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Sweetening the deal
Arrows
September 2004
FROM THE WINDOW of a crew plane, the mountainous, bright-yellow structure can be seen from miles away. Closing in on Apache’s Zama field in northwestern Alberta, Canada, the golden stockpile comes into focus.
The immense mound, a byproduct of years of oil and gas production, is made up of elemental sulfur derived from the hydrogen sulfide (H2S) stripped from the field’s sour hydrocarbons (to sweeten it) and then formed into layers of blocks at the Zama Production Office and Gas Processing Facility.
Thanks to Apache’s Zama Acid Gas Enhanced Oil Recovery (EOR) Project, the growth of that sulfur mound – as well as air emissions of carbon dioxide (CO2, a greenhouse gas) and sulfur dioxide (SO2) from flaring (a contributor to acid rain) released during the sweetening process – soon will come to a halt. By late September, Zama’s sulfur plant will be shut down.
But that is just the beginning. In what is believed to be the first such project in the world, Apache is aiming to wring another 10-15 percent of the oil out of the ground by injecting both H2S and CO2 into Zama’s depleted pinnacle reefs. In addition, the project translates to $500,000 Canadian ($375,000 U.S.) in annual savings related to acid gas disposal, as well as attracting incentives from both the Alberta and federal governments.
“It’s a win-win situation all around,” said Bill Jackson, manager of Joint Ventures, Canada, who has been responsible for the commercial aspects of the project. “This program is a good match for the Zama field. We have everything we need – the acid gas, the wells, the facilities – to make this happen.”
Due to the field’s sour hydrocarbons, Apache has faced costly disposal issues from the H2S stripped from the oil and gas in the sweetening process. About two-thirds of the acid gas – consisting of 67 percent CO2 and 33 percent H2S – is disposed of and sequestered (permanently stored in underground formations) in deep injection wells in the Keg River formation. Until now, the remainder was flared or processed into elemental sulfur and stored in the yellow block form. A glut in the sulfur market, which several years ago had been healthy, has added to that stockpile.
At Zama, where primary oil production yields just one-quarter of the oil trapped in the region’s pinnacle reefs and secondary waterflood production leaves about 65 percent of the oil in the ground, this third acid gas EOR project is pivotal.
In another new twist, the Zama EOR project will use a top-down injection scheme, where the acid gas will be pumped into the top of the pinnacle. (Pinnacles are underground reef formations that taper upward, like a steeple, where oil and gas can be easily trapped.) Acting as a solvent, the acid gas will drive the oil down, sweeping it through the rock to a production well at the bottom of the pinnacle. The solvents work to overcome forces that trap oil in small pores in reservoir rock, sweeping out oil left behind after primary production and waterflooding. Top-down injection is the reverse of a waterflood, in which water is pumped into the bottom to force the oil up to a producer well.
“I like this project because it has so many things going for it,” Jackson said. “For instance, we are able to use locally generated solvents, rather than just CO2. The H2S comes from the oil and gas that we produce in the area anyway, so it is going back to where it came from; plus it works as a fairly good solvent. We are already handling the H2S, so it doesn’t create any additional risks or issues.”
In addition to the increased oil production, the project will cut both greenhouse gas and acid rain emissions as well as operating costs related to acid gas disposal. Up to 67,000 tons of CO2 and 24,475 tons of H2S will be injected annually, with the potential to expand the project to provide long-term CO2 and H2S sequestration.
“The injection of acid gas is nothing new, and enhanced oil recovery using CO2 is nothing new,” Jackson added. “What is new is we are combining those two and using them in unconventional reservoirs, which are these pinnacles. They are not typical flat reservoirs where you get a gas front and it will move through the reservoir and knock the oil forward – and that’s why we are going about it with a top-down technique.”
Apache acquired the Zama properties from Canadian affiliates of Phillips Petroleum Co. for $490 million Canadian in 2000. Included were proved reserves of about 71.6 million barrels of oil equivalent, the area’s three sour gas plants with total capacity of 150 million cubic feet (MMcf) per day, and production of approximately 85 MMcf of gas and 8,000 barrels of liquid hydrocarbons per day.
The Zama Acid Gas EOR Project was put in motion a year ago when the Canadian government announced incentive programs to bolster the development of CO2 EOR projects in Western Canada, where a lack of infrastructure has restrained progress.
Alberta now offers royalty credits of up to $15 million Canadian over five years to offset as much as 30 percent of a company’s approved costs for capital projects that improve sulfur recovery efficiency, with a maximum of $5 million Canadian in royalty credits approved for any single project.
“We were keeping an eye out for these incentive programs,” Jackson said. “We knew it was on the horizon that we would have to look at CO2 issues.”
In September 2003, the Zama Acid Gas EOR Project concept was presented to Steve Farris, Apache president and CEO, who in turn gave Apache Canada a thumbs-up to proceed.
Apache’s Zama project was one of four projects awarded royalty credits earlier this year, and the company also has applied for federal assistance under Natural Resources Canada’s CO2 Capture and Storage Incentive Program.
To make sure the new EOR scheme worked, Apache Canada conducted a pilot program in Zama in June, reactivating the first acid gas flowback well, which hadn’t been on production since 1992. The pilot test proved successful (the well is now producing an average of 175 barrels per day) and bolstered Apache to begin acid gas EOR at Zama.
“We have to give credit to the Zama field operators for monitoring and producing the well,” said Doug Nimchuk, project coordinator for reservoir engineering support and project economics. “When they first turned on the well it had problems – it was only producing 50-60 barrels a day, due to extreme hydration prob-lems and wax deposition. By adjusting their chemical program, they were able to sustain a much higher pro-duction rate. Production foremen Bob Stanhope and Wally Samson worked really hard at optimizing the well.”
Credit should also be given to the following Apaches instrumental in the project’s development: Jim Ross, geophysical adviser; Bruce Beveridge, senior production engineering adviser; Ron Bachmeier, senior facilities engineer; Lavern Rankin, senior engineering adviser, and Llyle Eslinger, senior geologist. Senior reservoir engineering consultant Rob Lavoie also contributed to the project.
Apache is currently converting two depleted Keg River pinnacles into top-down acid gas EOR projects and has identified another seven candidate pinnacles within four miles of the Zama gas plant. Preliminary work on a third pinnacle has begun with the anticipation of submitting applications to the Alberta Energy and Utilities Board by late September.
The Zama and Shekilie basins are characterized by oil-trapping pinnacles that range from 165 feet to 820 feet wide. With over 800 pinnacles in the region – and plans to add two or three to the EOR project each year – the potential to expand to the remaining pinnacles is only limited by the supply of economic sources of acid gas or CO2.
“We figure with the seven candidates, we have enough acid gas at current rates that we could probably continue for about 15 years,” Jackson said. “The main factor is the proximity to the gas plant since we would have to build pipelines – either injection lines or production lines – because we need two lines and most of the other wells only have one line.”
Some pinnacles already have two production wells – or one production well and one water injection well where waterflooding was used, Jackson added. In those cases, the upper well can be converted to the injector well and the lower into a producer. In the majority of pinnacles where just one well exists, a second well will be drilled.
When all incremental oil has been recovered from a pinnacle, it will be used for acid gas disposal and se-questration. Nimchuk says phase one of the project, involving the first two of nine targeted pinnacles, has the potential to produce an extra 616,420 barrels of oil. Work is now under way to accelerate acid gas injection in a third pinnacle later this year.
Jackson noted that while he is not aware of any other top-down acid gas EOR projects, some organizations have tested the use of liquid hydrocarbons such as propane and butane.
“The phenomenon works,” he said. “It’s just a matter of being able to control the rate at which you inject the H2S/CO2 mix so that it doesn’t channel or finger on you. Because these reservoirs don’t all have the same permeability, the acid gas may want to pass through one area quickly, and then that’s the only place it goes. Then you may end up blowing back acid gas and not getting the oil. So we have to adjust the rate and the pressure to control the mobility of the acid gas in the reservoir itself.”
Testing at the initial sites will give Apache an idea of what kind of injection rates it needs, Jackson says. The company has installed separation facilities to strip the acid gas from the oil, and compression has been added at the Zama gas plant to compress the gas and move it on to the pinnacles. The sulfur plant will be shut down this fall and acid gas injection is expected to begin in December 2004.
The cost of acid gas compression needed to carry out the project, estimated at $500,000 Canadian ($375,000 U.S.) a year, will be more than offset by the savings of approximately $1 million Canadian ($750,000 U.S.) annually with the suspension of sulfur plant operations.
The Apache team is pumped about “breathing new life into some of these old pools,” Nimchuk said. The team is also jazzed about the message the Zama EOR project is sending to the public.
As Canada is a signatory to the Kyoto Accord to reduce greenhouse gas emissions such as CO2, this project will help both Apache and the Canadian oil and gas industry achieve the mandatory Kyoto targets.
“What we’re effectively doing is cleaning up the environment – and I think everyone feels pretty good about that,” Jackson added. “We make no bones about it; we’re here to make money – that’s our job. But, if we can do that in an environmentally advantageous manner, we’ll do it.”