2. Economic Options for Utilizing Vent Gas Lloydminster CIM, April 18 th, 2001 by Bruce Peachey, P.Eng. President, New Paradigm Engineering Ltd. Edmonton, Alberta

3. About New Paradigm Engineering Ltd.  Independent consulting company, Inc. 1991  Engineer “new paradigms” for industry  Focus for last two years on reducing methane emissions and developing new technology to support conventional heavy oil vent gas mitigation.  Previous work in collaborations: Downhole oil/water separation (C-FER) Novel EOR methods (C-FER and KeyTech) Heavy Oil Pipelining Study (C-FER, SRC) Climate change (CSChE) PERD study on Hydrocarbons R&D (K.R. Croasdale & Associates)  Methane Options Sub-consultants: EMF Technical Services Inc, Jamieson Engineering, Holly Miller, P.Eng.

4. The Target for Change Oil & Gas Methane Emissions Ref: CAPP Pub #1999-0009 NB. AEUB 2000 data indicates heavy oil venting Is now 79% of total gas not conserved

5. Where Are We Now?  Over $100-$200M/yr of methane vented from heavy oil sites ($3-$6/GJ) Equivalent to over 5% of O&G Industry energy use  Over $40-$80M/yr of energy purchased for heavy oil sites ($4-$8/GJ)  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

6. Heavy Oil Vents – Major Challenges  Highly variable vent flows (years, months and hours)  Vent volumes of low value per lease Large total volume but widely distributed over 12,000+ wells  Highly variable development strategies used by producers  Operations in two provinces  Highly variable commodity values  Options range from very simple to very complex  Must be simple and low cost

7. Case Study Assessment  Initial task for producers assessing their options.  What gas is venting from where and How Much?  What is the overall energy balance for the operating area?  Energy purchased or supplied vs. energy in vent gas  What is the individual lease balance? Little or no casing gas vented Some casing gas but not large surplus – Usual condition Significant amounts of excess casing gas  What are the best options?

8. Case Study Assessment Process Evaluate Current Site Balances in an Area A. Case Study Tool Assess & Implement Energy Displacement Options B. Fuel/Energy Displacement Options Tool Assess Location Factors vs. Surplus Energy Available and Potential Uses C. Managed Options Case Study Tool Assess Managed Equipment Options: Power, EOR or Compression D. Managed Options Tool Conversion & Odour Options

9. Production Data for Case Study

14. Purchased Energy Displacement  Key Drivers: Supply/Demand Balance, Best where supply and demand for energy are high  Pro’s: Economic prize is known from existing energy costs Generally supply/demand is proportional to production Generally lowest capital cost options Quickest payout with no little or no third party involvement  Con’s: Must be implemented at most producing sites Solutions need to be simple and easy to retrofit Short well life requires high portability

16. Case Study – Area Fuel Displacement Summary  Case Study of a group of 15 venting wells:  Potential fuel cost savings of over $200k/yr ($3/GJ) Cost of less than $5k per site to implement for year round operation.  Payouts Ranging from 1-18 months.  Best Sites – High fuel demand; Propane make-up  GHG Emissions Reduction potential was 23,000 tonnes/yr CO2(eq) by displacing fuel.  Over $100k/yr ($3/GJ) worth of vent gas remaining for managed options.

17. Case Study – Single Well  For methanol injection – Well Prod: Oil 44m3/d; Water 3.8 m3/d; Vent GOR = 22; Other assumptions.  Total Capital = $3,013 (pipe, insulation, MeOH pump)  Op cost Increment = $3,059/yr (time and chemicals)  Weighted Risked Cost = $5,624/yr (some downtime)  Fuel Cost Savings = $37,910/yr (@$3/GJ)  Value of GHG Credits (@$0.50/t) = $2,523/yr  Payout = 1.1 months  Year 1 Net Cash Flow = $28,737/yr  Year 2+ Net Cash Flow = $31,750/yr

18. Real Life Examples – Fuel displacement  Husky using vent gas for engines and tanks at many leases in the summer. Tried catalytic winterization heaters, payout in one season. Now using pump drive engine heat to trace above ground lines.  Anderson Exploration reported that they used basic water separators and methanol injection on 82 wells and saved $1.6 million/yr and over 145,000 t CO2(eq)/yr in GHG emissions. Cost $3000/well & $230/mo.  Others have used small compressors, CaCl dryers, electric tracing off drive engine to increase gas pressure and winterize sites.

19. Options Covered  Stabilize vent gas flows  Displace purchased gas or power  Distributed power generation  Vent gas collection and compression for sales  Enhanced oil recovery or production enhancement  Conversion of uneconomic vent gas to CO2 (GHG credits)  Odour mitigation methods  Some Examples

20. Heavy Oil – Stabilization Options  Increase Backpressure on Wells  Foamy Flow Options  Trapped Gas Options  Insulating Lines on the Lease  Dewatering Lines  Engine Fuel Treatment and Make-up Gas  Electric Direct Drive Options  Electric/Hydraulic Drive Options

21. Daily Casing Gas Flow Variability – Typical Circular Chart Traces Normal GOR FlowFoamy Flow?“Trap” Flow? Should be expected for most wells which have constant oil rates Theory: Indicates some gas going to tank as foam. Exits through tank vent Theory: Indicates gas building up behind casing. Periodically flows into well.

23. Foamy Flow - Solution T=65-80C Foamy Well T = 20-30 deg C Annulus Pressure = X (kPa(g)) Check-Valve h (m) Small Tubing String Down Annulus Small Tubing String Length (h) = X / 10 So pressure due to fluid column = X + head in tank Hot Water down annulus will help suppress foam in well and allow increase in vent gas pressure. Well Storage Tank Hot Produced Water

24. Daily Casing Gas Flow Variability Normal GOR Flow“Trap” Flow? Should be expected for most wells which have constant oil rates Theory: Indicates gas building up behind casing. Periodically flows into well. Foam Breakdown In Formation Casing Vent With Periodic Flow Production to Tank Gas Pocket

25. Heavy Oil – Production Heating Options  Fire Tube Heaters (Base Case)  Enhanced Fire-tube Controls  Thermosyphon systems  Catalytic Line Heaters  Catalytic Tank Heaters  Fired Line Heater  Co-generation Heating  Use of Propane as Heater Make-up Fuel

26. Reduce Purchased Fuel Required

27. Winterization and Gas Drying Options  Manipulate Conditions  Winterization Heaters  Electric Tracing  Engine Coolant Tracing  Methanol Injection: Anderson 82 sites ($1.6M/yr saving)  Glycol Injection  Calcium Chloride Dryers  Pressure Swing Adsorption Dryers  Glycol Dehydrators

28. Engine Coolant for Heat Tracing Return Line to Water Pump Outlet off Intake Manifold Coolant Hoses Run Outside Shack to Heat Trace Tubing

29. Engine Coolant for Heat Tracing Heat Trace Tubing Production Flow Line

30. Gas Compression Options  Rotary Vane Compressors  Beam Mounted Gas Compressors  Liquid Eductors  Multi-phase Pumps  Screw Compressors  Reciprocating Compressors

31. Reciprocating Compressors

32. Gas Transportation Options  Steel Pipelines  HDPE Plastic Pipelines  Modular Compressed Natural Gas Transport

33. Gas Collection, Sharing and Sales Low Pressure < 50 psig Freeze protect To/from County To/from HP Supply/Sales Local Sales System 150-200 psig No liquid water High Pressure >1000 psig <4# Water/mmscf Net Demand Sites Truck

34. Power Generation & Cogeneration  Thermoelectric Generation  Microturbines  Reciprocating Engine Gensets  Gas Turbine Gensets  Fuel Cells  Cogeneration Options for all of the above

35. Power Generation Low Pressure Gas Gathering < 50 psig Freeze protect To/from Local Grid Local Sales System 25 kV powerlines Net Demand Sites Central Power Generation Electrified Sites. Gensets to Back out energy Approx 10 m3/kwh for most systems

36. Enhanced Oil Recovery Options  Methane Reinjection  Hot/Warm Water Injection  Conventional Steam Injection  Flue Gas Steam Generator  CO2/Nitrogen Injection  Gas Pressure Cycling  Combinations of Methods

37. Enhanced Oil Recovery – Hot Water T=65-80C Lease Produced Water Storage Surface PCP Watered out Well Line HeaterT= 150-200C P= 400-1400 kPa 1 mmbtu/hr = 1000 m3/d gas @ 70% eff Can heat 100 m3/d of water by 100 deg C How many m3 oil would this add to production? Casing Vent Gas Avoids Produced Water Trucking to Disposal $3+/m3

38. Example – “Why Not” (WOR = 0.24)

39. Example – “What If” (WOR = 2)

40. Methane Conversion  Increase Use of Surplus Gas  Flare Stacks  Enclosed Flare Stacks  Catalytic Converters

41. Catalytic Methane Conversion Production to Tank Air CO2 + Heat Add or remove modules as required: Units start-up and shutdown based on the amount of vent gas available. Mounted near wellhead but out of the way of well operations and workovers. Patents pending Vent Gas

42. Odour Mitigation Options  Vapour Recovery  Tank Vent condenser  Incinerate in Firetube  Catalytic Conversion  Dispersion  Liquid contacting  Activated Carbon Adsorption

43. Fire tube Tank Vapors Tank Vent Tank Burner Heavy Oil Storage Tank Vent Upstream Of Air Eductor Flame Arrestor Fuel Gas Vent Gas Line (Insulate to Tank) Air Tank Vent Gas Tank Vent – Incineration in Firetube

44. Technology Transfer Plan  Basic Technology Transfer Workshops First Session was March 22, 2001 – Calgary Next Session May 3, 2001 – Lloydminster Future Sessions – Lloyd, Calgary and Edmonton based on demand  Spreadsheet Tools & Workshops Likely start in May/June for Participants Non-participant sessions September/October  Participation Fees for Producers based on vent volumes  Report Sales to Other Stakeholders  New Project Proposals; Implementation Support; Migrate Information to Internet

45. Summary for Vent Options Projects  Vent streams can be used to generate positive economics  Were there are no opportunities to use the energy, the methane/hydrocarbons can be converted to CO2  New Paradigm is working to develop low cost systems to convert methane from small and fugitive sources.  More work is needed to address: Royalty and Regulatory Issues Improve experience with some systems Try other systems. Transfer the Technology to Practice

46. Acknowledgements  Current Participants for Conventional Heavy Oil – AEC, Anderson, Husky, CNRL, Nexen, Exxon- Mobil, EnerMark Group, CAPP, AERI  Current Participants for Thermal Heavy Oil – Nexen, Husky, CAPP  Current Participants for Conventional Oil and Gas – BP Energy, Husky, CAPP  Sub-Consultants – EMF Technical Services; Holly Miller, P.Eng.; Jamieson Engineering Ltd.; SGS Services  Support from PTAC staff

47. Contact Information New Paradigm Engineering Ltd. C/o Advanced Technology Centre 9650-20 Avenue Edmonton, Alberta Canada T6N 1G1 tel: 780.448.9195 fax: 780.462.7297 email: bruce@newparadigm.ab.ca web: www.newparadigm.ab.ca