With the price of oil four times more than in 2002 on an average annual basis, exploration and recovery methods are improving by leaps and bounds. The result: a new race for black gold, with oil companies looking at deposits that, until recently, were considered impossible to operate. A tour of oil’s new frontiers, from the oil sands of Canada’s Far North to the ultra-offshore depths of the Brazilian coastline.

Facing the potential depletion of their conventional fields, the oil companies are rushing towards unconventional crudes. These are oils formed by dense, high-viscosity hydrocarbons that must be made lighter and more fluid before they can be extracted cost effectively in sufficient quantity. Unconventional crudes also include oil found in deep offshore fields. With the price of crude still averaging 40% more than last year on an annual basis and four times higher than eight years ago, every method is being used to recover the black gold, even if it means extracting oil from depths of more than 2,000 meters or operating oil fields where the raw material is more tar than liquid. Operating these fields can help to push back Peak Oil, or the point in time when global oil production will begin to decline. First stop on our journey: Venezuela and Canada, world champions of extra-heavy crudes.

150 billion barrels may be recoverable in Canada

The term “extra-heavy crudes” refers to certain types of oils, such as high-density crudes from Venezuela and crudes from the bituminous sands of Canada. Strictly speaking, the bulk of extra-heavy oils is found in Venezuela, in the Orinoco Belt of the Orinoco River basin. Bituminous sands, on the other hand, are found mostly in the Athabasca region of Alberta, Canada. According to the French Petroleum Institute, IFP, “the majority of unconventional crudes are degraded crudes found at shallow depths in loose, highly permeable sands. These crudes have been altered by water seepage and bacteria. The lightest molecules were destroyed in the process, while the oil was artificially enriched in asphaltenes and resins. They also contain heavy metals, nitrogen and sulfur, which require special re fining treatment.”

Using current production methods and recovery rates (the amount of oil that can be extracted from the deposit) in the 20-50% range, Canada can claim 152.2 billion barrels of recoverable reserves with these resources. That is second only to Saudi Arabia, which has 264.2 billion barrels in reserves¹. At an average recovery rate of 10%, the Orinoco Belt contains about 50 billion barrels of extra-heavy crude.

The industrial development of these hydrocarbon deposits requires considerable capital and expertise due to their extraordinary size. The average production cost for deposits under development ranges from $20 to $30 per barrel in Venezuela, and exceeds $40 in Canada; this compares with $5-8 for new conventional crude extraction projects in the Middle East.

The Athabasca and Orinoco oils are very dissimilar. A cold extraction process can be used for Orinoco oils. A diluting agent, naphtha (the very light component of crude oil) is injected into the bottom of the well and at the well head to facilitate oil flow and extraction, which is also stimulated with pumps. Naphtha is used again to transport the crude by pipeline to refineries some 200 kilometers away.

Athabasca crudes are practically solid; they are extracted from wells or from open pit mines. Although oil companies identified the fantastic potential of this region decades ago, the operation of bituminous sand deposits is relatively recent. The high cost of separating the oil from the sand was a barrier to the development of these deposits, since the price of crude didn’t cover operating costs. Fluctuating oil prices are not the only reason for the proliferation of this type of project in Canada: at long last, proven extraction processes are now available to operate these deposits.

Bituminous sands: thirsty for water

Two main mining methods are used for bituminous sands, depending on the depth of the deposit and other features.

The traditional open pit mining method, which requires enormous mechanical shovels, is used in areas where the sands are less than 70 meters below grade. Huge trucks or conveyor belts move the sands to a processing facility that uses hot water to strip the oil, which is then recovered by dilution in light crude. This process accounts for twothirds of Canada’s production. It requires large quantities of water, which must be filtered after use. The spent sands are stripped sever al times and then returned to the mine.

In the steam flooding method, steam is injected into the sands through a horizontal well. The resulting heat decreases the viscosity of the oil, which is recovered in another well. This is expensive technology. Huge amounts of water and a lot of energy are needed to supply the steam injected into the deposit. The process also generates large amounts of greenhouse gases. All of these factors raise operating costs. Environmental constraints also affect overall project economics. The steam flooding method will be subject to CO₂ taxes, increasing the cost of the oil produced. Ultimately, operators will have to invest capital to capture and sequester the gases produced.

One third of world oil production is offshore

Another oil frontier is located more than 1,500 meters under the surface of the sea, where oil is extracted from ultra-deep offshore fields. According to the French Petroleum Institute, IFP, offshore crudes of all types currently account for one fourth of the world's proven reserves and one third of global oil production. Ultra-deep fields (1,500 meters or more) represent only 3% of the world's reserves and 0.5% of its production. Oil can now be extracted at depths eight times greater than the early offshore wells – from 312 meters in 1978 to 2,540 meters in 2007 – and the 2,700- meter threshold is expected to be crossed this year. Geologists are presently focusing on a half-dozen major basins: the Gulf of Guinea, the Gulf of Mexico, the northern part of the North Sea, the Brazilian and Australian coastlines, and the China Sea. Enormous progress has been made in offshore oil exploration and production, particularly in seismic research. Production rigs have also improved greatly. Initially, the fields were operated from fixed rigs, which became taller and taller. Floating systems were used when the construction of fixed platforms became impossible. Only a dozen fields are operated at a depth of more than 1,500 meters. Oil companies use floating production, storage and offloading platforms (FPSO) moored with cables to ensure the stability of the rig above the drill point, even in strong winds or currents.

Pipes: too heavy for their own good!

Operating costs – exploration, development and production have risen from about $10 per barrel in 2000 to as much as $20-30 today. Going to such extremes to look for oil is still far from easy. Deepwater projects are fraught with difficulties, stemming mostly from water temperatures and equipment weight. At depths of more than 2,000 meters, traditional pipes connecting the rig to the ocean floor are unable to support their own weight. Manufacturers are working to develop pipes made with metals that are lighter than steel, or with composite materials. Below 1,500 meters, water temperature is only 4 °C. The oil is pumped at temperatures of 80 to 100 °C, and must be kept as hot as possible to prevent paraffin or hydrate buildup in the pipes. The pipes must therefore be kept at strictly controlled temperatures and pressures.

How deep can oil extraction go? Because the deepwater oil fields being explored are increasingly smaller, scattered, or far from shore, oil companies are faced with new challenges. Oil quality can vary. It is often heavier and more viscous, and is sometimes deposit-prone.

Ultra-deep fields: the new frontier

Not all ultra-deep fields are found offshore. While there are no oil fields in operation today at depths of more than 5,600 meters, many geologists believe that additional oil and gas reserves lie even deeper (6,000 to 8,000 meters underground) in specific geologic configurations, such as the piedmont areas of the Andes or Central Asia, in major river deltas such as the Niger, the Mississippi, the Volga and the Ural, or beneath ancient basins in the North Sea, Algeria or the Middle East. Such deposits represent a colossal challenge for engineers. Pressures and temperatures are very high at such depths², and existing tools and methods are either unsuitable or completely ineffective. At depths of more than 4,000 meters, exploration is difficult and drilling is very expensive. Nonetheless, gas is being pumped in the North Sea from approximately 5,500 meters below the ocean floor in the Glenelg, West Franklin and Elgin Franklin fields, at temperatures approaching 200 °C. This is a feat, since electronics have a short lifespan above 170 °C. Obviously, drillers must use different equipment under these circumstances. Also, the deeper the geologic strata, the poorer the seismic image, as image quality deteriorates with distance.

Technological advances continue to push back Peak Oil. Oil may be a fossil fuel in finite quantity, but the age of oil is not over yet! Every day, oil company engineers look for new ways to postpone the terminal decline, so that the oil we cannot recover today will be accessible in the future. This is a must if we are to continue to provide power to some sectors which, unlike the fuel sector, have not yet found an industrial-scale substitute for black gold.

1. BP 2008 Statistical Review.

2. At a depth of 4,500 meters, the temperature is about 150 °C and the pressure is 500 bar. Beyond 6,000 meters, the temperature is around 300 °C and the pressure is 1,000 to 1,500 bar.