The tangled tale of Petrobank’s THAI extraction technology

Alberta's oil patch glitters with success. Engineers, physicists and geologists are able to extract oil and natural gas that they once wrote off because it was deemed too expensive and challenging to suck out of the ground. But while the energy industry has racked up remarkable wins, some successes are debatable.

Petrobank Energy & Resources Ltd.'s banner technology, best known by the acronym "THAI," made it all the way to the pilot project phase in the oil sands before the company yanked it from its demonstration project in northern Alberta in September, 2011. However, Petrobank argues THAI did not fail and the company is trying to keep the technology alive in other slices of the oil patch.

It takes decades to perfect technology in the energy industry, with try, try again serving as a mantra among petrochemical engineers and academics. Petrobank serves as a prime example. Its key method of extracting oil has been batted around for years, and when it proved less than wonderful in the oil sands, the company packed up the blueprints and put it to use in Saskatchewan. It is too early to say whether THAI will hit the mainstream, but the same was said for the oil sands themselves just decades ago.

THAI, which stands for Toe-to-Heel-Air-Injection, is an in-situ heavy oil extraction method, meaning it uses wells rather than mines to get oil out of the ground. The process needs horizontal and vertical wells. Each horizontal production well is met with a vertical air injection well at the toe.

First steam is pumped down the vertical well to heat the bitumen beneath the surface. When the reservoir hits a certain temperature, air is injected down the vertical well and the bitumen or heavy oil auto ignites. The combustion process further heats the resource, allowing oil to move into the horizontal production well and then up the pipe to the surface. By burning the oil underground, THAI creates an upgraded crude. It also saves on steam and natural gas, Petrobank notes.

Petrobank believed combustion could churn out as much as 50 per cent more oil than steam-assisted gravity drainage (SAGD) extraction techniques, which experts say will be needed in 80 per cent of the oil sands, elbowing aside mining. THAI did indeed produce oil in northern Alberta. Inside its demonstration facility at Conklin, workers would open a small valve and let crude stream into a cup for visitors to view. The pilot produced an average of about 150 barrels of oil a day, and peaked at 400 barrels.

"This can play a very big role in the oil sands," Chris Bloomer, Petrobank's chief operating officer, said in June, 2010. "It has the potential to replace SAGD."

A year later, Petrobank pulled THAI from its Conklin demonstration project. "We recently encountered evidence of combustion gas possibly migrating up into the McMurray A formation," the company said in a statement at the time.

THAI's failure in the oil sands did not catch everyone off guard.

"Based on our analysis, we believe that the THAI process is still at a very early development stage and that considerable risks still exist with respect to commercializing the technology. As a result, we have used a 25 per cent probability of success for THAI," Justin Bouchard, a Raymond James analyst, wrote in an extensive report published Oct. 23, 2007.

Mr. Bloomer argues that Petrobank did not yank THAI out of the oil sands because of technical problems. Instead, he said, red tape made Alberta an unfriendly place to do business. The company, he said, made a "conscious decision" to move out of Alberta because it could move much faster in Saskatchewan.

"When we closed Conklin, we could have done more there but from the perspective of getting regulatory approval to do stuff, it is very difficult. And not just because of our technology, that's just the way it is," he said. The company decided the oil sands was a "large company game" best played by outfits with big balance sheets and the luxury of time.

"We'll go to Saskatchewan and we'll sit down and we'll say: 'This is what we want to do,' " Mr. Bloomer said. "And they say: 'Great. This is how you do it.' And they are on board with it."

Mr. Bloomer admits the company did encounter problems such as sand production and its liner design and its slow reaction time hampered the company.

He argues that other oil sands technologies have also struggled and THAI deserves similar patience. "SAGD is still a difficult, marginal technology. There's a lot of people out there that are having trouble with it. And it is not all rosy," he said. "And the microwave technology has been done before. The electric heating has been done before. There's a whole bunch of these solvents that have been done before and people are hanging their hats on solvents for SAGD."

With Conklin mothballed, Petrobank is now focusing on its properties in Kerrobert, Sask. The company started with two pilot wells and has since drilled 10 more. The project is ramping up slower than the company anticipated, and again, Petrobank is adapting as it learns from its errors. It has a better handle on well design and has more efficient air compressors, for example.

"We really haven't encountered what I would say is a fatal flaw," Mr. Bloomer said. "We can manage everything that this process throws at us. What we're working on now is the optimization to get the fastest ramp up on production and to get the biggest volume."

THAI technology, he argues, is proven and now the company is striving for commercial success. Kerrobert churns out around 350 to 500 barrels a day and Petrobank has spent about $300-million to $400-million there, including land leases. Mr. Bloomer says the company could break even at 800 to 1,000 barrels a day.

"What we're doing in Saskatchewan will have global impacts, because you can use this technology everywhere," he said. "There are benefits that still apply to the oil sands."