Thick as molasses: heavy oil development could provide boom to Alaska.

Imagine owning a piggy bank stuffed with gold coins-$5, $10, even $50 pieces. But the bank's opening is rather small to get the heavy gold coins out. Turning and shaking the piggy bank yields only a few of the smaller, thinner pieces, leaving the heavier, more valuable gold coins locked up.

That's the type of experience that Alaska's North Slope oil producers are facing in developing what could be another Prudhoe Bay-sized oil deposit-billions of barrels of thick, molasses-consistency crude called heavy oil, or its slightly lighter cousin, viscous oil.

Differences of viscous and heavy oil compared to typical light oil can be identified scientifically by several criteria, including density and gravity characteristics of the hydrocarbons. Bottom line-viscous oil is the step in between typical light crude currently being produced on the Slope and heavy oil that is not being produced. Neither viscous nor heavy oil flows easily.

"Light crude is the good, easy oil to produce with the consistency of water, viscous oil found in Schrader Bluff and West Sak is more like maple syrup ... and heavy oil is like molasses," said Daren Beaudo, spokesman for BP Exploration (Alaska) Inc. "Heavy oil is a great opportunity but also a great challenge."

Currently, five North Slope fields are producing about 50,000 barrels of viscous oil per day, according to Blaine Campbell, supervisor, Heavy Oil Development for ConocoPhillips in Alaska. Viscous production comes from ConocoPhillips-operated Tabasco and West Sak fields, and BP's Orion, Polaris and a portion of the Schrader Bluff formation from the Milne Point field, according to Arctic Energy, a North Slope overview booklet published by producers ConocoPhillips and BP Exploration in April 2006.

While amounting to less than 10 percent of today's crude oil production on the North Slope, viscous and heavy oil could be one answer in the future for maintaining product flow in the trans-Alaska oil pipeline system.

"We've identified a huge resource, more than 20 billion barrels in place," Beaudo said. "That's the beauty of Alaska's world class resources-they are huge resources that come in different shapes and sizes."

The amount of viscous and heavy oil on the North Slope could be even larger. U.S. Department of Energy estimates place the heavy oil resource as much as 36 billion barrels of original-oil-in-place in the Ugnu, West Sak and Schrader Bluff formations, surpassing the original-oil-in-place of Prudhoe Bay and Kuparuk combined.

How much more of the viscous oil resource will be tapped remains to be seen, and whether heavy oil will ever be produced is still a question mark for industry. It depends on a multitude of factors, including advancements in technology, steady oil prices and even possibly development of the North Slope gas resource, oil producers say.

From a technical standpoint, recovery rates are low, ranging from "... zero to over 20 percent depending on the oil quality and geology," Campbell said.

One positive-the huge resource is tantalizingly close, typically contained in shallow formations near the permafrost layer, just below existing oil extraction infrastructure. In fact, oil producers have drilled through these deposits for years, in their work to recover the deeper-lying, lighter crude oil.

"We've known about the resource ... we delineated it when we delineated Kuparuk in the 1970s," Campbell said, describing the company's viscous oil resource at West Sak. "The technology was just not there to develop it then."

In the 1980s, ConocoPhillips' predecessor on the Slope, Arco Alaska, started a small pilot program in an attempt to tap viscous oil at West Sak. That effort involved technology used in the Lower 48 at the time--vertical well development on a five-acre spacing, Campbell said. "It just did not deliver enough (flow) rate to economically justify development," he said.

Now, ConocoPhillips and its partners are back in the same area, spending about $450 million to increase heavy oil production at West Sak, a multi-year project that will increase viscous oil production on the North Slope by an estimated 30,000 barrels per day.

Alaska's other major North Slope producer, BP Exploration Alaska, also has an active viscous and heavy oil development program. The company's Polaris and Orion satellite fields, shallow viscous deposits located above the Prudhoe Bay formation, are being tapped using a variety of drilling and processing modifications.

Both companies are working together and with government researchers, searching for the best techniques that will enhance heavy oil production on the North Slope, collaborative efforts to squeeze more of the crude gold out of the frozen piggy bank.

WEST SAK DEVELOPMENT

Located in the southeastern part of Kuparuk, the West Sak reservoir is today's focus for viscous oil development by ConocoPhillips. That's because the reservoir is deep enough and warm enough for oil production. "It has a sufficient oil quality that is amenable to water flooding," Campbell added. "What we're doing is developing the favorable viscosity trends right now."

West Sak, estimated to contain up to 8 billion barrels of crude, is located above the geologic formation that produces Kuparuk crude, but below the shallow Ugnu formation, known to contain a larger resource of about 10 billion barrels of oil that's generally heavier than West Sak.

Production began at West Sak in 1997, initially with vertical well drilling, Campbell said. "We added water flood to it to keep the reservoir pressure up," he added.

Initial production peaked at 500 barrels per day, declining to 300. In 1999 and 2000, the company began drilling horizontal wells at West Sak, typically with three levels in a 250-foot-thick target zone, Campbell said.

In the tri-lateral process, crews drill down to the deepest target level, then extended horizontally, with up to 8,000 feet of horizontal exposure to the oil-bearing sands. Then the drillers moved up in the formation, targeting a shallower resource of crude with a similar lateral line. A third lateral was drilled in the shallowest layer of the formation, Campbell explained.

"Some wells have over 30,000 feet, with 18,000 feet of exposure to the reservoir," he said. "We started recovering 2,500 barrels per day plus ... we had a few well over that."

As production of the heavier crude picked up, so did the need to separate, clean out and dispose of sand, extracted at an increased rate from the less-stable formations.

"We are using slotted liners in the completions that are big enough that sand comes through, so we produce the sand to surface and modify facilities so we can deal with it," Campbell said. "The separation vessels need to have the ability to clean out while still operable ... we made a conscious decision to deal with the sand on the surface rather than the subsurface."

At present, modifications to existing processing facilities have been sufficient to handle incremental heavy oil production, he said. "However, significant facilities upgrades or new processing facilities dedicated to future thermal viscous developments will likely be required."

In mid-2004, ConocoPhillips and BP, which together own almost 90 percent of the West Sak reservoir, announced development plans for the largest-ever heavy oil development program in Alaska. The $450 million project currently being drilled involves two drill sites within the Kuparuk River Unit, 1E, an existing drill site and 1J, which will be the first stand-alone West Sak drill site.

Plans call for drilling a total of 27 wells, Campbell said. Two Doyon Drilling rigs were on site in late April, working on the 18th and 19th wells, he said.

The West Sak development program also includes facilities expansion at 1E and construction of new facilities, pipelines and power lines at 1J, according to the press release.

This project puts heavy and viscous oil development spending on the Slope over the $1 billion mark. Annual spending on viscous and heavy oil in recent years has been about $250 million across the Slope, according to ConocoPhillips and BP Exploration.

Future plans call for another viscous oil project in the northeast section of West Sak, called NEWS, made up of three targets, Eastern NEWS, Three K and the Western NEWS areas.

ConocoPhillips is working to sanction the Eastern and Three K areas initially, Campbell said, as they are similar in depth, oil quality and reservoir quality as the existing West Sak development. "There's a lot more faulting in that area, which will add increments to the technical development," Campbell said.

In addition, the company is working on future plans for a pilot project to tap the Ugnu resource, which is shallower than West Sak and typically containing heavier oil. The Ugnu project will focus on the northeast corner of the Kuparuk River Unit, where a "sweet spot" within the formation exists, Campbell said. There, viscosities are more favorable for production. The project will likely include drilling a long horizontal well and trying some type of downhole heat production process, he said.

The operator is looking at various types of thermal processing techniques. "Keeping that thermal downhole is the issue, rather than pumping it across the permafrost formation," he said, adding that such downhole heat technology is "fledgling ... it's out there on the horizon and we're trying to evaluate what the best method will be."

The existing viscous oil wells in production have long production tails, Campbell added. Initial production is typically stronger, before falling to 1,000 to 1,500 barrels per day, a rate sustained for roughly a decade before another decline occurs. These carry an end-of-field life similar to Kuparuk, he said, with production projected out through 30 years.

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