Sheila McNulty The next big breakthrough in oil extraction?

Oil executives are fond of saying, “Tell me when technology can no longer be invented or improved, and I will tell you when the world has reached peak oil.”

The point is that as that, as long as new technologies can be invented, then there are going to be new ways to get increasing amounts of oil and natural gas out of the ground.  The best example of this is in the US natural gas industry.

It was all but left for dead until a few years ago, when suddenly the US independents came up with new ways to get natural gas out of ground. The US natural gas industry took off, and estimates have grown from 30 years’ worth of supplies in the country to more than 100 years’ worth.

Indeed, Rod Lowman, president of America’s Natural Gas Alliance, says that while there are five major shale plays in the US now providing most of the natural gas, there are over 20 other shale formations that the industry believes “hold a lot of potential”.

Same goes for oil, as shown time and time again.

Not only are the majors now drilling in 10,000 feet of water, but they are extracting oil from Canada’s tar sands.

Most recently, Chevron has come up with an innovative steam flood technology, which Bernstein Research says could improve oil recovery several times over, compared to the low per centage recovery achieveable with conventional primary recovery methods.

It notes in a new report that the Middle East has many other examples of largescale heavy and intermediate oil accumulations trapped within carbonate reservoirs, and the role of steam assisted recovery in accessing these resources is only just getting started.

Chevron’s technology works by pumping steam into the carbonate reservoir, which heats up the heavy oil in the reservoir, reducing its viscosity so that it can more easily flow. At the same time it creates a pressure gradient, which pushes the oil towards vertical production wells.

Chevron this year began testing the technology in the partitioned neutral zone between Saudi Arabia and Kuwait, in which Chevron owns a 50 per cent share of the resources.

The company last year completed a small-scale pilot and this summer is launching a large-scale pilot. Bernstein’s examination of the technology, similar previous applications and locations where it might be suitable lead them to conclude the scope for carbonated steam-assisted recovery, or CSAR, in the Middle East could be “massive”:

…clearly if this project proves successful, Chevron would be able to book large extra volumes of reserves in the PNZ from a full field development commencing in the second half of the decade. If the steam flood process was used in a full field development, we estimate the technology could increase oil recovery from just a few percent, to perhaps 10%-30%. Since Chevron is entitled to 50% of the resource, this could equate to an additional 600-1800mmboe of booked reserves being added over a number of years. This equates to approximately 5%-16% of Chevron’s 2008 end of year reserve base.

They point out that steam flooding, used by Chevron in California and Indonesia, has had impressive results in boosting production from fields once thought past their peak:

However the neutral zone carbonate reservoirs have rock such as limestone, as opposed to classic sandstone reservoirs featured in the fields above. Carbonate reservoirs are inherently more tricky to deal with, hence the testing of new technology.

Bernstein says there are several key challenges for carbonate steam-assisted recovery:

- limited availability of fresh water in the Middle East, which creates erosion and corroding. The small trial addressed this successfuly, Bernstein says, by treating salty water.

- the carbonate reservoirs are oil-wet rather than water-wet, meaning that, unlike sandstone reservoirs, the grains bond more strongly to oil than to water, making it difficult to extract the oil. This can potentially be dealt with by raising the temperature, Bernstein says.

So will this be the next big breakthrough in oil extraction technology? Bernstein say that it could be useful in several fields in the partitioned neutral zone, but carbonate fields in many other parts of the Middle East have rock that is too fractured for steam to work. Potential in Oman, however, is being examined.

Chevron’s pilot studies for the application of steam flood to carbonate reservoirs could be the first time in a long while that a technology may be developed that could unlock large quantities of previously discovered oil reserves. Which is the sort of thing that gives the oil industry hope for the potential of new technologies.

Related links:
Chevron seeks new Middle East reserves (FT)