The Long Lake reservoir is not perfect, but is “very manageable”—that’s one of the messages OPTI Canada president and chief executive officer Christopher Slubicki had for attendees at today’s Unconventional Oil forum put on by TD Newcrest.
This follows a report July 3 from Peters & Co. stating that while at-surface issues such as steam generation have been well documented as the cause of a slower-than-expected production ramp up at Long Lake, there are probably sub-surface challenges as well.
Peters & Co. analysts wrote that they expect the project to be successful in the long term, albeit with the injection of further capital for more steam generation, pumps, and facilities. The analysts say that while the extra cost may not significantly impact project operator Nexen, it could hurt junior OPTI.
OPTI reports that steam injection in early June averaged above 90,000 barrels per day, with subsequent bitumen production averaging about 18,000 barrels per day–about 25 per cent of the 72,000 barrel per day design capacity. OPTI and Long Lake joint venture partner Nexen both say this is in line with industry experience, but Peters & Co. disagrees.
“All projects have reliability issues in the first year, with projects operating at an average of 60 per cent of design capacity after 18 months…Long Lake’s performance is significantly below the average, given the time that steam has been injected. Facilities issues have accounted for some of the problems to date, although we continue to believe that reservoir issues also exist based on the performance of well pairs that have not been steam constrained.”
Slubicki acknowledged there are reservoir issues at Long Lake, citing “lean zones,” described as areas where the bitumen-bearing reservoir is greater than 15 metres thick compared with the majority of the operated portion, where the reservoir is more than 30 metres thick.
“We have a tier one reservoir, and we have some lean zones,” he said, pointing to a slide which showed these areas existing within the original Long Lake pilot. These zones, Slubicki notes, exist in less than three per cent of the total reservoir, and are easy to see on core samples. “When [the core] is bitumen-saturated, it looks like tar. When it’s lean, it looks light grey.”
He added that, “it’s easy to sit here in Calgary and talk about an issue like a valve not working, but when you go up there, it’s very impressive to see what’s working. It hums like a Swiss watch. It’s an impressive operation.”
And as for those lean zones, he says “in terms of issues with the reservoir, I’ll take that any day.”