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What are “in situ” and SAGD?

In situ oil sands production means extracting bitumen from underground by drilling wells into the reservoir, as with conventional oil and natural gas production. This distinguishes in situ recovery from surface mining, which requires removing topsoil and other overburden and creating a large open pit mining area.

Steam-assisted gravity drainage (SAGD) is a specific form of in situ extraction. Nearly all bitumen is too viscous or thick at ambient reservoir temperature to flow on its own. It must be thinned, either through heating or by diluting it with solvents, or both. SAGD recovery involves drilling pairs of horizontal wells, one placed above the other in each pair. Steam is injected into the upper well. The steam heats the reservoir, thinning the bitumen which can then drain threw gravity to the lower well. The bitumen-water mixture (along with solvents, if applicable) is then pumped to surface.

Another common form of thermal recovery is cyclic steam stimulation (CSS). CSS or “huff-and-puff” uses vertical wells that alternate as both steam injectors and bitumen producers, creating a cycle of injection, heating and recovery from each vertical well.

As of 2011, in Alberta there were approximately 20 in situ oil sands projects at the pilot or commercial stages in production, and a further 19 with regulatory approval.

Benefits of the in situ approach

In situ extraction, particularly SAGD, offers compelling technical, economic, environmental and public policy benefits.

It is simply necessary, since over 80 percent of Alberta’s bitumen lies too deep for surface mining. To date, the large majority of Alberta’s oil sands production has been from surface mining projects. Given the nature of the resource base, this suggests the majority of future growth in oil sands production must come from in situ projects.

Economically, in situ projects are easier to initiate because they are commercially viable at a far smaller size and therefore require less initial investment capital. It is also easier to market the smaller volumes of bitumen produced by SAGD projects. Surface mines usually include an upgrader and produce a specific grade of synthetic light oil, requiring a large scale to gain market acceptance. SAGD projects are far easier to scale up in measured increments, and with shorter lead-times, again reducing and spreading out the capital requirement, making these projects highly responsive to market signals.

In situ oil sands projects create much less surface disturbance, cover a smaller land area and typically use less water than surface oil sands mines. They are therefore environmentally much friendlier and meet public expectations of reduced environmental and social impacts.

Lastly, in situ recovery technologies are getting better all the time, creating the possibility for continual incremental improvement in productivity, resource recovery, and capital and operating efficiencies. This in turn creates incremental upside in the value of existing SAGD projects. Surface mines and upgraders, by contrast, typically are expanded and/or improved in large, capital-intensive steps.