SAGD Basics

Presentation Overview Forces driving current oil sands development What are oil sands General SAGD process overview and project lifecycle Reservoir and operating considerations SAGD surface facilities and produced fluids processing Benefits & Challenges, related technologies and the future of SAGD Questions The goal for this presentation today are to give everybody an introduction to processes putting us through oil sands developments, What are Oil Sands, What is Oil Recovery Options, What are the general SAGD Process Overview. We have to focus on what is going on in the reservoir because if you can understand what is going on in the reservoir you tend to understand why you are building the plant, the way it’s built and what is designed to do. SAGD is very much a steady state unit operation in a processing plant, that is a steady state process. The emphasis today is to give an overall picture. Of course we are going to touch on some of the surface elements. There will be future presentations that go over what those elements are and how to size them. We are determined to bring everyone up to the same baseline in the company. To make us a better company to compete in the market for these types of projects. The more everyone knows the better off we are. The topics today include operating considerations around the reservoir, the surface facilities, some benefits and challenges, the future of SAGD and SAGD derivatives.

Introduction Declining “conventional” oil reserves Global demand for energy is steadily increasing Enormous deposits of heavy oil (bitumen) in oil sands Until recently, production of these resources was uneconomical Alberta oil sands reserves are estimated at 174 billion barrels (second only to Saudi Arabia) So why are we chasing heavy oil? There are declining conventional oil reserves and we are finding continuous trend across the world that light oil (being conventional) is being depleted at steadily increasing rate. Also energy demand is steadily increasing and the only way we can make up the reserve quantity required, to make the demand needs is to start producing the heavy reserves. Of course, one of the largest reserves (the are three deposits Athabasca, Peace River and Cold Lake.) is in fact in Alberta with continuation into Saskatchewan as well in the Athabasca deposits. Until oil hit the sky high levels in price production of these resources were generally uneconomical and now we have reached the point that it is not only economical but exceptionally attractive (practically given the 1% pre-capitial-payout royalty that the government allows). Until project payout a fantastic deal for the producers, so very attractive. Where do we rank? At a 174 barrels, puts us basically 2nd to Saudi Arabia. If you add on the continuation into Saskatchewan it would be more than Saudi Arabia.

What are oil sands? Water Sand Crude deposits that are substantially heavier (more viscous) than other crude oils Consist of sand, bitumen, clays and water Result of millions of years of biodegradation of conventional (light) crude oil Each grain has three layers: an envelope of water surrounding a grain of sand, and a film of bitumen surrounding the water Bitumen requires more processing than conventional crude Bitumen does not flow at reservoir conditions Bitumen So what are Oil Sands? Oil Sands are crude deposits that are substantially heavier than other crude oils. If you go up to the tar sands you’ll find that the oil present it is a joy to work on. It is a near solid substance embedded with sand and gravel etc.. It has to be heated to a point where it’s mobile. It is comprised of three things: a sand layer surrounded by a water layer which is in a continuous phase of bitumen. When a reservoir is deemed totally saturated, we are talking about a combined solid that surrounds 16-18% bitumen, so 84% of it is sand. The oil itself is contained in the void space between sand grains.

Viscosity and Temperature Due to high viscosity bitumen will not flow at reservoir conditions (>1,000,000 cP) The key to in-situ production is mobilization of the bitumen (lower its viscosity) Viscosity is a function of temperature Viscosity of Bitumen vs. Temperature Reservoir Conditions Mobility Limit Typical Viscosity for Treaters Viscosity and Temperature Bitumen really does not xxx reservoir conditions. It is a theoretical viscosity and we could measure it over a million xxx, again it is just like xxxx you can’t really tell the difference. It is a very hard solid, you xxxx. Heated xxxx is of course mobilizing the bitumen lowers viscosity so it feels like xxxx. Viscosity of course production function of temperature so, the viscosity temperature graph, reservoir conditions adhere mobility limits to 5000 xxx, which is to us Process Engineers, we use this curve and that is where we come up with tracing temperature. We will put any of our typical hold temperature on any hydro carbons xxxxx. We find that the hold point is around 60 degrees, which if you look on the graph is about 5747. Some background on that. Further down the graph, you find treating viscosity at 20-30 xxx, and of course, that falls in the xxxx

SAGD Process Overview Typically in the SAGD process two horizontal wells are drilled near the bottom of the pay zone Payzone thickness usually between 20 & 75 meters The top well is called the injector and is positioned approximately 5 m above the lower well called the producer Lower well located at bottom of producing zone Depending on reservoir conditions, the oil is pumped or lifted to the surface Previously, SAGD projects tended to use gas lift (i.e. the introduction of gas under pressure) rather than pumps if artificial lift is needed. Trend toward Electrical Submersible Pumps (ESP) Vertical depth of the wells in Alberta ranges from 150 m to 750 m Horizontal portion of the well pair between 250 and 1000 meters Each project will consist of a large number of horizontal well pairs So focus overview, What is SAGD? Typically it is two horizontal wells drilled near the bottom of the pay zone filled with bitumen. Payzone thickness is usually between 20 & 75 meters. The two wells are located 5 meters apart with upper one being the injector and the lower one being the bitumen producer. The lower wells will be right on the basement block, xxx so right on the water xxx. Depending on the reservoir conditions primarily being xxxx the oil will be either pumped or lifted to the surface by gas or steam or some other method. Having to trend away from gas xxx, of course using pumps is a gentler way of recovery. Generally applicable to a depth of 150 – 750 meters. The horizontal portion of the well pair is up to 1000 meters long and of course, there are many well pairs on the project. So it is quite a drilling exercise to drill two well pairs 5 meters apart and the end of the well pad is 2 km away from the rig. It is an interesting piece of science. (I could not make out this sentence, it ends like this) very impressive technology. It is about a half a million dollars to develop, so by all means it is not small change.

SAGD Configuration Looking at the SAGD well pair. That’s a typical configuration.

Normal Operations 100% Quality steam is injected into the reservoir through the upper horizontal well Steam rises through the formation to heat the bitumen forming a steam chamber Steam condenses at the interface The heated bitumen and water then flow by gravity to the production well Production well is fitted with a slotted liner to prevent sand production Steam fills the void left by the bitumen – chamber grows up and out

Development of Steam Chamber Vertical Cross-section Through Fully-Developed Steam Chamber

Blowdown Phase No Steam Injected Occurs usually 6-9 years into well life

Steam Chamber Pressure Considerations Steam in the Steam Chamber is at saturated conditions therefore steam temperature is determined by pressure The following must be considered with regard to operating pressure: Formation fracture pressure Three operating modes: Balanced pressure Low pressure High pressure Requirements for lifting produced fluids to the surface Thief zones (gas and water)

Keep Dp small to maximize stability steam + oil +water + CH4 liquid level oil and water q lateral steam chamber extension “insulated” region countercurrent flow CH4 + oil Keep Dp small to maximize stability overburden water leg cool bitumen plug

Other Reservoir Considerations Net pay thickness Presence of cap rock Potential thief zones (either top gas or top water) should be restricted in thickness and lateral extent Bottom Water No connective shale layers May affect design and operations

SAGD Surface Facilities Overview Field Gathering Facilities Distribution and gathering systems (production gathering, steam distribution, water supply & disposal) Well pads and associated facilities Central Processing Facility Produced liquids treating Water treatment Produced gas treating Steam generation Product tankage

Generalized SAGD Process Overview Brackish &Fresh Water Make-up from Water Supply Wells Utility Neutralization Losses Water Treatment Produced Water Skim Oil Recycle Deoiling Slop Recycle Utilities Treated Water Interface Fluids Oily Water Desalting Fuel Gas Fuel Gas System Produced Gas Diluent Bitumen Steam Production Separation & Degassing Reservoir Sand Produced Water Steam Generation To pipeline or tanks Produced Gas Dilbit LACT Blowdown to Disposal Wells Sand

Field Gathering Facilities Distribution and Gathering Systems Consist of above ground pipelines connecting central facilities to well pads Steam and produced liquids pipelines are insulated to prevent heat loss Pipelines for: Gas distribution Water Supply and disposal Production gathering (bitumen, water, gas) Steam distribution

Field Gathering Facilities Well pads Minimize site disturbance and optimize operational efficiencies Project’s consist of multiple pads with multiple well pairs (5 – 13 pairs per pad) Connected to central processing facility by pipelines Contain: Wellheads Separators Production measurement facilities

Well Pads - Production Side Schematic

Pad Facility

Central Processing Facility Produced Liquids Treating The SAGD process will produce both bitumen and water Two main approaches to treating Diluent treating Results in a “dilbit” product that can be transported by a conventional pipeline Subject to diluent shortages May see trend to use SCO MEG Energy, Foster Creek, Surmont Flash treating Product requires a heated pipeline JACOS, MacKay River

Produced Liquids Treating Diluent Treatment System Produced liquids are cooled prior to diluent addition Until oil floated from water Separation of bitumen and water: Possible Slug Catcher Free Water Knock Out Vessel A Treater (Desalter)

Produced Liquid Treating: Diluent Treatment Schematic

Produced Liquids Treating Flash Treatment System Produced liquids are heated to 220°C Water floats on oil Skim water from oil Pressure is reduced to boil remaining water Separation of bitumen and water: High temperature separator Flash treater Ancillary equipment

Central Processing Facility Water Treatment Facilities are designed to minimize water usage through recycling Water that cannot be recycled is sent to disposal wells Make – up water from water supply wells is combined with recycled water between the oil removal and water treatment systems Water treatment is required to ensure that produced and make-up water meet quality standards required for the steam generating equipment

Central Processing Facility Water Treatment Water treatment facilities include: Oil removal systems: Skim tanks Induced gas or induced static flotation Oil filters Water treatment systems (reduce hardness) Warm lime softener Gravity filters Strong and weak acid cation exchangers

Water Treatment Schematic Slop Oil

Central Processing Facilities Produced Gas Treating Gas is produced with the bitumen and water as well as by gas lift when used Systems may include Gas sweetening unit Gas dehydration unit Sulfur recovery unit

Produced Gas Treating Schematic

Central Processing Facility Steam Generation Steam generation system used in SAGD must be capable of delivering 100% quality steam Water from the steam separator can be flashed to generated medium and low pressure steam for: Hot lime softener To recover high quality boiler feed water Waste heat power generation (The upgrading process)

Central Processing Facility Steam Generation Boilers Minimum requirements: Steam generators capable of generating sufficient quantities of 80% steam High pressure steam separators to bring the steam to 100% quality Once – Through Steam Generator (OTSG) Cogeneration (Cogen) A number of current and planned projects include co-generation facilities to deliver steam and electricity Improved efficiency Power Boiler No need for steam separator

Steam Generation Schematic

Processing Facility

Long Lake Steam Generators

Benefits of SAGD Economic Recovery High recovery High sweep efficiency Improved Steam Oil Ratio (SOR) High recovery High sweep efficiency Potential for production from closed fields Continuous production Smaller Footprint Type Recovery Rate* Oil sands Mining 90+ % In-Situ Oil sands* 20 – 60% Conventional Light Oil 30% Average Conventional Heavy Oil Up to 20% * Recovery rates vary according to the qualities of the reservoir and the recovery method used. Bitumen recovery rates at Cold Lake, where cyclic steam stimulation technology is used, have improved from initial estimates of about 17 percent to more than 25 percent today. At the Mackay River oilsands facility, steam-assisted gravity drainage results in recovery of more than 60 per cent of the original oil in place.

Challenges to SAGD Low initial oil rates Limited reservoir applicability (low perm., low pressure, bottom water, thick pay zones) Gas over bitumen Resource intensive (water, energy) Water treatment (AEUB 95% recycle rate target)

Summary Market forces and technological developments are leading to increased production from Alberta’s vast oil sands deposits SAGD is a leading method of bitumen recovery if reservoir conditions are right Surface facilities are required for bitumen treatment Several variations of SAGD are under development SAGD provides higher recovery and a smaller footprint than some other recovery methods SAGD is capital and resource intensive (water, gas)