Full Steam Ahead

SAGD projects bring billions in new industrial construction

New steam assisted gravity drainage (SAGD) projects will keep construction crews in Alberta busy well into the next decade.

New SAGD facilities to produce heavy oil, particularly from the oilsands regions near Fort McMurray and Peace River regions, could mean as much as $4.2 billion in industrial construction spending per year between now and 2020.

But there's a catch: all the announced heavy oil projects, including in situ SAGD, would have to be built on schedule. And industry experts say that is unlikely.

Bob Dunbar, an engineer and principal at Calgary-based consulting firm Strategy West Inc., explains that the figure assumes that about 90 per cent of new in situ production would be SAGD, based on an anticipated $4.7 billion that is to be spent on new in situ capacity annually.

He says that prior to giving a presentation to the Canadian Association of Petroleum Land Administration in May, he assigned a probability value for completion on schedule of all announced projects-that includes underground in situ and surface mining-to develop an adjusted case for increased oilsands capacity over the same period. An analysis was done on each project and took into account operator experience, financial capacity, and where each operator was in the regulatory process with respect to a project, among a host of other factors.

Under the more modest, adjusted case, about $12.5 billion in capital expenditures per year will be invested in new oilsands capacity to 2020, of which about $2.6 billion will be spent annually on new in situ facilities. (The very bullish, unadjusted case would see a total of more than $21 billion per year spent on oilsands development between now and 2020. The total includes mining, in situ, and upgrading.) Assuming again, that 90 per cent of new in situ capacity is SAGD, this translates to about $2.3 billion spent per year.

Either way, says Dunbar, "with over 80 per cent of the oilsands resource underground, there is going to be a lot of industrial construction for new SAGD facilities over the next dozen or so years."

SAGD facilities are cheaper to build than oilsands mines. But they are nevertheless complex, substantial projects.


SAGD uses pairs of horizontal wells-one to inject steam to soften the bitumen and one to produce the bitumen to the surface-to achieve oil production in a steady, continuous process. Generation of heat for steam, recycling water, and treating the oil are three other key parts of a SAGD operation, besides production at the well pads.

Mike Krayacich, operations general manager for Suncor's Firebag SAGD project, was project director for Firebag Stage 2. He says the expansion cost about $500 million and added another 35,000 bbl/d of production. Stage 2 began production in the fall of 2005.

Krayacich says Firebag Stage 3, which will add a further 62,500 bbl/d of production, will likely require more than 500 modules of pipe and other equipment for its construction, expected to ramp up in 2008. The full cost is not yet available. The project is expected to go to the Suncor board of directors for final approval later this year.

A SAGD facility, with well pads sometimes located 3 to 5 km away from the central processing facility, can cover a wide area and use an array of fabricated components-structural steel, many kilometres of pipe, separators, pressure vessels, pumps, turbines, and heat exchangers-and many of these on a fairly huge scale.

Also, as the SAGD sector matures, components get bigger as capacity increases. As the bitumen and water are produced from the well, the mixture goes to a separator. The separator, which begins the process of removing water that was pumped down in the form of steam from the bitumen, that was built for Firebag 2 was about 15 ft in diameter and 40 ft tall.

For Firebag 3, says Krayacich, the separator will likely be about 20 ft in diam-eter and 100 ft tall. A separator is located at each well pad.

Although the central processing facility is perhaps the biggest part of a SAGD operation, well pads today are built sometimes with as many as 10 to 14 pairs of wells. Each of these can be 700 to 1,000 m in length and about 300 m deep. Krayacich notes that the 35,000 bbl/d Stage 2 facility at Firebag has two well pads, each with 10 pairs of wells.

Firebag is scheduled to include three more stages after Stage 3, as part of its Voyageur expansion project. This is also slated to include an upgrader that will process into light synthetic crude the 250,000 bbl/d of production expected when all stages are complete.

A few other equipment dimensions give a sense of the scale of modern SAGD projects:

  • A 24-inch, high-pressure (1,500 to 2,000 psi) steel pipe brings steam from the central processing facility to the well pads.
  • A 30-inch pipe transports bitumen from well pad to processing facility.
  • Pressure vessels used for processing can measure 120 ft long, with an 18 to 20 ft diameter.
  • An atmospheric pressure tank that is about 120 ft in diameter and 30 ft tall is used for water softening. "This has a large turbine drive that aids in contact of chemicals that soften the water," says Krayacich.


Specialists in oilsands fabrication, module assembly, and construction generally concur that labour costs for site work can often be as much as three times what they are for shop work and yard assembly. As a result, more off-site modular construction of as many components as possible is being done.

"We have gone very much more modular than previously," Krayacich says. "Before, we would modularize just the pipe racks. Now, instrumentation, pumps, and housing and pressure vessels, and heat exchangers and equipment that goes with them are modularized. The modules are then buttoned together on site."

Lockerbie and Hole Management Corp.'s Sherwood Park-based business development manager, Gary Cutmore, says that although the company has been more involved with upgraders and refineries in the past, "SAGD is an increasing part of our business."

Module assembly has been a significant part of Lockerbie and Hole's business recently, and Cutmore has been doing forecasts for module construction, based on the most recent announcements for oilsands projects.

Cutmore's latest forecast indicates that module construction should peak in Alberta with about 800 modules under construction in mid-summer 2009. This includes modules for all announced projects, including SAGD.

The number of standing modules will average around 500 to 600 for much of 2008 and 2009 and on into 2010 and will drop sharply going into early 2011, but could increase later that year to a 250 average.

OPTI/Nexen's SAGD project has almost completed construction of Phase 1 of its SAGD project, which includes an upgrader. Steam injection began in April, says Sean Noe, a spokesman for the Long Lake joint venture project. He says the two main components-the SAGD production facility and the upgrader-required more than 700 modules in construction.

The second phase for the Long Lake project should get board approval sometime "in the second half of '08," says Noe.

The project has created considerable interest among players in the heavy oil sector, as it does not use natural gas for fuel, the major source of operating costs for SAGD and other thermal in situ technologies. Instead, it uses a patented method involving gasification of so-called ‘bottom-of-the-barrel' asphaltenes.

The next year will provide the project's management with breathing space to assess a few key issues.

Says Noe: "The timing of Phase 2 depends in part on Phase 1 learnings. More clarity is being sought on the fiscal and regulatory environment. [Oil and gas royalties are currently under review.] Also, more clarity is needed around CO2 from both the province and the federal levels."

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