By June 19, 2017 Read More →

Oilsands innovators look for ways to compete with US shale

oilsands

Calgary-based Nsolv is testing the use of solvents to liquify oilsands bitumen. Nsolv image.

Oilsands innovators developing new techniques, products to help reduce costs

A report by Reuters on Monday highlighted the innovators working to help Alberta oilsands producers find better, cheaper ways to get oil out of the ground and compete with the booming US shale industry.

A handful of firms are running multi-million dollar pilot projects with large oilsands companies that they hope will reignite innovation in the world’s third-largest oil reserve.

Joseph Kuhach runs Nsolv, a small Calgary-based firm that is testing the use of solvents to liquify the peanut-butter-like bitumen buried in the oilsands.

According to Kuhach, solvents can cut 20 to 40 per cent from the cost of producing oil.  Currently, many producers use steam to heat the sands underground to extract the oil.

But, with Canadian producers struggling with low crude prices, he says its a tough sell.  Companies are reluctant to invest in multi-million dollar technology that has not been proven on a commercial scale.

“The comment I hear so often when I am talking to companies is, ‘We want to be the very first in line to be second’,” Kuhach told Reuters. “It’s easier to go after incremental improvements that they can back away from with no great cost and no great risk.”

Right now, Nsolv is finishing up a three-year pilot project with Suncor Energy at the Dover oilsands lease.  Erin Reese, spokeswoman for Suncor says the company is currently evaluating the results of the project.

Two decades ago, innovators developed the technique using steam in the oilsands to help soften up the bitumen, making it easier to extract.  Oil majors were eager to adopt the technology.

Since then, breakthroughs in the oilsands have stalled.  According to Reuters, the risk-averse culture has left the oilsands years behind US shale where some producers say they can turn a profit at $15/barrel.

Despite the cautious nature of oilsands producers, some companies like Cenovus and Suncor are testing the addition of solvents to steam in their operations.

Kuhach says this allows the companies to adapt existing thermal plants rather than build new ones.

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Recently a number of multinational oil companies, including Shell, Statoil and ConocoPhillips have sold their oilsands assets, which means there are fewer potential customers who may adopt new technology, Joe Gasca, chairman of Fractal Systems told Reuters.

Fractal Systems processes bitumen into higher-quality crude at the wellhead.  The company is currently operating a 1,000 barrel per day (b/d) test plant in eastern Alberta for Cenovus.  Cenovus has not decided if it will expand the project to a commercial level.

According to Steve Fisher, chief executive of a Calgary-based startup company called Veerum, Canadian producers have fewer projects to experiment with.  They also are dealing with complex, long-term techniques where it takes months of pumping steam into underground reserves before the bitumen starts to flow.

Engineers are reluctant to experiment with the delicate balance of heat and pressure.

“Shale is like going on a date, the oil sands is like getting married,” he told Reuters. “The risk for capital is high in the oil sands, you have massive assets that need to complete on time and operate for 40 years to make money.”

According to Fisher, Veerum’s technology cuts capital costs by tracking how accurately a new project adheres to design specifications during construction.  Fisher says his technology reduces the need for costly fixes later.

Veerum is supported by GE’s Zone Startups Calgary, which is an incubator for new companies in the city.

Sales and marketing, or lack thereof, along with low oil prices are often roadblocks for these companies as well.

Marty Reed, chief executive of clean-tech fund Evok Innovations said “At $100 a barrel it didn’t take a sales and marketing genius to sell the product.”  He added “But if you are a new company trying to get Suncor to adopt a new widget those skills are crucial.”

Evok was launched in 2016 with a $100 million investment over 10 years from Cenovus and Suncor to develop technologies to cut oilsands costs and emissions.

But one of the problems facing innovators in the oilsands is it takes years to build projects and billions of dollars in upfront capital.

Even if pilot projects like the steam-and-solvent projects work, it would take another three to five years for the technology to become standard practice in the oilsands, according to Dan Wiklum, chief executive of the Canadian Oil Sands Innovation Alliance.

As well, venture capitalists are now more cautious about new oilsands investments since the global companies pulled out, according to Wal van Lierop of Vancouver based Chrysalix Venture Capital.

“I am really hoping we can get breakthrough technologies, but I don’t see them yet,” he said.

“Mediocracy will not help. It will be go big or go home.”

NEB

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