Massive Surmont thermal expansions amplifies the cautious return of development

Oilsands Review — While many oilsands production projects were shelved in the wake of the 2008 oil price collapse and global recession, one significant one was not. And now, as its leaders say according to plan, ConocoPhillips Canada and partner Total E&P Canada are going ahead with the second phase of the Surmont steam assisted gravity drainage project.

“It has always been our plan to move ahead with Surmont Phase 2 at this time,” says Matt Fox, president of ConocoPhillips Canada. “We are ready to proceed.”

By in situ standards the project is massive, adding 83,000 barrels per day of production capacity, all in one big chunk. However, Fox says it will be executed with a “hybrid approach” in the spirit of phased building, while at the same time enjoying the economies of scale of a larger operation.

“You can think of it as a big project being executed in several stages strung together.”

While ConocoPhillips, which operates Surmont alongside its 50/50 partner, does not offer cost estimates, Fox says the expansion project hopes to enjoy some of the capital cost-softening the industry as a whole is experiencing.

“Had we sanctioned in the middle of 2008, we might have expected costs to be higher than we now expect them to be,” he says, adding that “we weren’t ready to sanction in 2008, so it didn’t really matter to us.”

Surmont began as a pilot project in 1997. In 2003, ConocoPhillips received regulatory approval for both commercial phases, totalling 110,000 barrels per day. First steam at the 27,000 barrel per day Phase 1 occurred in June 2007, with first oil production following in October of the same year. In the third quarter of 2009, production averaged 16,442 barrels per day, up more than 3,000 barrels per day from the same period in 2008 as ramp-up continues. Surmont Phase 2 operations are expected to commence in 2014, with first oil flowing the next year.

With the successful construction of Surmont Phase 1 and over two years of commercial operations, ConocoPhillip’s Canada lead says this next giant phase will incorporate some changes.

“There are literally hundreds of learnings from Phase 1 in construction and operations,” says Fox.

In the second phase, the company plans to reduce its greenhouse gas emissions by lowering its steam-oil ratio (SOR). It will do this by “optimizing well placement to take advantage of the geology of certain locations.”

According to the Energy Resources Conservation Board, Surmont Phase 1 averaged an SOR of 2.79 between January and November 2009—among the top 10 lowest in the industry. The plan for the combined two phases is an SOR of about 2.5.

“Steam-oil ratio is closely tied to the characteristics of the reservoir and we’re going to plan our first wells in places where we know we’ll need a lower steam-oil ratio and therefore burn less gas per barrel of oil we produce,” says ConocoPhillips.

Surmont Phase 2 will also include the use of water with increased salinity, and the incorporation of an evaporator in the water treatment process, designed to improve the overall water cycle and reduce the amount of source water required for steam generation.

Fox notes the expansion project will pilot what the company believes is a first in the oilsands industry—vacuum-insulated tubing in its wells.

“This reduces heat loss as steam moves down the tubing into the reservoir, and improves energy efficiency,” he says. “It is used in other parts of the world in thermal operations.”

The new well pads will also be modified in an effort to minimize land disturbance, the company says.

“Surmont Phase 2’s well pad design and well configurations will enable us to improve our recovery efficiency,” reads a description of the project. “In other words, we will be able to recover more barrels of oil per hectare from a smaller well pad in comparison to our Surmont Phase 1 project.”

While announcing the sanction of the Surmont expansion, ConocoPhillips reiterated its plan to spend more than $300 million in heavy oil research over the next five years to “improve economic and environmental performance.”

Says Fox, “Technology is going to provide a lot of incremental improvements and some step-change improvements.”

Site clearing in preparation for earthworks and utilities is currently underway at the expansion site, about 63 kilometres south of Fort McMurray, Alberta.