Companies move into producing North Slope's heavy oil

Posted: Monday, November 10, 2003

ANCHORAGE - Jason Brink opened a small valve on well 1C-104 and caught globs of bubbly, dark, faintly ruddy gunk in a metal bucket.

"Looks more like Play-Doh than oil," said Brink, an engineer for ConocoPhillips Alaska Inc.

It's ugly stuff compared with most of the crude oil produced from the North Slope oil fields. This is heavy oil, so called because of its thickness.

Heavy oil is notoriously hard to get out of the ground because it's syrupy and relatively cold, meaning it doesn't flow easily through porous rock and sand.

But it's incredibly abundant, with 25 billion barrels or more contained in shallow North Slope pools with names like West Sak, Schrader Bluff and Ugnu. That equals or exceeds the amount found at Prudhoe Bay, the biggest oil field in North America.

Oil companies increasingly are staking big dollars on heavy oil development as the more free-flowing fields, including Prudhoe and neighboring Kuparuk, are drained.

In the last couple of years, both Conoco and BP Exploration (Alaska) Inc. have made strides toward unlocking the thick oil with new technology, including well bores that twist and turn like snakes to get at oil-soaked "sweet spots."

The oil companies aren't the only ones counting on turning this ugly oil dribble into some serious cash flow.

The state finances 80 percent of its budget with oil revenue, excluding federal spending in Alaska. North Slope oil production, at about 1 million barrels a day, is only half what it was in 1989. The industry and the state hope heavy oil can help stem further production declines.

Currently, heavy oil flow is about 30,000 barrels a day, or 3 percent of total North Slope output. The state projects heavy oil will surge to 123,000 barrels a day by 2010, or 12 percent of the total.

"We're counting on it," said Chuck Logsdon, the state's chief petroleum economist. "Heavy oil is something the companies have been working on for a long time. It's a big prize."

For guys like David Boyd, a Wasilla resident who helps run BP's new Schrader Bluff heavy oil production pad in the declining Milne Point field, the thick crude means more than state revenue and company profits. It means job security on the Slope.

"I feel a hell of a lot more confident than I did 10 years ago," he said. "I'm one of those weirdos. I love getting on a plane and coming up here to work for two weeks at a time."

Oil company managers, however, are guarded in their enthusiasm. They caution that boosting heavy oil production means proving up new technology, weathering possible oil price collapses and winning competitions inside their own companies for dollars to fund Alaska projects.

Congress also is considering energy legislation that could include a $3 per barrel tax credit for heavy oil developments.

The North Slope isn't the only place in the world with lots of heavy oil. The Slope's reserves are puny compared with those of Venezuela or Alberta, Canada, where the oil is so thick and shallow that it's strip-mined with colossal steam shovels and dump trucks from deposits known as tar sands.

Alaska's heavy oil has been known about since the 1960s. Explorers generally ignored it, drilling right through for deeper, lighter, higher quality oil that flows more readily up wells to the surface. North Slope oil isn't found conveniently in big, underground lakes.

Rather, it is dispersed in layers of porous rock and sand, and often the different oil-bearing formations are pancaked one over the other.

At the top of the stack, at about 2,000 to 4,000 feet deep, are the cold heavy oil accumulations just beneath the permafrost: Ugnu, West Sak a bit deeper, Schrader Bluff, and some smaller pools including Orion, Polaris and Tabasco. At the bottom, at roughly twice the depth, are the hot, light liquids of the prolific Kuparuk and Prudhoe Bay fields.

Because heavy crude is so stubbornly stuck in the ground, and often mixed with sandy grit when it surfaces, oil companies might be forgiven if they just abandoned it.

But these sticky pools have an ace in the hole - lots of nearby processing plants and pipelines thirsty for more oil.

Around the world, petroleum engineers have conceived all manner of ideas to get the oil out, from cracking rock formations to making escape paths for the oil, to injecting steam or warm water or even lighting subterranean fires to heat up the oil for better flow. Oil hands on the Slope now are unleashing some creative new weapons.

In late August, Doyon Drilling's Rig 141 steadily ground into West Sak, a vast heavy oil deposit that overlies the Kuparuk field. The rig weighs a couple million pounds, employs more than 100 people and doesn't come cheap.

"The day rate is about one Mercedes SUV a day," said Bobby Morrison, a drilling supervisor for Conoco, which hired the rig.

Used to be, drillers would sink their holes straight down and hope for a decent flow rate. Now, directional drilling is the standard, especially when it comes to heavy oil. West Sak's oil is held in multiple layers of loose sand or crumbly sandstone, each only a few feet thick.

The task for the Doyon crew is to drill down about 3,700 feet, then steer the drill bit out at a right angle for close to two miles through one of the sand layers. It's sort of like running a straw through a folded napkin, except the napkin, or sand layer, is crumpled with faults, dips and rises.

The layers also can contain undesirables like water pockets or hard calcium "cannon balls" that can wham a diamond drill bit like a tooth hitting a jawbreaker. These directional, or lateral, wells can bring up far more oil than vertical wells. In the last three years, the oil companies have started drilling super wells with two or even three laterals to probe multiple layers of oil-bearing sand.

And Conoco is drilling other types of "undulating" wells that move like a desert sidewinder up and down through multiple sands to either collect oil or squirt water to flush out more crude.

"These are more or less designer wells," said James "Chip" Milchak, a directional driller on the Doyon rig.

Conoco engineers were thrilled earlier this year when one of the company's West Sak wells briefly produced more than 5,000 barrels a day. A few years ago, a heavy oil well did good to make 300.

Competing oil company BP also is using lateral drilling, though not the snakes, to tap the Schrader Bluff heavy oil deposit in the company's Milne Point field, which neighbors Kuparuk. The pearl of BP's effort, and the best heavy oil project so far on the North Slope, is S Pad, a compact new gravel drill site on a lonely swath of virgin tundra.

Its dozen producing wells, the first of which started up only a year ago, are pumping a combined 15,000 barrels a day, or about half of all North Slope heavy oil output. BP engineers hope to get 50 million barrels from the pad over the next 15 to 30 years.

That's only about 20 percent of the oil thought to lie under the pad and a poor rate compared with the more than 50 percent recovery expected at Prudhoe Bay, which originally held 25 billion barrels.

For Dan Hejl, a BP field technician who helps tend S Pad, it's just nice to see heavy metal drilling for heavy oil.

"The low-hanging fruit is gone," Hejl said. "Now we're getting the stuff that's hard to get."

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