PTAC Conventional Heavy Oil (CHO) Forum “Heavy Oil Vent Gas Utilization” Results of Pilot and Next Steps Bruce Peachey, P.Eng. & Colin Gosselin, E.I.T. New Paradigm Engineering Ltd. June 20, 2000

The Target for Change Oil & Gas Methane Emissions Ref: CAPP Pub # Heavy Oil Venting 29%

The Prize  $50M/yr of methane vented from heavy oil sites Equivalent to 5% of O&G Industry energy use  $20-$40M/yr of energy purchased for heavy oil sites  GHG emissions from heavy oil wells 30% of oil & gas industry methane emissions 15% of oil & gas GHG emissions Over 2% of Canada’s GHG emissions  GHG, Flaring, and Odour Issues affecting ability to develop new leases

The Need  An economic solution to maximize the use of vented gas on the well lease  Ideal Solutions should: Generate an economic benefit Be low capital cost and easy maintenance Not cause other problems – high reliability Reduce GHG equivalent emissions

The Catalytic Solutions  Based on existing off the shelf catalytic heaters Heaters already in use by industry for building heat Well suited for remote/isolated locations Relatively low cost and safe compared to other options Provide other economic and intangible benefits Benefit factor of 21 GHG reduction for fuel replacement Minimum benefit factor of 7 GHG reduction for converting methane to CO2

Catalytic vs. Thermal Combustion  Thermal Flame temperature as high as °C Thermal formation of NOx Narrow flammability limits Operation control can be difficult  Catalytic Flameless - temperature of reaction °C Low or zero emissions of NOx Wide range of fuel concentrations Higher process safety Low visibility

Field Trials - Background  Operator’s successfully using casing gas as fuel for engines and burners  Some leases must switch over to purchased fuel for winter operations (propane or line gas) because of freezing problems  Casing gas production exceeds on site fuel requirements, venting excess  Looking for ways to maximize use of casing gas year round  Economics and operability key drivers

Field Trials – Test Wells  9-9 (Line gas, Line heater test site) 20 m3/d oil, 9 m3/d water 120 bbl/d oil, 54 bbl/d water  4-21 (Propane) 12 m3/d oil, 1 m3/d water 72 bbl/d oil, 6 bbl/d water  7-25 (Propane) 3 m3/d oil, 12 m3/d water 18 bbl/d oil, 72 bbl/d water

Field Trials – Winterization Heaters  Catalytic Heater Winterization Systems installed on three well sites in heavy oil operations  Winterization achieved by heating gas to minimize condensation of water, keeping system above zero to prevent freezing, and purging free water at key points

Field Trials – Lessons Learned Part I  Based on initial runs High winds can blow out catalytic heaters in standard housings Fuel lines to tank heaters need to be kept free of water build-up Piping can be modified to reduce water to tank heaters Improved insulation required to reduce heat loss and cold drafts Automatic restart would help ensure continuous operation

Field Trials – Lessons Learned Part II  Based on current operation Units have operated reliably through –25 degrees and blizzards Systems can be started up in winter after an initial period on purchased fuel to warm up the ground, but fall start-up is better Systems allow use of vent gas for both catalytic heaters and tank heaters Boxes ensure sufficient ventilation while reducing wind effects Best application – Sites with buried fuel lines to tanks

Key Benefits of Winterization  Reduce fuel costs by %  Rapid economic payout <3-4 months if propane backed out <1 yr if purchased natural gas backed out  Low Cost Alternative  Easily Retrofitted  High Operability  GHG equivalent emissions reductions achieved 21 tonnes of CO2eq/tonne of methane burned in catalytic or tank heaters

Next Steps for Winterization Systems  Ready for wider use  Rest of the learning will come from use Determine if auto restart needed Optimize installation details for various site layouts Operator training Develop standardized installation instructions  Equipment Price Range - $3,800 - $4,600 depending on options

Field Trials – Line Heater  Designed to prove ability of catalytic heaters to run on low pressure gas (under ½ psig) for applications where it is undesirable to put back pressure on the well  Also will test improvements in heat transfer efficiency of heating a flow line versus fire tube heaters in stagnant storage tanks  Skid mounted, portable unit designed to be retrofitted into existing production lines

Next Steps for Line Heater Systems  They work and are ready for wider use  Additional work required to quantify: Overall efficiency gains over fire tubes in tanks »Can reduce purchase fuel needs even at wells with no vent gas production Impacts on production of lower vent gas pressures Impacts on tank treating effectiveness and foaming Optimum fuel use strategy with varying vent gas volumes  Equipment Price Range $13,300-$15,000 for 120,000 BTU/hr line heaters

Basic Project Proposal for Additional Trials (NPEL Scope)  Identification of Field Test Locations  Data Collection for Design  Development of Installation Options and Designs  Prototype Equipment Manufacture (Scott-Can)  Installation, Start-Up, and Monitoring  Post Trial Analysis and Reporting  Input to Larger Scale Implementation

Other “New Paradigms” in Methane Venting  “Methane 2000 Options” Project Launched this month PTAC) Objective to assess all options for use of conventional heavy oil vent gas Fuel displacement, Power generation, Compression and Gathering, EOR, Conversion to CO2, Tank vent mitigation As of June 9, 2000 commitments from four producers for $15k each Base study to be complete by January, 2001 Follow-up study for thermal vents later in 2000  New Options Applying for IRAP and IGAP support to develop new systems for other methane vent streams

Project Summary  It is possible to utilize low pressure vent gas for production heating  Systems have been demonstrated for winterization and line heating  Most systems will payout in under one year, some in as little as 3-4 months  Other options to collect or utilize vent gas are under study  New options are being developed and will need producer support to develop and demonstrate viability

Acknowledgements  Husky Oil Limited for their funding support and vision Brian Watt, Ron Schmitz, Brock Blakely, Dean Lypkie Pumpers Kevin Josuttes and George Leer  Scott-Can Industries Ltd. Peter and Dave Howie  PTAC Eric Lloyd, Arlene Merling and the rest of the staff

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