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Calgary-based Husky Energy hopes to tap new type of oil resource. (Jeff McIntosh/The Canadian Press/Jeff McIntosh/The Canadian Press)
Calgary-based Husky Energy hopes to tap new type of oil resource. (Jeff McIntosh/The Canadian Press/Jeff McIntosh/The Canadian Press)

Husky Energy hopes to tap new type of oil-sands reservoir Add to ...

Husky Energy Inc. is drilling test wells into a new type of oil resource that holds promise as a major source of Alberta crude, if it can be profitably exploited.

On Monday, the company revealed a new estimate suggesting it might one day be able to pull as much as 10 billion barrels of oil from a relatively new type of reservoir on its oil sands properties. The vast pool is contained in the so-called carbonates, which are limestone rocks that contain crude, but which have so far resisted efforts at commercial production.

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“We recognize the technology isn’t fully cracked yet, but when we do, this is a mind-boggling resource,” Asim Ghosh, Husky’s chief executive officer, told investors in Toronto on Monday.

Husky revealed that it is unlikely to see growth in 2012, as lengthy maintenance at two of its Atlantic Canada operations pare away oil production.

But it also disclosed that it has begun what it calls “pilot” operations, using vertical wells to tap into its carbonate resource, which according to a recently completed third-party estimate contains 28 billion barrels of oil. Of that, 10 billion barrels are considered a “contingent best estimate recoverable resource.”

That is a very early-stage calculation, and it could be optimistic. Several companies are chasing the carbonates; one, Athabasca Oil Sands Corp. , has an independent estimate showing 15 billion to 18 billion barrels in place, of which 2.7 billion barrels may be recoverable. Athabasca thinks it can do better, but that ratio suggests Husky may be able to pull less from the ground.

That assumes the oil can be brought up. Carbonates have Swiss-cheese-like networks of openings, and getting the heavy oil out is a challenge.

But the prize is huge: The oil sands carbonates hold about 400 billion barrels of oil. Even if only a small fraction can be extracted, it stands to increase the overall production potential of the oil sands, which currently sits at slightly more than 170 billion barrels. Efforts to tap the carbonates date back decades; Unocal, for example, produced 100,000 barrels in the 1980s.

One of the current leaders in chasing the carbonates is Laricina Energy Ltd., which has conducted its own test operations, producing about 26,000 barrels so far. It has applied for a 10,700-barrel-a-day commercial plant, which it hopes will win approval midway through 2012. Laricina chief executive Glen Schmidt said the company is “quite comfortable with meeting our objective of meeting or beating the typical” oil sands well – but it will still take years to prove.

Husky, too, acknowledges that its carbonates are a “long-long-term” resource. The company hopes to submit a regulatory application for more work in 2014, but Mr. Ghosh said, “I certainly think any commercial impact of that would be beyond 2020.”

In the meantime, Husky is entering a slower period. In the past year, production rose 9 per cent, and its netbacks – or profits – rose 20 per cent. The coming year will be more difficult. Two offshore platforms in which the company has a substantial interest will be taken down for maintenance, which will last 125 days for Sea Rose, and 15 weeks for Terra Nova.

That downtime is expected to diminish annual production by 15,000 barrels a day, which will lead to output of 290,000 to 315,000 barrels a day in 2012, or roughly even with the past year.

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