Some oil sands companies are increasingly tweaking a decades-old method of tapping underground seams of bitumen as they scramble to eke out profits after slamming the brakes on multi-billion-dollar growth projects.
High costs and pressure to reduce pollution are forcing companies such as Imperial Oil Ltd. and Suncor Energy Inc. to accelerate testing of new technologies touted by executives as a cheaper and more benign way to extract crude from northern Alberta.
The trials include mixing solvents – butane, condensate and other petroleum liquids – with steam at well sites, as well as experiments to see if carbon dioxide can be harnessed to boost efficiency and lower greenhouse gas emissions at new developments.
Such tests have become more important amid growing expectations that triple-digit oil prices are unlikely to return any time soon.
When oil was closer to $100 (U.S.) a barrel, companies designed and built megaprojects using technology pioneered in the 1970s. Now, many of them are retrenching, putting expansion plans on hold while they devise new methods of squeezing more crude from the ground at a much lower cost.
"The easy money in terms of cost improvements has already been made," said Chris Cox, an analyst at Raymond James Ltd. "And even with that, the vast majority of projects today probably still aren't able to compete, even if we assume a recovery to $60 or $70."
While it is spending about $150-million (Canadian) this year to advance new technologies, Suncor is also seeking to grow production through a hostile takeover of Canadian Oil Sands Ltd., its partner in the Syncrude Canada Ltd. consortium.
Analysts have said the $4.3-billion all-share deal, if successful, would enable Suncor to boost output at a hefty discount compared with the cost of building a brand-new oil sands project from scratch.
In the long term, the company is experimenting with steam generators that also inject carbon underground in hopes of reducing the amount of energy needed to pump oil sands crude. A commercial trial is tentatively set for late 2017 at its Firebag project, said Gary Bunio, Suncor's general manager of strategic technology.
The company is also studying results from two pilot projects using solvents, he said in an interview. "If the downturn takes longer than you think it's going to, you have to fundamentally change the cost structure or else your company is going to be stuck in the glue," he said.
Imperial, which has slashed its annual spending outlook for this year by about $1-billion, told investors last month that its version of the solvent technology is now "commercially ready." The technique stands to boost production rates at steam-driven plants by 30 per cent while lowering costs by about one-third – a "step-change improvement," said chief executive officer Rich Kruger.
Such efforts are billed by promoters as a tool for curbing carbon emissions at oil sands sites, in part because they hold potential to reduce the amount of steam and therefore energy it takes to extract crude. Imperial, for example, says the technology could lower emissions intensity by 25 per cent compared with the status quo.
But widespread adoption remains years away. Imperial has more technical work to do before implementing changes, Mr. Kruger said. Similarly, the next steam-driven project on Suncor's radar, called Meadow Creek East, "looks like all the other ones we've built," Mr. Bunio acknowledged.
It's not clear, either, that the use of solvents actually lowers emissions, said Farouq Ali, a petroleum engineer at the University of Calgary's Schulich School of Engineering. "That is yet to be shown convincingly," he said in an e-mail.
He also questions the economic advantages, which hinge in no small measure on how much solvent can be recovered from the reservoir once it is injected underground.
"As I see it, solvent can be looked upon as an expensive oil," he said. It will result in "some additional bitumen" when injected with steam. "But the question is how much more than steam alone?"