Time has come for heavy oil

Time has come for heavy oil

 

Tamsin Carlisle

 

An oil pump or ''nodding donkey'' operates in the Awali region of Bahrain, on Wednesday, March 3, 2010. Bahrain's economy will grow 3.5 percent to 4 percent in 2010, keeping the same pace of expansion as last year, Finance Minister Ahmed Bin Mohammed Al-Khalifa told Al-Arabiya TV channel.

 

Oil companies faced with higher environmental costs have not given up on “dirty oil” and are making huge investments in exploiting bitumen and other heavy crudes.

Even in the Middle East, which holds 60 per cent of the world’s reserves of conventional light crude oil, producers are eyeing nearly untouched heavy oil resources totalling 1 trillion barrels.

 

Worldwide resources of tar-like crude amount to 5.1 trillion barrels, of which at least 510 billion barrels are economically recoverable today.

At 28 per cent of the world total, Middle Eastern heavy crude is an energy resource that “cannot be overlooked”, says Abdulhussain Mirza, the Bahraini oil minister. But producing the oil would be costly, while posing huge environmental challenges in terms of pollution, carbon emissions and water consumption.

 

“Is heavy oil a pain or a pleasure?” asked Mr Mirza, an oil industry veteran of nearly five decades, while opening an oil conference last week in Manama, the capital of Bahrain.

“For the past 30 years, experts have been saying heavy oil is the way of the future,” Mr Mirza said. “They have been exactly right.”

In 1982, when international crude prices slumped after the “oil shock” precipitated by the Iranian revolution and the outbreak of war between Iran and Iraq, a forecast boom in heavy oil development was cut off at the knees.

 

“If 1982 was not the time for heavy oil, has its time come?” Mr Mirza asked.

He believes it has, following crude’s ascent to a record US$147 per barrel in 2008 and the recent period of relative price stability at between $70 and $80.

“My view is that 2008 was the turning point and a signal for the future. … I see in the next few years increasing activity returning to heavy oil production and it may start in some of the older fields of the world.”

 

Bahrain has one of those fields, the Bahrain or Awali oilfield, which was discovered in 1932. Awali, which was the first commercial Gulf oil discovery, demonstrates why producing the region’s heavy crude would be both challenging and potentially profitable.

Like most Gulf oilfields, it is structured like a layer cake topped with sticky icing. At the very top, bitumen, the heaviest type of crude, oozes from the ground, providing a natural tar source. Several stacked oil reservoirs close to the surface contain crude that is technically classified as “heavy”.

 

The viscosity of the oil decreases with depth underground, meaning that crude from the lower reservoirs flows more easily. Further still below the surface are more oil reservoirs containing light crude. Below those are gas deposits. All three types of deposits are held in carbonate rocks such as limestone, which are notorious in the oil industry for resisting efforts to extract heavier crudes.

The big western hemisphere heavy oil deposits in countries such as Canada and Venezuela are mostly trapped in sandstone or are found mixed with actual sand near the surface of the ground. Most of the extraction methods involve digging tar sands in giant open-pit mines or steaming the oil out of the ground.

 

Royal Dutch Shell, however, is evaluating carbonate reservoirs in Canada and is in the early stages of experimenting with new approaches to extracting the oil.

But it is in the Middle East where the most progress has been made towards solving knotty problems such as preventing powdery crystals of gypsum and other soft minerals from clogging up rock pores and oil pumps.

In the partitioned zone between Saudi Arabia and Kuwait, the US company Chevron is scaling up a test project to pump heavy crude from the Wafra oilfield using steam.

 

The $340 million (Dh1.24 billion) pilot “overcame one of our largest barriers – the water supply”, said Guy Hollingsworth, the Chevron president of exploration and production for Eurasia, Europe and the Middle East. He was addressing last week’s Heavy Oil MENA 2010 conference in Manama, which was the first regional oil conference devoted to heavy crude. Chevron demonstrated it was possible to purify enough salt water pumped from underground to make the steam needed for oil extraction, eliminating the need for an external water supply except during start-up.

 

The next stage is a large-scale pilot aimed at improving gas usage and eliminating flaring. Chevron is drilling 25 producing wells, 16 wells to inject steam, and another 16 “observation wells” to collect data.

“We’re encouraged by what we see; actually very encouraged,” Mr Hollingsworth said. Final results from the trial are expected within three years and full field development could start by 2017.

 

“Our goal is to free up for the first time the potential of the Eocene carbonate [rock formations], freeing up billions of barrels of oil. That would be a game-changer.”

Faisal al Mahroos, the chief executive of the state-owned Bahrain Petroleum Company, said that if companies such as Chevron succeeded in cracking the technical problems associated with carbonate reservoirs, then the Middle East would hold a big advantage for oil producers seeking to exploit ever more challenging opportunities.

 

That is because the region’s deposits of light and heavy crude are found one beneath the other in the very same fields. Enhanced oil recovery projects to boost output from tapped-out reservoirs of light oil could be integrated and share infrastructure with projects to develop heavy crude.

Taken together, Middle Eastern heavy crude and “residual light oil” resources, requiring advanced extraction technologies, comprise a 1.75 trillion barrel resource, Mr al Mahroos estimated.

 

tcarlisle@thenational.ae