​Competition tight to get SAGD well pads right as producers target 50% reductions

Illustration: Jeremy Seeman/JWN

On the road to globally competitive new in situ oilsands projects in a market where WTI hovers around US$50/bbl, smaller well pads are a critical incremental step.

Producers are already moving on smaller sustaining well pads and throwing around what’s possible, building the lessons that will help the industry move forward with lower cost greenfield facilities in the future.

“While SAGD is still relatively immature, the industry has made great strides in improving its understanding of reservoir performance. As such, new SAGD project designs will likely be more streamlined and require less ‘bells and whistles,’” CIBC analysts Arthur Grayfer, Mark Zalucky and Trevor Bryan wrote in a research report released in January.

“New developments will have smaller central processing facilities, sustaining pads with less metal, fewer valves, less instrumentation and greater automation, which will all serve to lower costs. These new designs will be relatively low risk and will begin to be implemented on the next phase of greenfield developments, likely later this decade (slimmer sustaining pads have already started to be implemented by industry).”

Zero-based design

Suncor Energy, Cenovus Energy and ConocoPhillips Canada have all made recent statements about the success of their well pad reduction programs.

ConocoPhillips has a line of site to a 50 per cent reduction in well and pad costs through standardized designs, executive vice-president Al Hirshberg told the company’s annual investor day in New York in November 2016.

The most dramatic improvements so far have been realized in well pad surface facilities, he said.

“We’re using a process called zero-based design. We question the need for every component in the design, and we get rid of it if we don’t need it for a safe, environmentally sound or reliable operation,” Hirshberg said.

“As we move from the previous design…to the current design, the footprint and height of the facility have been reduced dramatically, driving down the amount of structural steel, piping and electrical components required. This has been amazing progress by our Surmont team—but they are not done yet. They still have some more ideas, and they are well advanced to drive down costs even further.”

Cenovus Energy also refers to its new well pair and pad design approach as “zero-base,” which basically means that every line item is fair game for review each time a project is executed.

The first redesigned well pad began construction in the third quarter of 2016, Cenovus says.

The company expects the new approach will result in overall cost savings of 35–50 per cent, including 40–60 per cent reductions in materials and a five to 20 per cent drop in well pad surface footprint.

Suncor also says its greatest well pad cost reductions have been realized in surface facilities.

In the company’s third-quarter 2016 investor presentation, Suncor said that before its new pad design program, facilities accounted for 47 per cent of cost. Using its new design, which has been developed with Wood Group, Suncor says overall well pad costs are expected to drop by up to 50 per cent.

This includes dramatic reductions in engineering hours, field construction hours and manual valves.

“SAGD is still a fairly new technology, but has now matured to the point that design and specification of its component parts can be effectively standardized,” says Dean Piquette, well pad program director in Wood Group’s Calgary office.

“Prior to 2014, a large part of the industry still believed that one of the keys to success was in ‘build to suit’ design, with all of the associated costs. Wood Group is proving that the benefits do not outweigh the costs and that a simpler, standardized design is the key.”

Ongoing sustaining well pad development is estimated to account for two-thirds of a SAGD project’s overall costs, and Wood Group isn’t the only supplier working to get in on the action.

BlueSteam WellPad Solutions

Privately owned BlueSteam WellPad Solutions is one of the lesser-known players in the well pad space, but its eight principles have extensive SAGD design and operations experience, stretching back to 1998.

BlueSteam, like its competitors, takes a standardized design approach to well pad development and is targeting surface facility infrastructure reductions, but with a key difference.

President Tim Webber and civil, structural, architectural lead Dave Vrkljan say the company’s inclusion of continuous emulsion metering in its design helps distinguish it from the competition.

“BlueSteam’s approach has been to create a standardized design that covers the majority of SAGD wellpair production/injection process envelopes in the province,” Webber says.

“The design incorporates continuous emulsion metering, which is a unique attribute as far as BlueSteam is aware, in the well pad design arena. By doing so, the test separator and its associated piping can be eliminated.”

BlueSteam’s approach, initially developed in 2010 in response to a technological gap identified by SAIT instructor Russ Ritchie, evolved because Ritchie wanted to address the limitations and problems caused by having a test separator in SAGD well pad design.

Although the use of a test separator is still the standard in SAGD design, some metering alternatives to its use have been successfully applied.

When test separators are included, there is a requirement for significant structural steel and piping loops to accommodate thermal expansion forces, as the test separator is heated up to 200 degrees Celsius. The resulting stresses in piping and vessels must be accommodated in the design.

“When the test separator concept is replaced with continuous emulsion metering, the job of the piping designer and piping stress engineer requires skillful innovation to enable the main process headers on the well pad to expand and move independently, without restraint,” Webber says.

When that is achieved, the requirements for structural steel, piling and piping are dramatically reduced, which leads directly to reduced fabrication and construction costs, according to BlueStream.

“We spend more money on instrumentation, but the amount of money saved on pipe, steel foundations and the footprint of the package are each greatly improved,” Webber says.

The company is working with component providers, service companies, fabricators and SAGD plant operators to develop projects that incorporate its approach.

Integrated Thermal Solutions

Ashley Leroux and Chad Hadler of Integrated Thermal Solutions (iTS), a subsidiary of Tundra Process Solutions, are also veterans of the SAGD sector who have been focused on cost reduction.

“We were leading innovation during the pilot days, at the beginning of the SAGD industry,” says Hadler, iTS director of technical services.

Both Hadler and iTS chief executive officer Leroux have worked in the sector through its relatively short lifespan, stretching back to its earliest projects as far as 1999.

While iTS hasn’t yet built a next generation well pad, they say interest in the firm’s “bolt-in-and-bolt-out” manufactured model is high.

“We’ve been asked to become involved in five projects at various stages; planning, brownfield and greenfield,” Leroux says.

The company’s approach is based on the simple premise that “90 per cent of the cost is spent on procurement, fabrication and construction, so our fabricators and constructors played a large role in the design,” Hadler explains, adding that the iTS system results in pads that don’t need to be redesigned every time, overtime costs are not required and engineering costs virtually go away.

iTS is also targeting reductions in subsurface costs through its dual parallel row drilling technology.

“It allows the operators to drill in multiple different directions from the same surface location,” says Leroux. “It increases the reservoir coverage by 300 per cent.”

With fewer wells needing to be drilled, hundreds of millions of dollars in costs can be saved.

“Everyone is focusing on well pad design, but you also need to take a more global approach to drilling and completions and infrastructure that goes with the well pad,” says Leroux.

The approach should stretch the lifespan of a SAGD well pad, keeping the facilities and infrastructure fully utilized, since it allows for a wider area to be developed.

“They can sweep the reservoir, from existing locations,” says Leroux.

Because a wider area of the reservoir is accessed, the surface facilities don’t need to be as large.

“We can help operators save 60 per cent of the wellhead and infrastructure footprint needed for a project,” Hadler adds.

No dramatic changes are required to adapt to the approach, since ITS designed it as a “bolt-on” technology to work with longer well laterals and flow control devices.

The idea is to start with a base design that allows for flexibility and then bolt-on options, which is why the DPR drilling technology is also an available option.

“Adding pre-engineered options, such as the inclusion of solvent-assisted processes, is as easy as turning a wrench,” Leroux says.

Wood Group

Wood Group also has extensive SAGD and in situ oilsands experience, including long relationships with Canadian National Resources, Cenovus Energy and Suncor Energy.

Well pad program director Piquette describes the company’s standardized well pad design approach “industry proven.”

The 2017 model of the approach, which has been implemented at Suncor’s Firebag facility, offers significant cost and operability improvements over previously installed pad infrastructure, Piquette says.

“It’s vital that the industry do that,” says Scott Rempel, vice-president of business development in Wood Group’s Calgary office. “Owners will struggle to be cost competitive utilizing previous designs; they simply won’t be building new pads under the old cost structure.”

This schematic shows the difference between two Wood Group SAGD well pads. The company says the latest design features a significant reduction of bulk materials and equipment, removes the central spine, and places the equipment and instruments on a module near the well head.

Previously producers might have spent $100 million on a large well pad. Wood Group believes it can slash that down to between $25 million and $30 million for a 10 well pair pad. And it has found a way to reduce the direct facility module costs of each well pair to around $1.5 million.

One key is that it has reduced the footprint of the well pads by substantially reducing the module count. By doing that, significant cost savings are realized as less earthwork needs to be prepared, the regulatory process is streamlined and many other costs are stripped away.

Piquette says the previous approach used by owner companies to well pad development essentially involved an “over-engineered” design.

For instance, previous well pads were designed to operate for 30 or more years instead of the more common 12–15 year lifecycle. Previous pad designs required 27 modules to make a pad, but with the Wood Group approach, that has been reduced to six modules per pad. Piping and instrumentation has been cut substantially as well.

In the same way that no Ford F-150 model suits all, the company is developing a next generation well pad for SAGD producers with slant wells that are inspired by the company’s global experience designing facilities for offshore and subsea.

Wood Group, which has built a prototype well pad facility at a site in Calgary, continues to make subtle changes to its design and the interaction with the wellhead as part of its continuous improvement approach. For example, by optimizing the valves and cable trays, it saved an additional $300,000 from the previous design.

Given the firm’s success in reducing costs, one might think orders would be lined up. That’s not quite the case, largely because the emphasis has been on slashing capital spending to the bone. But Rempel said potential customers are showing much more interest in the firm’s design approach, as freezes on capital spending start to thaw.

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