Heavy Oil

Working Document of the NPC Global Oil & Gas Study

Made Available July 18, 2007

TOPIC PAPER #22

HEAVY OIL

On July 18, 2007, The National Petroleum Council (NPC) in approving its report, Facing the Hard Truths about Energy, also approved the making available of certain materials used in the study process, including detailed, specific subject matter papers prepared or used by the TaskGroups and their Subgroups. These Topic Papers were working documents that were part of the analyses that led to development of the summary results presented in the report’s Executive Summary and Chapters. These Topic Papers represent the views and conclusions of the authors. The National Petroleum Council has not endorsed or approved the statements and conclusions contained in these documents butapproved the publication of these materials as part of the study process. The NPC believes that these papers will be of interest to the readers of the report and will help them better understand the results. These materials are being made available in the interest of transparency. The attached Topic Paper is one of 38 such working document used in the study analyses. Also included is a roster ofthe Subgroup that developed or submitted this paper. Appendix E of the final NPC report provides a complete list of the 38 Topic Papers and an abstract for each. The printed final report volume contains a CD that includes pdf files of all papers. These papers also can be viewed and downloaded from the report section of the NPC website (www.npc.org).

Working Document of the NPC Global Oil andGas Study

Made Available July 18, 2007

NATIONAL PETROLEUM COUNCIL HEAVY OIL SUBGROUP OF THE TECHNOLOGY TASK GROUP OF THE NPC COMMITTEE ON GLOBAL OIL AND GAS

TEAM LEADER Brian Clark Schlumberger Fellow Schlumberger Limited MEMBERS W. Gordon Graves Petroleum Consultant Pagosa Springs, Colorado Mariano E. Gurfinkel Project Manager Center for Energy Economics Bureau of Economic Geology TheUniversity of Texas Jorge E. Lopez-de-Cardenas Perforating Domain and Technical Advisor Schlumberger Reservoir Evaluation Wireline

Allan W. Peats Business Development Manager Heavy Oil Schlumberger Oilfield Services

Working Document of the NPC Global Oil and Gas Study

Made Available July 18, 2007

Heavy Oil, Extra-Heavy Oil and Bitumen Unconventional Oil
Team leader: Date submitted: BrianClark February 2, 2007

I. Executive Summary

There are huge, well-known resources of heavy oil, extra-heavy oil, and bitumen in Canada, Venezuela, Russia, the USA and many other countries.1 The resources in Canada and the USA are readily accessible to oil companies, and the political and economic environments are stable. While these resources in North America only provide a small percentageof current oil production (approximately 2%), existing commercial technologies could allow for significantly increased production. These unconventional oils can be profitably produced, but at a smaller profit margin than for conventional oil, due to higher production costs and upgrading costs in conjunction with the lower market price for heavier crude oils. Canada, Venezuela, and the UnitedStates are leading producers of these unconventional oils. In Canada, open-pit mining of shallow oil sands provides approximately 50% of the nation’s heavy oil production. In situ production of heavy oil with sand and thermal production using injected steam provide the remainder of Canada’s production. In particular, steam assisted gravity drainage (SAGD) production is rapidly growing. In Venezuela,cold production with horizontal and multilateral wells predominates. In the USA, thermal production using steam is the primary production means. However, there are several barriers to the rapid growth of heavy oil, extra-heavy oil, and bitumen production. Open-pit mining has a large environmental impact and

1

See the Discussion section for the definitions of heavy, extra-heavy oil, and...