Wednesday, August 3, 2011

Oil Sands Production Costs to Drop?


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Canada, and many parts of the western United States, have vast reserves of oil trapped in so-called "oil sands" and it has, historically, been too expensive to extract the oil from the oil sands.  Oil trapped in oil sands is too thick to flow easily and it must be refined before it will flow through a pipeline.  Much of Candada's oil sands are accessed and refined - through heating the oil - at the surface.

Drilling for oil in an oil sand formation is difficult because the oil has to be heated downhole before it will flow.  Until recently, steam was injected downhole to heat the oil and cause it to flow.  The article linked below describes a new process that involves the use - and re-use - of propane as a solvent cabable of reducing the viscosity of the oil in the oil sands, enabling production without steam.

The article also highlights the value of horizontal drilling techniques in the process.

Because the new process requires less energy, it should also be cheaper. Smith adds that the equipment needed for heating and reusing the propane is less expensive than technology for managing the large volumes of water used in the steam process. With conventional techniques, oil prices have to be above $50 to $60 per barrel—as they have been for several years—for oil sands to be economical. Smith says that with the solvent process, oil sands are still economical even if oil is $30 to $40 per barrel, close to what it was in the 1990s and early 2000s (in inflation-adjusted dollars). N-Solv says the lower costs will make it possible to economically extract more than twice as much oil from the oil sands compared to conventional technologies.

Read the whole thing


James L. Salmon, Esq.
Collaborative Construction
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