BlackPearl advances Onion Lake thermal EOR

BlackPearl Resources Inc., Calgary, will accelerate thermal enhanced oil recovery at a heavy oil property now producing conventionally in Saskatchewan to help finance a larger oil sands development in northern Alberta called Blackrod (OGJ Online, May 6, 2012).

The company will use steam-assisted gravity drainage to produce 12,000 b/d of heavy oil at its Onion Lake property on First Nation land near Lloydminster, Sask., where primary recovery is about 5,000 b/d.

An independent assessment puts best-estimate contingent resources of the thermal project at 74 million bbl. BlackPearl estimates approval of its application for the SAGD project will result in reclassification of 30-50 million bbl to probable reserves.

Onion Lake wells produce 11º gravity oil from the Lower Cretaceous Cummings formation. In the conventional development area, BlackPearl has drilled more than 300 wells. It expects to continue development for 3-5 years, planning to drill 20 wells this year.

Net pay thickness in the part of the Onion Lake area amendable to thermal development is 10-24 m. The operator expects thermal recovery rates to exceed 50% and cumulative steam-oil ratio (SOR) to be 2.5-3:1 over a project life of more than 20 years.

It has reached an agreement to convert the working interests held by Onion Lake Energy, owned by the Onion Lake Cree First Nation, to a gross overriding royalty for EOR production. BlackPearl holds 87.5-100% working interests at Onion Lake.

It had planned to start the first 20,000-b/d phase of its Blackrod development before beginning the Onion Lake thermal project. At Blackrod, where a pilot in operation since 2011 has achieved commercial production and SOR, it expects eventually to produce 80,000 b/d of bitumen.

To fund first-phase capital requirements of $750-800 million, the company originally planned to use debt, sales of noncore assets, joint-venture proceeds, and possibly new equity.

“Given the current soft market for oil and gas assets and the challenging equity markets, the company believes it would be too dilutive to its shareholders to proceed with financing a project of this size at this time,” it said in a press release.

John Festival, BlackPearl president, said, “Over the next 3 years, the Onion Lake EOR project is expected to double company production and will put us in a much stronger financial position to tackle the 80,000-b/d Blackrod project.”

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