By OGJ editors
HOUSTON, June 22 -- Surge Global Energy Inc., San Diego, and technology development company Genoil Inc., Calgary, Alta., signed a letter of intent to jointly build a 10,000 b/d heavy-oil upgrader for Surge's Sawn Lake heavy oil development in the Western Canadian Sedimentary basin of Alberta.
The unit, based on Genoil's hydroconversion upgrader technology, will convert heavy oil (about 9° gravity) into light oil (about 34° gravity).
The partners will first conduct a feasibility study analyzing the raw Sawn Lake crude and establishing parameters for the unit's construction.
Surge is the lead operator of and holds a 40% working interest in the Sawn Lake field, which is estimated to hold 820 million bbl of heavy oil in place.
The companies plan to build a gathering system from each wellsite to a central collection system adjacent to the upgrader. From there, oil will move through an existing high-pressure, 8-in. oil sales pipeline to Edmonton, Alta.
Genoil will have the unit built for Surge at cost, with no site license or royalty, the companies said. Net revenue for the upgrader will be determined by the market price for the upgraded crude less the market price for the heavy oil and the operating costs associated with the unit.
After Surge has recovered its capital costs from the net revenue stream, Genoil will be entitled to 30% of net revenue for the life of the project.