necessary infrastructure.
So to bridge the years between completion of solvent pilots and full commercial rollout, an “intermediate commercialization” is planned where SAP will be implemented on a pad-by-pad basis.
Within three years of starting its solvent deployment program, Cenovus plans to have 10 existing Foster Creek / Christina Lake SAGD well pairs converted to SAP.
“Over the next four or five years we’ll have about 55 wells converted over,” said Chhina. Cenovus believes SAP has the potential to increase oil production from existing wells by about 15,000-20,000 bbls a day by 2021.
“So ultimately we feel the potential for the solvent is going to be 200,000 bbls a day — about 130[, 000 bbls a day] of that coming from Narrows, and the rest will be [from] implementation at both Foster Creek and Christina Lake.”
Leveraging low propane prices
One reason the company is speeding up SAP implementation at existing SAGD operations is to take advantage of low propane prices, Chhina said.
In some of its SAP pilots, Cenovus used butane as the NGL injected into the reservoir to go into solution with the oil to improve viscosity and mobility. But on the commercial implementation of SAP, Cenovus plans to use propane as the injected solvent.
“We felt price should dictate which solvent you’re using,” the chief technology officer said.
Today, Cenovus believes propane offers better value then butane because of propane’s “substantially lower” price, he said. “If prices were to change to [favour] butane, you could switch.”
He added: “So our strategy right now is to go after propane. In the future it might be butanes or pentanes perhaps.”
Solvents a priority
In its investor day disclosures, Cenovus identified implementation of solvents as a priority.
The company’s stated goal is to reduce its overall greenhouse gas emissions intensity by 33 per cent.
While Cenovus has already significantly reduced its GHG emissions per bbl of bitumen produced, it sees SAP as a way to achieve much bigger cuts.
“Our company goal is to reduce the intensity by 33 per cent. And we think we can get there over the next 10 years, predominantly by solvents and by a combination of installing more cogen units,” Chhina said.
“The other thing I wanted to say here is this isn’t going to be a cost to us. It actually adds value. So we’re investing in projects that improve our rate of return, increase our NPV [net present value] and at the same time reduce our carbon emissions.”
Cenovus says pilot results show that adding solvents to injected steam can reduce steam/oil ratios by 30-35 per cent and increase oil production rates by up to 10 per cent. It believes non-fuel operating costs can be cut by 20 per cent.
“The biggest bang for the buck we get in reducing our [greenhouse gas emissions] is going to come from solvents,” Chhina said. “So this is the future in the oilsands — working with solvents and reducing our emissions at the same time.”