Petrobank, Baytex try new oil extraction technique

A Calgary company is using a counter-intuitive process - burning oil to extract it - in an experiment that aims to revolutionize heavy-oil production around the world.

Petrobank Energy and Resources Ltd. , which piloted the technology in the Athabasca oil sands, is now applying it to a Saskatchewan petroleum reservoir in a joint venture with Baytex Energy Trust. The technology uses a slow-moving wave of underground combustion to heat reservoirs to temperatures as high as 600 degrees, hot enough to melt the heavy oil from the rock in which it is locked.

Heavy oil is a massive global resource; in Saskatchewan alone, some 20 billion barrels of heavy crude have yet to be recovered, in part because current technologies can't get it.

Producers currently use a cold flow technique that uses suction to pump heavy oil from the earth. But, "you only get about 6 to 10 per cent of the oil out [that way] so you've got 90 per cent of the oil still in the reservoir with no way to get it out. And this is the way to get it out," said Chris Bloomer, Petrobank's senior vice-president and chief operating officer for heavy oil.

Mr. Bloomer said the company's pilot project ran into some problems in recovering the oil (design changes have since been made to some equipment) but proved the science behind the method.

The current Saskatchewan demonstration project, near the town of Kerrobert, is being conducted on a 50-50 joint venture basis with Baytex, which produces 23,000 barrels of heavy oil per day.

Petrobank intends to license the technology if it's proven successful, and believes it can recover 70 to 80 per cent of remaining heavy-oil reserves in Saskatchewan. It also hopes it can be used in heavy oil reservoirs in places such as Venezuela and China.

About 10 per cent of the reservoir is burned during the process, but Petrobank believes it produces fewer greenhouse gases than natural-gas fired steam extraction processes.

Its cost remains one of the key questions the company hopes to answer with its $12-million Saskatchewan demonstration project, which is expected to produce 1,200 barrels per day.

"Anything that can increase recovery factors on heavy oil reserves is obviously good for heavy oil producers, and [Baytex]is one of the biggest," said Kristopher Zack, an analyst with Raymond James. "But I think the jury's still out on whether it works and what the economics are."