April 11,2005

TPC to invest up to $9M in Petrobank pilot project for cleaner oil recovery

Through Technology Partnerships Canada (TPC), the federal government will invest up to $9 million in a process with the potential to revolutionize heavy oil production in Canada and around the world through increased resource recovery combined with substantially reduced environmental impact. The TPC investment is part of a $44.7-million development and demonstration project being undertaken by Petrobank Energy and Resources, of Calgary. The Whitesands pilot project will culminate in the field demonstration of Petrobank's patented Toe-to-Heel Air Injection (THAI(tm)) heavy oil recovery process in the Christina Lake area, south of Fort McMurray.

Petrobank's project will use a new combustion process which combines a vertical air injection well with a horizontal production well. The well bores will be pre-heated with steam. When air is injected, spontaneous combustion will occur. This will generate heat, reducing the viscosity of the oil and allowing it to flow by gravity to the horizontal production well.

The combustion front sweeps the oil from the toe to the heel of the horizontal producing well (giving the process its name). This results in an estimated 70-80% recovery rate of the original oil in place, while partially upgrading the crude oil in situ.

The THAI(tm) technology offers a number of advantages over the current steam-assisted gravity drainage (SAGD) system for heavy oil recovery, including higher potential resource recovery (70-80%), lower production and capital costs, minimal usage of natural gas and fresh water, the possibility of a partially upgraded crude oil product and significantly lower greenhouse gas emissions.

The Canadian oil sands are a strategic resource of North American energy. Current in situ production methods, however, consume large volumes of natural gas, fresh water or hydrocarbon solvents. The Petrobank oil recovery process differs from other techniques in that it does not require a fresh water source, nor does it consume natural gas--both of which are barriers to the extensive development of Canada's heavy oil and bitumen resources. All necessary heat is generated within the reservoir, rather than being introduced via steam generated at the surface. This offers the twin benefits of lower natural gas costs and reduced carbon dioxide emissions.

Petrobank acquired the intellectual property rights to the THAI(tm) technology in 2003 and received regulatory approval in 2004 to proceed with a pilot project to further develop and field test the technology.

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