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Petroleum News: Penn West touts multi-billion barrel deposit in Alberta

EXTRACT: The Penn West leases are adjacent to properties acquired by Shell Canada earlier this year in a C$2.43 billion takeover of BlackRock Ventures. The purchase gave Shell 268,000 net acres with more than 1 billion barrels of estimated oil initially in place and has given the company enough confidence to aim for 100,000 bpd of production once it decides how to upgrade the heavy crude into refinery-ready synthetic crude.

THE ARTICLE

By Gary Park

Penn West Energy Trust, the largest producer among Canadian trusts, is gearing up to become a big-time heavy oil player with a possible stake in production, transportation and upgrading.

Its prospects have taken another major leap forward following an analysis of 370,000 acres of leases in the Pace River area of northwestern Alberta.

Chief Executive Officer Bill Andrew told a conference call that technical studies have identified up to 7 billion barrels of recoverable oil in the Seal project, where production is now about 4,000 barrels of oil equivalent per day.

Initial plans call for output of 20,000 barrels per day within five years, although the trust has previously said its goal is in the 100,000 bpd range.

Peace River is the least developed of Alberta’s three primary oil sands regions, which include Athabasca and Cold Lake.

Relatively easy flow

Andrew said the Seal oil, although deeply buried, flows to the surface relatively easily using primary production methods. Once the near-term target has been exploited, Penn West will use secondary methods, such as steam injection to underground deposits, forcing the oil to the surface.

Although the technique costs more the rates of recovery are higher, Andrew said, while sidestepping any attempt at estimating how large Seal could become.

Earlier this year he said a pilot project at Seal indicated production costs could be in the range of C$7-$8 per barrel, about half the current costs.

The Penn West leases are adjacent to properties acquired by Shell Canada earlier this year in a C$2.43 billion takeover of BlackRock Ventures.

The purchase gave Shell 268,000 net acres with more than 1 billion barrels of estimated oil initially in place and has given the company enough confidence to aim for 100,000 bpd of production once it decides how to upgrade the heavy crude into refinery-ready synthetic crude.

Penn West said it is exploring a possible upgrading partnership, moving into new territory for trusts which traditionally avoid stakes in long-term capital undertakings.

Andrew said discussions have involved a number of firms, but there is “no plan of action right now.”

Penn West is also contemplating construction of a pipeline to deliver heavy crude from Peace River to upgraders in the Edmonton area.

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