November 19, 2007

Alberta Energy supports testing of more sustainable oil, bitumen extraction processes

Alberta's Energy Department is providing nearly $16.5 million in royalty adjustments to support two innovative projects that will explore environmentally sustainable ways to recover new energy supplies from existing oil and bitumen deposits.

The royalty adjustments will be made under Alberta Energy's Innovative Energy Technologies Program (IETP). The two projects most recently approved under the program were submitted by Petrobank Energy and Resources and Penn West Energy Trust.

Petrobank's subsidiary, Whitesands Insitu, is developing a pilot project to demonstrate its patented toe-heel air-injection (THAITM) process for in-situ bitumen combustion and heavy oil recovery. The process involves the injection of air into a vertical well at the end, or "toe," of a horizontal production well.

Air injected into the vertical well causes a portion of the oil to oxidize rapidly oxidize, burning at temperatures over 400*C. The combustion heat reduces the viscosity of the bitumen, allowing it to flow into the horizontal production well.

Laboratory physical tests and reservoir simulation modeling suggest that this combustion "front," sweeping the bitumen from the toe to the heel of the horizontal production well, could recover between 70 and 80% of the bitumen, while partially upgrading it in-situ.

The process does not require the use of natural gas or water, and has the potential to significantly lower bitumen production costs and operate in a broader range of bitumen and heavy oil reservoirs than the widely-used steam-assisted gravity drainage (SAGD) technology.

Petrobank will test the process over a period of up to five years on Whitesands' oil sands lease, about 13 km west of Conklin, Alberta. The project will involve three pairs of vertical injector and horizontal production wells, together producing an estimated 1,800 barrels per day of partially upgraded bitumen. The facilities and wells will be extensively monitored, yielding data on reservoir conditions and production parameters. Surface facilities will consist of conventional oil field treatment and handling equipment.

The IETP has approved $10 million in royalty adjustments to support this research. More information is available from

Chris Bloomer at Whitesands Insitu, 403/750-4400.

Penn West Energy Trust's CO2 pilot project is designed to evaluate the feasibility of recovering additional oil from an area of the company's South Swan Hills unit, 175 km northwest of Edmonton. Carbon dioxide will be injected into the reservoir, which was previously flooded with water and hydrocarbon solvent. The injected CO2 will target areas within the Beaverhill Lake reef that were not adequately swept by the hydrocarbon solvent. This process is predicted to recover an additional 13% of the original oil in place above the current volume forecast.

If successful, the pilot would yield both economic and environmental benefits. It would have a substantial positive impact on building the required capture and transportation infrastructure to deliver CO2 to the Swan Hills area. A multiphase commercial project would likely increase Alberta oil reserves and royalty revenue. And the use of CO2 would also result in permanent sequestration of significant volumes of the greenhouse gas.

The IETP has approved $6.47 million in royalty adjustments for this project. More information is available from Brendan McGowan at Penn West Energy Trust, 403/777-3320.

The five-year, $200-million IETP offers royalty adjustments of up to $10 million per pilot project that demonstrates the use of new or innovative technologies to increase environmentally sound recoveries of existing reserves and encourages responsible development of new oil, natural gas and in situ bitumen reserves. More information on the program is available on the Alberta Energy Web site, www.energy.gov.ab.ca.

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