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Accident Leads to Scrutiny of Oil Sand Production Accident Leads to Scrutiny of Oil Sand Production
(4 months later)
CALGARY, Alberta — In the annals of oil well blowouts and pipeline disasters, the 7,400 barrels of oily slush that oozed out of the mossy bogs of the boreal forest in northeast Alberta last summer may seem like a trivial matter. CALGARY, Alberta — In the annals of oil well blowouts and pipeline disasters, the 7,400 barrels of oily slush that oozed out of the mossy bogs of the boreal forest in northeast Alberta last summer may seem like a trivial matter.
No one was hurt in the accident, which spread across at least 17 acres in the Primrose oil sands field, and the most damage to wildlife came from the killing of about 70 frogs in a lake contaminated by the leak. It has since been drained.No one was hurt in the accident, which spread across at least 17 acres in the Primrose oil sands field, and the most damage to wildlife came from the killing of about 70 frogs in a lake contaminated by the leak. It has since been drained.
But while the accident has so far been overshadowed by the controversy over the proposed Keystone XL pipeline south of the border, it has nevertheless stirred nervous misgivings throughout the oil sands industry and drawn an unusually intense response from Alberta regulators, who have traditionally had a cozy relationship with the oil companies.But while the accident has so far been overshadowed by the controversy over the proposed Keystone XL pipeline south of the border, it has nevertheless stirred nervous misgivings throughout the oil sands industry and drawn an unusually intense response from Alberta regulators, who have traditionally had a cozy relationship with the oil companies.
In a move that has raised eyebrows in the industry, officials of the Alberta Energy Regulator have refused to accept the explanations for the cause of the accident by Canadian Natural Resources, the field’s operator and one of the country’s largest oil companies. In March, the agency also rejected the company’s bid to restart its operation until a complete investigation had been completed.In a move that has raised eyebrows in the industry, officials of the Alberta Energy Regulator have refused to accept the explanations for the cause of the accident by Canadian Natural Resources, the field’s operator and one of the country’s largest oil companies. In March, the agency also rejected the company’s bid to restart its operation until a complete investigation had been completed.
“The circumstances surrounding Primrose are a test case for both the industry and the regulator,” said Andrew Leach, a business professor at the University of Alberta. “The public needs to have confidence in the regulator that it can prevent these kinds of incidents.”“The circumstances surrounding Primrose are a test case for both the industry and the regulator,” said Andrew Leach, a business professor at the University of Alberta. “The public needs to have confidence in the regulator that it can prevent these kinds of incidents.”
The full implications of the Primrose accident are still unclear, as are the causes of the accident. But the regulators’ new interest in what caused it has raised questions, more broadly, about the way oil companies are planning to tap Alberta’s richest deposits.The full implications of the Primrose accident are still unclear, as are the causes of the accident. But the regulators’ new interest in what caused it has raised questions, more broadly, about the way oil companies are planning to tap Alberta’s richest deposits.
The Primrose well uses high-pressure steam to free the oil from the sands deep underground, allowing it to rise to the top. The technique — known as “huff and puff” — is vaguely similar to fracking, which instead of steam uses a high-pressure mix of water, sand and chemicals to unlock the trapped oil and has led to a surge in oil production in the United States.The Primrose well uses high-pressure steam to free the oil from the sands deep underground, allowing it to rise to the top. The technique — known as “huff and puff” — is vaguely similar to fracking, which instead of steam uses a high-pressure mix of water, sand and chemicals to unlock the trapped oil and has led to a surge in oil production in the United States.
At issue is whether the thick rock that traps the raw oil sands, keeping them from escaping to the surface, was fractured by high steam pressure applied during the production process — as environmentalists say was probable — or whether Canadian Natural Resources is correct in saying that the leak was simply a malfunction.At issue is whether the thick rock that traps the raw oil sands, keeping them from escaping to the surface, was fractured by high steam pressure applied during the production process — as environmentalists say was probable — or whether Canadian Natural Resources is correct in saying that the leak was simply a malfunction.
So far the suspension of some operations at the Primrose field has meant a loss of only about 10,000 barrels of daily bitumen production, which roughly translates into 8,000 barrels of crude oil after the bitumen is refined. It is a fraction of the 3.4 million barrels a day produced in Canada.So far the suspension of some operations at the Primrose field has meant a loss of only about 10,000 barrels of daily bitumen production, which roughly translates into 8,000 barrels of crude oil after the bitumen is refined. It is a fraction of the 3.4 million barrels a day produced in Canada.
But the losses could become much larger depending on what the provincial regulator determines were the causes of the accident, especially for production in the immediate vicinity. (The regulator in late April approved some renewed production at the Primrose field, but no closer than one kilometer [0.62 mile] from the surface seepage and at low pressure.)But the losses could become much larger depending on what the provincial regulator determines were the causes of the accident, especially for production in the immediate vicinity. (The regulator in late April approved some renewed production at the Primrose field, but no closer than one kilometer [0.62 mile] from the surface seepage and at low pressure.)
Energy experts say the results of the Primrose investigation and the tighter regulations that may follow it could also slow oil sands production in other areas of Alberta or require potentially less efficient drilling techniques. They say that leaks underground can be particularly difficult to control, and can pollute critical aquifers. The provincial regulatory agency in January suspended development in a second large but shallower oil sands field, as officials argued that more research was needed.Energy experts say the results of the Primrose investigation and the tighter regulations that may follow it could also slow oil sands production in other areas of Alberta or require potentially less efficient drilling techniques. They say that leaks underground can be particularly difficult to control, and can pollute critical aquifers. The provincial regulatory agency in January suspended development in a second large but shallower oil sands field, as officials argued that more research was needed.
“We’re trying to be very proactive and trying to get out ahead of this,” said Stephen Smith, the vice president in charge of monitoring steam-pressure operations for the Alberta Energy Regulator. He added that there was “connective tissue” between the January order, the Primrose accident and at least one additional accident in recent years.“We’re trying to be very proactive and trying to get out ahead of this,” said Stephen Smith, the vice president in charge of monitoring steam-pressure operations for the Alberta Energy Regulator. He added that there was “connective tissue” between the January order, the Primrose accident and at least one additional accident in recent years.
Mr. Smith said that in the case of Primrose, “We are not going to allow steaming until we understand what caused this accident,” and more generally that there “certainly is a possibility here that there may be areas where we say we cannot accept the risk and would not allow development.”Mr. Smith said that in the case of Primrose, “We are not going to allow steaming until we understand what caused this accident,” and more generally that there “certainly is a possibility here that there may be areas where we say we cannot accept the risk and would not allow development.”
The Primrose incident became public nearly a year ago after a mix of bitumen and water seeped to the surface at four separate sites from drilling operations 1,500 feet below the surface at Canadian Natural Resources’ oil sands project. The seepage came out of large gashes in the ground, polluting an unnamed lake. The company has already spent $60 million on the cleanup and drilling wells to identify the rock pathways from which the seepage emerged.The Primrose incident became public nearly a year ago after a mix of bitumen and water seeped to the surface at four separate sites from drilling operations 1,500 feet below the surface at Canadian Natural Resources’ oil sands project. The seepage came out of large gashes in the ground, polluting an unnamed lake. The company has already spent $60 million on the cleanup and drilling wells to identify the rock pathways from which the seepage emerged.
The project injects high-pressure, high-temperature steam to fracture and soften the oil sands deposit so the bitumen can be pumped to the surface. But the company has insisted that the leaks were caused by “mechanical failures” in old oil drilling holes, known as well bores, rather than from unwanted stresses in the rock holding the oil sands reservoir.The project injects high-pressure, high-temperature steam to fracture and soften the oil sands deposit so the bitumen can be pumped to the surface. But the company has insisted that the leaks were caused by “mechanical failures” in old oil drilling holes, known as well bores, rather than from unwanted stresses in the rock holding the oil sands reservoir.
In an interview, Steve W. Laut, the president of Canadian Natural Resources, said that extensive company testing in the Primrose field showed it was highly improbable that seepage could move through the 500-foot-thick rock that sits 60 feet below the surface without going through the defective old well bores. “I would say the cement jobs were inadequate,” he said.In an interview, Steve W. Laut, the president of Canadian Natural Resources, said that extensive company testing in the Primrose field showed it was highly improbable that seepage could move through the 500-foot-thick rock that sits 60 feet below the surface without going through the defective old well bores. “I would say the cement jobs were inadequate,” he said.
Mr. Laut said that while the company cleaned up the spill, it was running tests on more than 30 test wells in the field for similar problems, making repairs and installing monitoring systems that will enable engineers in the future to stop steaming before seepage can rise to the surface. “We’re making sure it will never happen again,” he added.Mr. Laut said that while the company cleaned up the spill, it was running tests on more than 30 test wells in the field for similar problems, making repairs and installing monitoring systems that will enable engineers in the future to stop steaming before seepage can rise to the surface. “We’re making sure it will never happen again,” he added.
But Chris Severson-Baker, managing director at the Pembina Institute, a leading Canadian environmental group, said that the accident most likely resulted from oil company injections that placed too much pressure on the rock, producing unwanted fissures. The oily mush that oozed out probably “came to the surface following the path of least resistance,” he said.But Chris Severson-Baker, managing director at the Pembina Institute, a leading Canadian environmental group, said that the accident most likely resulted from oil company injections that placed too much pressure on the rock, producing unwanted fissures. The oily mush that oozed out probably “came to the surface following the path of least resistance,” he said.
Most of the growth in Canadian oil output — which industry executives predict will increase from the current 3.4 million barrels a day to 3.9 million barrels a day in 2015 — is driven by projects that rely on steam pressure.Most of the growth in Canadian oil output — which industry executives predict will increase from the current 3.4 million barrels a day to 3.9 million barrels a day in 2015 — is driven by projects that rely on steam pressure.
For Pembina analysts, the Primrose leak is similar to a handful of accidents that go back to 1988 in projects that use high-pressure steam or a second, lower-pressure steam technique. In that procedure, two well bores are drilled — one to pump steam that loosens the bitumen from surrounding rock and another that pumps it to the surface.For Pembina analysts, the Primrose leak is similar to a handful of accidents that go back to 1988 in projects that use high-pressure steam or a second, lower-pressure steam technique. In that procedure, two well bores are drilled — one to pump steam that loosens the bitumen from surrounding rock and another that pumps it to the surface.
In one accident, at the Joslyn Creek project in Alberta, which used the lower-pressure technique and was operated by the French oil giant Total, an apparent steam-induced pressure release in 2006 forced a large, oily leak and created a crater larger than a football field. The project was abandoned.In one accident, at the Joslyn Creek project in Alberta, which used the lower-pressure technique and was operated by the French oil giant Total, an apparent steam-induced pressure release in 2006 forced a large, oily leak and created a crater larger than a football field. The project was abandoned.
The Joslyn accident alerted the industry and regulators that the questionable strength of the rock that sits on top of the oil sands — described in industry parlance as the caprock integrity — could limit the safety of steam drilling operations.The Joslyn accident alerted the industry and regulators that the questionable strength of the rock that sits on top of the oil sands — described in industry parlance as the caprock integrity — could limit the safety of steam drilling operations.
In January, the Alberta Energy Regulator began a review of several projects around Fort McMurray that use lower-pressure steam. One company, Ivanhoe Energy, has suspended work on a project valued at 1.37 billion Canadian dollars, about $1.25 billion. Another, SilverWillow Energy, has put itself up for sale because of delays in a 550-million-Canadian-dollar project.In January, the Alberta Energy Regulator began a review of several projects around Fort McMurray that use lower-pressure steam. One company, Ivanhoe Energy, has suspended work on a project valued at 1.37 billion Canadian dollars, about $1.25 billion. Another, SilverWillow Energy, has put itself up for sale because of delays in a 550-million-Canadian-dollar project.
“The implications of caprock integrity is an unknown that could have significant implications,” said David McColl, a senior Morningstar oil equity analyst, “for the small producers and beyond that for the larger producers as well.”“The implications of caprock integrity is an unknown that could have significant implications,” said David McColl, a senior Morningstar oil equity analyst, “for the small producers and beyond that for the larger producers as well.”