Nsolv reports “game-changing” results of oil sands pilot

09 March 2017, Week 09, Issue 448

A three-year pilot project that produced Alberta oil sands bitumen with no water and resulted in low emissions has been dubbed a success by the company leading it.

Calgary-based Nsolv announced on March 7 that the project designed to test a new warm solvent-based production method had displayed “game-changing” results heading into the final stages. Nsolv reported that it had produced 125,000 barrels of oil while generating “very little” greenhouse gas (GHG) emissions at the pilot project that started in January 2014 near Fort McKay, Alberta. The pilot project is due to be wrapped up by mid-2017. 

“I believe that our results are shifting the paradigm for the future of the oil sands industry,” said Nsolv’s CEO, Joseph Kuhach, in a statement. “Our technology extracts heavy oil while protecting the environment and providing economic benefits to industry and government, even when oil prices are low.”

News of the Nsolv technology’s success comes as Alberta’s oil sands industry is struggling amid questions over its ability to remain profitable given low oil prices and high production costs. Royal Dutch Shell recently opted not to develop new Alberta oil sands projects and announced on March 9 that it was selling its undeveloped oil sands assets. This comes in the wake of major write-downs of oil sands assets by Imperial Oil and ConocoPhillips. Statoil is another company that recently sold off its oil sands assets in favour of offshore oil projects in Atlantic Canada, among other operations elsewhere in the world.

Nsolv said its technology, which uses vapour from heated solvent to improve the flow of the heavy oil, would generate a higher return on investment owing to lower capital and operating costs than the widely used steam-assisted gravity drainage (SAGD) method. SAGD uses one barrel of predominantly recycled water for every four barrels of oil produced. However, critics have contended that the process can have harmful environmental effects.

In addition, Nsolv claims its technique will produce a “partially upgraded, higher quality oil product” and will allow for access to shallow resource pools. The new technology, the company added, will also enable the energy industry to produce 800,000 bpd more under Alberta’s 100-megatonne carbon cap. 

“It’s much cheaper than what’s being done today,” Kuhach told CBC. “A SAGD plant is effectively a giant water plant on the surface. There’s so much water handling and use that goes on.”

Nsolv said it was now advancing discussions with potential partners on a number of commercial-scale projects. Kuhach told CBC that the next big hurdle was to raise the C$100 million (US$74 million) necessary to build a commercially viable plant capable of producing 5,000-10,000 bpd of oil. He anticipates that financial support from the Alberta or federal government will likely be needed.

“I think government can be an enabler to make that happen,” Kuhach told CBC. 

“We really need to get that boost to get over the highest hurdle, which is the first commercial demonstration project. After that, we’ve talked to many companies, and there are many that are very eager to be the very first to be second.” 

Nsolv’s shareholders include majority owner Hatch, Enbridge and Nenniger.

“We are extremely pleased with the performance of the Nsolv pilot project,” Hatch’s president and CEO, John Bianchini, said in the Nsolv statement. “As a key influencer in Nsolv’s growth and development, Hatch is ready to support the next phase of commercial efforts.”

In an interview with CBC, a professor at the University of Calgary’s Schulich School of Engineering, Harvey Yarranton, who researches heavy oil production, called on governments to help get the new technology off the ground. He contended that the technology’s success could benefit both the environment and Alberta’s economy.

“I do think there is potential in these processes to certainly reduce [carbon dioxide] emissions and more economically recover bitumen,” he said. “It’s potentially significant and could bring in a new wave of heavy oil projects.”

However, a Pembina Institute analyst, Benjamin Israel, told CBC that other environmental issues still needed to be considered.

“I’m talking about land-use impact, biodiversity,” he said.

The Pembina Institute has consulted with Nsolv about its project.