Management: It's Time for an Industry Initiative on Heavy Oil

Abstract

Last year, five of the 10 largest development projects in the world were going after heavy oil. When oil experts assure outsiders that there are significant petroleum reserves yet to be developed, they are talking about the class of crude that is so difficult to produce, transport, and refine that many companies have stayed away, until now. What has changed, of course, is supply and demand. Asset managers know they cannot ignore it any longer; if they want to book new reserves, they have to look at heavy oil. There is also some urgency to produce the heavy oil associated with lighter reserves. The reason is transportation. Heavy oil is often blended with conventional crude to make it light enough to flow through a pipeline. If operators wait until the lighter crude is gone, their heavy oil assets may become stranded. The good news is that heavy oil reservoirs can be huge. What is more, the wells tend to produce at a steady rate and for much longer than conventional wells. Some heavy oil operators producing 100, 000 BOPD expect to maintain that rate for 15 or 20 years. Total recovery of the oil in place can be as great as 70% for certain processes, which is much better than the rate for lighter crudes. While a handful of companies have been producing heavy oil for decades, many more are just entering the game. The knowledge gap between those two groups is large, but even the most experienced players face new challenges. The Nature of Heavy Oil Tip a beaker of heavy oil and chances are it will not run out, at least not right away. One definition of heavy oil is any hydrocarbon with a gravity of 22.3° API or below. On the lighter end, that includes oil with the consistency of honey. At room temperature, ultra heavy oil can be as thick as peanut butter. Motor oil has a gravity of approximately 35° API. Refiners often use API gravity to describe and set the price of heavy oil. For reservoir engineers, however, the more important number is viscosity, because that tells them how well the heavy oil is likely to migrate through the reservoir. Although there is a correlation between gravity and viscosity, the distinction is misleading. Heavy oils with the same gravity can have very different viscosities. Historically, heavy oil has come from relatively shallow reservoirs. Most are less than 500 m (1,650 ft) deep, but some new plays are as deep as 2700 m (9,000 ft). Even that is not a limit. At greater depths, temperature plays a big role in the ease of production because any oil flows better when it is hot. Keeping heavy oil flowing is the trick. That is a particular challenge in cold climates, or when producing heavy oil from subsea wells.