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SAGD September 14, 2014

Posted by hslu in Economics, Energy, Oil.
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In-situ thermal recovery process to produce oil from heavy oil reservoirs in Alberta, Canada was mentioned in an article in a recent issue of The Economist. An image of it is reproduced below.

image

Source: The Economist, September 6, 2014.

The process is called in-situ SAGD and you can find it discussed in the lower left corner of the picture above. ‘In-situ’ means in place which implies that the recovery process called ‘SAGD’ takes place where the oil is: in the formation hundreds or thousands of feet below the surface.

The article also mentioned Cold Lake which was part of my play ground when I worked up there more than a quarter of a century ago.

Cold Lake is an area of hundreds if not thousands of square miles in size surrounding a small lake called Cold Lake. The area could be very cold in the winter and the coldest temperature I have ever experienced there was -43 degrees F. That’s very cold especially when we occasionally had work in windy and icy conditions.

I was fortunate enough to be involved in in-situ SAGD’s development from the start roughly 30 years ago and we knew we were actually on to something after successful tests of the brand new process in the field in Cold Lake.

We wanted to continue the tests but our company rejected our multiple requests. The reason: oil price was too low.

Yeah, oil price was ridiculeously low and our division was bleeding money fast.

Do you know how much crude oil was selling for back then? WTI sank to as low as $10 and the type of heavy oil I dealt with could only fetch $7 Canadian. Yes, Canadian. Not USD. Back then, $1 Canadian only got you $0.75 USD or something around that level. Tough time indeed for many who worked in the oil patch. Hundreds of my colleagues got laid off over a course of 15 years and oil was a dirty word back then.

Now with WTI selling for $90+, in-situ SAGD is making tons of money for many oil companies up around the Cold Lake area.

I like the time I spent in the field even though I had to fly into Edmenton from Calgary and then drive 2 to 3 hours to the field near Cold Lake. Sometimes, we could take company’s private plane and flew tto the airport near the field from Calgary. After we were done with what we came here for, we could fly back to Calgary. It was convenient and it saved several hours on a round trip.

However, I really didn’t like the ride because, to me at least, it was quite dangerous. The twin-engine propeller plane was old and small. The ride was always bumpy and sudden drop of hundred feet or more at a time was common.

One thing I didn’t like the most was taking off: it was very noisy with the engine at full blast around me and taxing down the runway was always bumpy. Since I was only a few feet away from the pilots, I could see what they did from taking off to landing. I cringed everytime when I saw both of them pushing the throttle lever in the middle all the way down while accelerating the airplane to take off. I kind of held back my breath while our airplane was rushing down the runway and hoped everything was okay. I only felt relieved when we reached the cruising attitude knowing the most dangerous phase of my flight was over.
Our company also had a mid-size jet airplane which could seat 20 people or so. I liked it a lot because we were allowed to enjoy what was in the minibar during our flight. The ride was usually smooth but it only flew to Edmenton. I still had to drive to the field by myself. Later, both airplanes were sold, along with headcount reduction of 25% or so in one fell swoop to reduce spending as crude oil price kept sinking lower and lower.

Our project got canned before it could be widely applied in the field. But, the ‘in-situ SAGD’ process lived on.

After 30 years, I am glad we came up with something that was successfully applied in the fields and I am happy to see it mentioned in a world renown magazine.

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