Laricina Energy plans to advance the oil sands industry by opening up Alberta’s second-largest in SITU development opportunity.
Laricina Energy Ltd. is a private, Alberta-based company that is capturing opportunities in the oil sands of Western Canada. It is one of only a few companies focused on developing carbonates – a massive resource found in 11 countries around the world, including Canada, where it is found in the Alberta oil sands.
Laricina is following a clear path towards commercial development of this resource that is supported by quality assets, project scale and technical innovation. “We have focused on the quality and scale of our prospects in order to build the strongest asset base we can,” President and CEO Glen Schmidt says. “We are now developing these assets using advanced, innovative, yet well-understood recovery processes to enhance our ability to compete on an economic basis.”
After the sale of Deer Creek Energy Ltd. in 2005, Laricina Energy Ltd. was formed and has grown to become a leader in private oil sands development in Western Canada. Several members of Deer Creek Energy’s board of directors and management team are now with Laricina Energy, giving it the experience and knowledge necessary to succeed.
“We saw we could leverage Deer Creek and put together a team that had a strong business and technical base,” Schmidt explains. “We started by focusing on both the development of first-class prospects and leadership in cost and execution. To be a leader in in situ oil sands development, a company must excel at both exploration and development.”
Schmidt, one of several other Deer Creek employees who formed Laricina, is a member of the board along with a number of other well-respected business people who have strong energy backgrounds.
Laricina’s management team includes Schmidt and COO and Vice President Operations David J. Theriault, Vice President Enhanced Oil Recovery Neil R. Edmunds, Vice President Finance and Controller Karen E. Lilljord, and Vice President Corporate Development Marla A. Van Gelder.
Not many companies are able to match Laricina’s exceptional technical team, which is focused on a number of innovations to advance in situ oil sands development. Its engineering and geological teams have experience in 48 commercial oil sands projects already operating or under construction, giving it a strong advantage to unlock new opportunities.
Goals and Objectives
Laricina began by concentrating on acquiring the right land base to grow the company. Through its focus on targeted prospects, Schmidt says the company has achieved an initial objective created at the outset of the company.
“The goal of our company’s exploration stage was to select projects based on the quality of the prospects,” Schmidt states. “We didn’t go after simply the largest land base, but rather the most targeted areas based on the quality, scale and location of recoverable bitumen. That of course leads to superior economics, since high-quality concentrated assets that are in proximity to infrastructure gives us leverage.”
Alberta is estimated to contain 1.7 trillion barrels of bitumen in places such as Fort McMurray, which has become a boomtown for the oil sands market. Laricina says it has created a broad-based portfolio of projects not only within the oil sands near Fort McMurray, but also further west in the Wabasca area. The company’s land base echoes Schmidt’s points on assembling projects based on value and potential for large, meaningful scale operations, and not only geographical size. Its assets in northeastern Alberta present an aggregate gross production potential of 350,000 barrels of bitumen per day.
“The objective is to have a leadership position [in in situ projects],” Schmidt stresses. “In order to meet that objective, we have a focused execution plan to achieve effective resource recovery and lower our cost of operations. The first step was to get the best aggregate resources in place.
“The second step is to optimize and integrate operations to drive the costs down,” Schmidt continues. “We have the right people to do that, with our strong technical team who know the things you should do and should not do to exploit the projects.”
The company is both utilizing and developing proprietary techniques for screening and ranking formations and improving recovery through innovative reservoir optimization and exploitation strategies. The Germain and Saleski developments are located within the West Athabasca Oil Sands region approximately 100 to 130 kilometers southwest of Fort McMurray.
At Germain, the main reservoir target is within the Grand Rapids formation of the Mannville Group. The Grand Rapids is a regional marine deposit at an average depth of 225 meters, and comprises the upper part of the regressive upper Mannville Group, consisting dominantly of thick sandstones. Laricina says its unique features of clean sand with homogeneous and continuous reservoir pay increase the predictability and consistency of the reservoir.
It expects that the initial phase of the Germain project will exploit 5,000 barrels of bitumen per day through solvent-cyclic steam-assisted gravity drainage (SAGD) technology. The company believes this will demonstrate the emerging technique of adding light hydrocarbons to steam in order to speed and enhance recovery. The initial commercial demonstration will launch subsequent larger commercial phases which will grow production to more than 150,000 barrels of bitumen per day.
The Grosmont formation lies at an average depth of approximately 325 meters and is the target zone for the Saleski development. The Grosmont formation is a dolomitized, shallow marine and tidal flat carbonate complex with a reservoir characterized by extensive vertical fracturing, karsting and high permeability with potential thermal intervals of bitumen greater than 50 meters on average over an extensive land area. Laricina will use modern horizontal-well SAGD technology as the recovery process for the reservoir.
Located in the central area of the Athabasca Oil Sands region, the Poplar Creek and Conn Creek projects’ main reservoir targets are the lower McMurray formation. Both Poplar Creek and Conn Creek are to be developed using existing SAGD technology, the company says.
The Germain/Saleski Platform
“The growth of Laricina really builds on our platform,” Schmidt says. “There are more than 4 billion barrels of bitumen recoverable in the neighboring Germain and Saleski developments. We have constructed the key infrastructure and are commercializing the initial phases of both projects. This platform will provide one the largest SAGD developments in the industry.”
The company says there is anticipation as the Germain and Saleski developments advance. According to Schmidt, industry watchers are especially interested in the commercialization of the carbonate formation, which is the second largest formation in the in situ oil sands. He has confidence that the developments will advance as the company expects. “We are excited,” he declares. “Germain and Saleski are the culmination of nearly five years of detailed testing and technical work.”
Germain is effectively 100 percent owned by Laricina. To produce its expected bitumen recovery, the company is utilizing a combination of thermal and solvent assisted processes. “We understand how to produce with conventional SAGD – what we are excited about doing is adding the solvent to the steam,” Schmidt says. “Importantly, Germain is fully delineated and is a large enough project to generate cash flow as we ramp into full development. It will ultimately produce more than 150,000 barrels a day.”
Laricina filed its regulatory application in October 2007 for a 1,800 barrel per day pilot project at Germain, which gained approval from the Energy Resources Conservation Board (ERCB) and Alberta Environment two years later. While awaiting approval, the company continued to develop its understanding of the Grand Rapids formation through additional drilling, lab studies and other operating projects. As a result, in November 2009, Laricina filed an amendment to the pilot for a commercial demonstration project that increases bitumen production to 5,000 barrels per day.
As a commercial demonstration, Laricina says Germain will have several advantages over its pilot designation. It will incorporate solvent injection, diluent treating and water recycling. It expects this to result in improved product value, a lower steam-to-oil ratio and lower carbon emissions for the same volume of bitumen produced by thermal processes alone, such as SAGD.
The commercial demonstration project is located east of the original pilot project, which the company believes will accommodate future Germain growth potential. Engineering design to transition from basic SAGD to solvent-cyclic SAGD is underway, and Laricina targets a late 2012 start-up for the first steam injection.
Laricina also received ERCB approval for a 1,800 bitumen per day pilot project at Saleski, of which it owns a 60 percent working interest, and is now awaiting regulatory approval for a solvent cyclic-SAGD amendment. Together, Germain and Saleski have more than 3.9 billion gross barrels of recoverable bitumen. Additionally, being only 33 kilometers apart, Laricina recognizes that synergistic opportunities exist for its capital, operating and environmental management.
Value and Pride
Schmidt sees Laricina as part of an important industry that is bringing great benefits to Canada and to the entire world. “As people become more knowledgeable and familiar with in situ oil sands, they recognize the integral socio-economic role it plays for the future,” he says. “Canadians can be proud of the responsible manner in which their country is meeting the world’s ever-increasing need for energy.”
The oil sands represent 97 percent of Canada’s oil reserves, which in turn are second in the world behind Saudi Arabia. “Population growth and emerging new economies are driving global energy demand,” Schmidt explains. “Alberta and Canada can meet the ambitious goal of securing the oil needs of the world. We can also deliver oil with a lower carbon footprint than many other countries with far less stringent environmental and human rights regulations.”
Schmidt sees many future developments and growth opportunities on the horizon for Laricina. “We’ve built a strong foundation and are now taking the next step into commercial development,” he stresses. “As we succeed, we will continue to develop our current projects while further delineating our assets to identify other areas for future oil sands development. We have the land, the people and the technology to be a leader in the in situ oil sands industry.”
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