Global energy demand is projected to increase roughly 33% in the next 25 years, according to the International Energy Agency. How that demand will be met is a central question in the current debate around combatting climate change. In the wake of COP21, governments around the world have set their sights on a low-carbon future and a transition away from so-called ‘dirty’ fuel sources, like oil. The challenge is that oil is currently the most-used fuel source worldwide, so it is hard to imagine a near-term scenario where oil is phased out and energy demand is still met.
Despite this reality, governments have already begun pulling on policy levers like carbon taxes to discourage a reliance on oil. Such initiatives are particularly precarious to heavy oil development. Heavy oil is an unconventional liquid petroleum with less than 20° API gravity, and extra-heavy oil is even more dense and immobile at less than 10° API gravity. Because of their low viscosity these oils are more challenging and expensive to extract compared to conventional oil. They also impose a larger environmental footprint, including carbon emissions. Therefore, the impact of carbon taxes and low prices is more severe for heavy oil producers compared to conventional oil counterparts. This begs the question whether the future of the heavy oil industry is in jeopardy.
The status quo of heavy oil extraction may be under pressure, but new technology being developed in Canada is showing that unconventional reserves can be developed in a more sustainable and economic way. Nsolv, a clean energy company, has introduced a solvent-based extraction process that results in significantly fewer greenhouse gas emissions, uses no water and improves project economics compared to existing heavy oil recovery technologies.
A Global Picture of Heavy Oil
Some estimates have shown there is twice as much heavy oil left to be tapped worldwide than there is conventional oil. The largest known reserves of heavy and extra-heavy oil are situated in Canada and Venezuela, with significant amounts also found in the Middle East, Russia and China. What makes oil ‘heavy’ is the fact that it is thick, sometimes immobile and often locked into a reservoir of sand underground. This leads to monikers like ‘oil sands,’ a term used to describe the natural extra-heavy oil or bitumen in northern Canada.
Several technologies have been developed over the years in order to mobilize the otherwise immobile fluid. In the Canadian oil sands, the industry incumbent is steam assisted gravity drainage (SAGD), a process that uses natural gas to heat vast amounts of water to create steam that is injected underground. When heated with steam at high temperature and pressure, the bitumen melts, allowing it to flow into a production well, which pumps it to the surface.
While effective, SAGD has environmental and economic consequences, which include high greenhouse gas emissions associated with steam generation, as well as high costs associated with handling, separating and purifying large amounts of water. This environmental reality reinforces the negative perception that oil is a dirty fuel source.
Solvent Not Steam
Both the environmental and economic challenges of SAGD are rooted in the consumption and handling of water to make steam. Calgary-based Nsolv is proving that when steam is removed from the equation, heavy oil extraction becomes a whole lot cleaner and cost efficient. The company has patented a process that replaces steam with a purified, warm solvent. Nsolv demonstrates that when a solvent, typically butane or propane, is vaporized and injected underground, it condenses and diffuses into heavy oil, decreasing the oil’s viscosity and allowing it to flow. Injected solvent is produced with the oil and reused in the process.
This simplified process has major environmental and economic advantages over SAGD. There is no need for a continuous supply of water, and since the solvent only needs to be heated slightly, Nsolv uses a fraction of the energy required for SAGD. As a result, heavy oil can be extracted with only a quarter of the greenhouse gas emissions.
The lack of water and reduced energy use also result in significantly lower operating costs and about a 40% reduction in capital costs to the operator. In addition, the solvent-based process results in a partially upgraded, higher-value oil with less waste from the refining process, since the low-value, high-carbon asphaltenes, along with heavy metals, get left behind in the reservoir. The partial upgrading also means that very little diluent is needed to ship the oil via pipeline. In effect, more oil of better quality can be shipped through existing pipelines. When all the benefits are considered together, it means extraction with solvents is economically viable even in a low oil price environment.
Evolution of Solvents
Nsolv’s process dates back to the 1970s, when Emil Nenniger began researching methods to extract oil sands bitumen in-situ. One winter, while tapping maple trees at his family farm in Ontario, Mr Nenniger found inspiration in the consistency of the maple syrup after it was distilled from the thin tree sap. If only heavy oil could move like maple syrup, he thought, the problems of getting it out of the ground and to market would be solved.
Nenniger began to experiment in the lab to develop a process that would use solvent. He was testing his theory that by mixing the solvent with the heavy oil, the oil would become less viscous and movable. While the solvent idea worked, further testing showed that the process occurred too slowly for it to be economically viable.
Years later, John Nenniger would work with his father to finish the work Emil began. Through further testing, they showed that purifying and heating up the solvent just a little would make it diffuse into the heavy oil more quickly, drastically reducing the viscosity of the heavy oil and enabling it to flow into a production well. The solvent could also be recovered and reused throughout the process, only needing a small top-up. This seemingly simple idea is at the heart of Nsolv Corporation, which was formally founded in 2003 and shortly thereafter received financial backing from engineering and pipeline giants Hatch Ltd. and Enbridge as major longterm equity partners.
In 2012, Nsolv teamed up with one of Canada’s largest energy companies, Suncor Energy, to put its technology to the test via a pilot project in the Alberta oil sands. With support from this partnership, and government funding from Sustainable Development Technology Canada and Alberta’s Climate Change and Emissions Management Corporation, the Nsolv pilot plant was constructed.
After construction and commissioning, the pilot began producing in spring of 2014 and the plant recently produced its 90,000th barrel of oil, all the while meeting key performance indicators. The project has been pivotal to the company’s evolution. Not only does it prove the technology’s commercial potential – a requirement for any producer to even consider switching production methods – it provides a showcase for the technology’s environmental and economic benefits.
Implementing Solvent Technology
Large-scale commercialization of solvent-based extraction will be the next big step in the technology’s evolution. Despite the push toward renewable energy sources, the world will continue to rely on oil as a fuel source. Yet governments remain eager to find economic and environmentally sustainable energy technologies. With pressure mounting on producers to reinvent or adjust their extraction methods for both environmental and economic reasons, solvents offer a viable alternative. This presents great opportunities for technologies like Nsolv.
To date, this process has been applied strictly to the bitumen found in the Canadian oil sands; however, the technology has huge potential to unlock heavy oil resources worldwide. Heavy oil will continue to be in high demand until there are significant advancements in renewable energy generation and storage. With companies like Nsolv proving that heavy oil extraction can be done in a more sustainable fashion, at reduced cost, the future of heavy oil is looking brighter than one might expect.