Lloydminster and The Future of Heavy Oil
by Maurice Dusseault

Ladies and Gentlemen, Friends and Colleagues

 First, I would like to congratulate the Lloydminster Oilfield Technical Society, as well as all others involved in organization, including the companies that participate, for the remarkable effort over the last 20 years in developing the Lloydminster oil show and conference into an ongoing success story. 

 I have talked to many people in many countries about what is happening in the heavy oil and oil sands industry in Alberta and Saskatchewan, but I take particular pleasure at talking to you tonight.  I must admit that I was more nervous about this after-dinner talk than any other talk I’ve given in the last few years.  After all, what can I tell Lloydminster people about heavy oil that you don’t already know?  On the other hand, coming here is like coming home.  My great-grandparents settled in the province over 100 years ago as farmers, so Alberta is home to me in many ways. 

 Heavy oil has been good to Lloydminster, particularly in the last twenty years.  Lloydminster has also been good for heavy oil.  Many new technologies have been developed in this region, and many more have been attempted and abandoned.  You can fly over this region and see many derelict pilot projects where some oil company in the 1970s or 1980s tried the latest idea to produce cheap heavy oil, only to walk away a few years later, humbled by the huge technological difficulties.  This is the main reason why, for most of Lloydminster history, large integrated oil companies ignored you: heavy oil is hard to get out of the ground.  But failures are part of the learning process, and major new successes have taken place.  Big oil is no longer ignoring heavy oil; they understand the vital role that heavy oil will play in the next few generations.  We also should understand this because business, political, and environmental decisions depend on it.

 The rate of increase in conventional oil production worldwide is slowing down, and many experts predict that the peak will occur in the next five years.  As a result of this, there has been a dramatic recent upsurge in heavy oil and oil sands development.  But, just how much heavy oil is there in the world?

There is 2.5 - 3 times the amount of viscous oil as there is conventional oil.  Conventional oil is soon going to peak, slowly decline, and then heavy oil and oil sands will make up most of the difference.  In fact, if we extract 30% of our viscous oil in Canada, it will be enough to meet 100% of current Canadian and USA needs, about 20 million barrels per day, for over 100 years.  I often ask American colleagues what they are doing in the Middle East fighting wars over oil when a fully secure supply exists in Canada for over 100 years.  Interestingly, two years ago, Canada became the largest exporter of oil to the USA, and has likely permanently passed Saudi Arabia and Venezuela.  Few Americans or Canadians know this. I believe that our American colleagues will soon clearly recognize the advantages we bring them, and we may even see an acceleration of heavy oil and oil sands development that could surpass the Alberta Energy Utilities Board predictions.  It makes sense.

 These predictions suggest that both heavy oil and oil sands production will triple in the next ten years, and I know this is reasonable.  In fact, the major limitation on production capacity right now is the lack of sufficient upgrading capacity in North America.  There are about 850,000 b/d of heavy oil and bitumen produced (not counting oil sands mines), and over 80% of this is shipped to the USA as raw, diluted crude oil for upgrading.  We are now at maximum upgrading capacity, and need more upgrading capacity for more growth.

 So this means that the Lloydminster area is going to be experiencing continued robust growth for many years, certainly well beyond my lifetime.  Let’s review some of the developments made in the Lloydminster area, in a general manner.  [There has been a] massive production technology shift in the last 20 years:

 Only cyclic steam injection was viable 20 years ago, but a new group of production technologies has emerged.  Cyclic steam has some limiting difficulties and the operating costs are high. The Lloydminster area has been the focus of CHOPS – Cold Heavy Oil Production with Sand, but horizontal wells and SAGD were also largely developed in the area.  The technology drivers are listed here, but this is a very short and incomplete list of the many small micro-engineering improvements that have been made.

 Let’s look a little closer at some of the technologies that have been developed in the last 20 years.  The most important one for the region is perhaps CHOPS.  Here is an example of a single well that, after 12 years of very modest production, was converted to CHOPS.

 What has made CHOPS viable, even in zones as thin as 4 m?  First, and perhaps most important, was the development, here in Lloydminster, of progressing cavity pumps that can tolerate extremely large amounts of sand in the viscous oil.  The first PC pumps used in 1982, only 20 years ago, were barely adequate, but continued micro-engineering has resulted in highly reliable pumps that can last 20 months or more while pumping 4-6% sand.  These pumps are now being shipped around the world, wherever there are large volumes of sand in heavy oil.  In China, when I advise on a heavy oil project, I insist on Canadian-made PC pumps.

 The drilling of long horizontal wells at shallow depth was perfected in the 1980’s and early 1990’s in the greater Lloydminster region.  Horizontal wells have opened up new technologies based on gravity drainage.  The idea is to heat the oil and let it drain by gravity to the lower production well. 

 New developments have been made in the lifting of the hot oil, and these developments are continuing here in the Lloydminster region.  Here is a picture of two SAGD well pairs operated by Husky Oil at nearby Pike’s Peak, using two different lifting methods.  Of course, Husky has been a mainstay of the heavy oil industry in the Lloydminster area for many years.

 Oil is heavier than the steam and gas, so the oil and water sink to the bottom, and the steam and methane rise to the top during the steam-assisted gravity drainage process.  The process is much more stable than any high-pressure injection process, requires less steam, and produces more of the oil in place. 

 There are many supporting technologies that have been developed as well.  For example, CHOPS means sand handling and disposal, either in landfills or through slurry injection into salt caverns or sand strata.  A whole industry has arisen, based on the need to handle sand efficiently and in an environmentally safe manner.

 There are many other new technologies in various stages of development that started here in the Lloydminster area.  The list includes down-hole electric-drive PC pumps, computer-optimized production management, high-temperature pressure sensors, pumps that can directly extract 55% sand from the well, new workover approaches such as foam and pump-to-surface methods, new oil-water-sand separator technology, new production technologies, new methods to increase well flow rate, improvements in upgrading, and so on.  For example, we are trying reservoir pulsing as a means of sustaining CHOPS production in this region.

 I understand that there are many emerging technologies in upgrading that will reduce the costs per barrel in the future, and make these huge facilities cheaper to develop as well as more efficient.  I’m told that the Lloydminster upgrader consistently operates at over 110% of its design capacity!!

 There are so many developments taking place that I haven’t mentioned that I must apologize to anyone who I’ve neglected, and that is probably half of this room.

 So what is the future for the Lloydminster region?  What would I like to see?

 I’d like to see the provincial governments recognize the importance of CHOPS and not focus taxation benefits solely on huge oil sand plants.  I’d like to see Lloydminster technology spread around the world.  I’d like to see more upgrading capacity installed in Canada.  I’d like to see greater environmental care.  I’d like to see continuing innovation here in the Lloydminster area.  I’d also like to see warmer winters and more summer rain!

 Lloydminster may be a small city, but the region has played a huge role in the development of technologies that are now spreading around the world.  Lloydminster has always been a special place for me, and many of you know that I prefer to come here rather than to visit most other places in the world.  I guess you can take the boy out of the country, but you can’t take the country out of the boy. 

 Thank you all, and continued success in the years to come.