1. Summary - open.alberta.ca€¦ · IETP 01-0100 GRIPE Progress Report Page 1 1. Summary The Gas...

IETP 01-0100 GRIPE Progress Report

1. Summary

The Gas Re-Injection and Production Experiment (GRIPE) was proposed by Paramount Resources Ltd in

June 2004 as a possible technical solution for the Gas-over-Bitumen issue in the Surmont area (ERCB

decision 2000-22). The concept of GRIPE is to test a method to produce shut-in gas pools by injecting

exhaust gases and producing remaining gas without changing reservoir pressures. Paramount received

approval for GRIPE on October 26, 2004 (ERCB Approval No. 10100) with an expiry date of November 1,

2007. Following the approval, Paramount completed facility design and construction with an initial start-

up of April 15, 2005 (and re-started in October 2005 after start-up failure repairs). MEG Energy Corp.

acquired GRIPE along with Paramount’s interest in Surmont oil sands leases and shut-in natural gas

rights in June 2007. Paramount continued to operate GRIPE (for MEG) as a contract operator. The

GRIPE operation was shut in (due to an injection line coupling failure) prior to the transfer of ownership.

MEG requested and received approval for the extension of Approval No. 10100 to December 31, 2009

and repaired the pipeline to resume operations which re-started on March 1, 2008. The GRIPE facilities

ran sporadically during 2008 with down time caused by corrosion, safety and heat exchanger issues.

Operations have been suspended since May 09, 2009 due to corrosion related failures at the

compression facility.

To date the GRIPE pilot has demonstrated that exhaust injection and production is feasible while

maintaining reservoir pressure. Approximately 12% of the remaining recoverable shut-in gas has been

produced in the two pool GRIPE pilot. The pilot has also confirmed the corrosion challenges associated

with exhaust gas compression and cooling. Facility learning’s from GRIPE will facilitate future design and

operations. MEG is currently evaluating options for the GRIPE pilot and investigating concepts using a

GRIPE type processes for other shut-in gas pools in the Surmont area.

This submission is intended to fulfill the Innovative Energy Technologies Program (IETP) annual reporting

obligations, which for this report, is defined as period from January 01, 2008 to June 01, 2009.

a. Project Background

GRIPE is a pressure maintenance scheme that uses exhaust gas to displace natural gas within two

pools, the Chard Wabiskaw-McMurray X (WM-X) and the Chard McMurray AAA (M-AAA). These pools

were shut-in under the Surmont Decision 2000-22. Under ERCB Approval 10100, each pool consists of

one injection well and two producers and the pools are operated above a minimum annual voidage

replacement ratio of 1.05. In total there are 10 observation wells; 6 wells are equipped with continuous

pressure monitoring and 4 wells require annual static gradients. Static gradients are also conducted on

the injectors and producers on an annual basis. ConocoPhillips, as the owner of the oil sand rights under

the approved area, has drilled 2 observation wells and supplies MEG with the pressure data.


Exhaust gas is generated and compressed within the GRIPE unit located at Paramount Energy Operating

Corp.’s (PEOC) 15-02-81-06W4 Kettle River facility (Figure 1).

GRIPE is a possible solution for the Gas-over-Bitumen issue with the potential of the return to gas

production of certain pools. If successful, there are an estimated additional 30 BCF of gas resource in the

Surmont area that could be recovered.

The six objectives of the GRIPE pilot as defined in the ERCB approval application are:

I. Recovery Factor using exhaust gas for natural gas displacement

II. Predictability of recovery process

III. Degree of control over exhaust gas breakthrough

IV. Operational and reservoir variables that impact performance

V. Reliability and consistency of exhaust gas treatment facilities

VI. Maintainability of current gas pool reservoir pressure

Figure 1. GRIPE Pool and Well Map:


b. Chronological Report of all activities and operations conducted

A summary of the operations from June 2007 through June 2009 is outlined below in Table 1. A

complete summary inclusive of the 2005 to 2009 operating years is outlined in Table A1 in Appendix A.

Table 1. GRIPE Chronological Report of Activities and Operational Events

June 01, 2007 to June 1, 2009

Date/

Period Activity Comments

1-Jun-07 MEG Acquired GRIPE from Paramount Resource Ltd.

5-Jan-08

to

9-Feb-08

Injection Pipeline Repair Replaced failed couplings with stainless steel

couplings.

11-Jan-08

29-Feb-08

Re-commission facility

including full ultrasonic

survey on facility and

injection piping

Met with PEOC to address operating concerns.

Reviewed last ultra sonic survey to help design UT

program. Series of electrical and instrumentation

issues with circuit board and onsite turbine power

generator. Replaced circuit board.

20-Jan-08 Obtain data from

observation wells

Contracted Promore to download pressure data from

6 sites. Several issues with condition of equipment

and missing surface equipment. Replaced and

repaired surface equipment.

24-Jan-08 Testing GRIPE unit Started compressor in circulation mode. Made

several changes to operating parameters to get the

unit to operate according to manufacturers specs.

Feb-08 Annual gradients Conducted annual static pressure gradients, surface

casing vent flow and packer isolation tests.

29-Feb-08 Start-up of GRIPE Commence operations

4-Mar-08 Installed catch tank at

12-27 injection site Installed a 24.7m3 tank and containment at 12-27 to

catch pigged liquid

6-Mar-08 Start weekly pigging

schedule

Pigged injection line down to 12-27 and recovered

only 0.04m3 of fluid. Sent water to Baker for

analysis

9-Mar-08 7-14 Injection well header

Failure Corrosion related failure of carbon steel riser. It was

believed that this piece was internally coated.

12-Mar-08 Restarted GRIPE unit Replaced failed 7-14 riser with stainless steel.

28-Mar-08 Shutdown Compressor going down on high discharge pressures

as a result of the corrosion inhibitor precipitating in

the surface piping.

7-Apr-08

Remove scale in piping

PEOC raises safety

concerns

PEOC requests air quality testing for airborne

contaminates within the GRIPE unit. Other issues

include the venting procedures of exhaust gas during

start up and the safe handling of acidic fluids.

15-Apr-08 Install vent line catch tank Modified vent line to the exhaust stack to flow into

newly fabricated catch tank. Purpose is to knock out

liquids while venting during the initial start ups

17-Apr-08 Transition to new type of

corrosion inhibitor MEG worked with Baker to formulate a new

corrosion inhibitor.


19-Apr-08 Baseline and operating air

quality sampling Air quality assessment. Air samples were taking

inside and outside the GRIPE unit.

9-May-08 Receive draft report of air

quality assessment There were no detectable levels of airborne

contaminants.

25-Jun-08

Heli-drop in shower units

to 7-14 and 12-27 injection

sites

Due to the low pH of the pigged fluid, two shower

units installed at the injection sites

26-Jun-08

Replace carbon steel riser

spool at 12-27 injection

site

Ninety degree elbow showed some loss in thickness

on the ultra sonic survey.

01-Jul-08 Re-Start GRIPE Injection Unit start-up

25-Jul-08 Cooler Shut-down Unit running at too high temperature, louvers worked

over to improve cooler efficiency and runtime.

14-Oct-08 7-14 Injection well header

Failure

Replaced failed coated steel coupling at flow tee with

pin-hole leak. Stainless steel replacement flow tee

manufactured and installed.

13-Nov-08 GRIPE Compressor Compressor main coolant pump failed. New pump

sourced and installed.

19-Nov-08 GRIPE Cooler Cooler freeze off problems (high differentials

indicate internal tube blockage).

26-Nov-08 GRIPE Cooler Cooler freeze off problems

12-Dec-08

to

18-Jan-09

GRIPE Cooler

Cooler freeze off problems

Extreme cold temperature, combined with tube

blockage caused several tube bundle failures (split).

This long duration cooler failure and subsequent

repair hampered by extreme weather conditions and

complex cooler design that limited the access to tube

and the option to by-pass failed tubes.

24-Jan-09

to

07-Feb-09

GRIPE Cooler Cooler freeze off problems. Extreme cold

temperature.

03-Mar-09

to

14-Mar-09

Annual gradients Conducted annual static gradients, surface casing

vent flow and packer isolation tests.

19-Apr-09

to

27-Apr-09

Cooler Blockage Heat exchanger plugging due to fouling

01-May-09

to

07-May-09

Discharge Piping

Corrosion

Corrosion failure (pinhole leak) on the discharge

piping prompted shut down and investigation. Upon

completion of UT scanning of the major vessels, we

have deemed it unfit for operation due to internal

wall thickness loss. GRIPE operations were

suspended until further notice pending technical and

economic review.


Table 1a below is a summary of GRIPE operating days over the project life.

The GRIPE process has averaged 38% of calendar day operating time since the October 2005 start-up or

496 operating days of 1,311 available calendar days. The most significant downtime period was from

March 2007 to March 2008 (approximately 12 months) which was caused by the injection pipeline

coupling failures. The failures occurred at the end of the winter season, and could not be repaired until

the next winter.

Once the injection pipeline was repaired, the GRIPE process operated for 20 days in March 2008 until

solid precipitation and safety concerns forced a three month shut-down. Safety concerns were raised by

the contract operator (Paramount) regarding procedures and emergency response plan in handling

corrosion inhibitor chemicals and had air quality concerns at the compressor plant. Emergency showers

were installed at injection well sites and air quality testing cleared the operation to begin again in July

2008. The corrosion inhibitor chemical was also changed to avoid solid precipitation issues and start-up

venting procedures were improved using a new vent tank.

Issue with the exhaust cooling heat exchanger unit impacted operations in the last half of 2008 and

continued into 2009. Low ambient temperatures caused condensation of the exhaust gases and hydrates

and freezing created exchanger blockage and leak failures.

Corrosion failures on the plant exhaust compressor discharge piping caused another shutdown in May

2009. Upon investigation, the discharge pipe and separator vessels were found to have multiple areas of

corrosion failure which resulted in the suspension of the GRIPE operation since May 9, 2009.

For the reporting period of January 2008 to June 2009, the GRIPE process operated 230 of 517 calendar

days for an average run day percentage of 44%.


Table 1a. Summary of GRIPE Run-time (days)

Running Annual days in Annual

Days Total Month % run time %

Oct-05 3 3 100%

Nov-05 25 30 83%

Dec-05 27 55 31 87% 86%

Jan-06 29 31 94%

Feb-06 0 28 0%

Mar-06 29 31 94%

Apr-06 30 30 100%

May-06 8 31 26%

Jun-06 10 30 33%

Jul-06 17 31 55%

Aug-06 6 31 19%

Sep-06 0 30 0%

Oct-06 0 31 0%

Nov-06 0 30 0%

Dec-06 29 158 31 94% 43%

Jan-07 30 31 97%

Feb-07 20 28 71%

Mar-07 3 31 10%

Apr-07 0 30 0%

May-07 0 31 0%

Jun-07 0 30 0%

Jul-07 0 31 0%

Aug-07 0 31 0%

Sep-07 0 30 0%

Oct-07 0 31 0%

Nov-07 0 30 0%

Dec-07 0 53 31 0% 15%

Jan-08 0 31 0%

Feb-08 0 29 0%

Mar-08 20 31 65%

Apr-08 3 30 10%

May-08 0 31 0%

Jun-08 0 30 0%

Jul-08 25 31 81%

Aug-08 29 31 94%

Sep-08 28 30 93%

Oct-08 23 31 74%

Nov-08 21 30 70%

Dec-08 11 160 31 35% 44%

Jan-09 5 31 16%

Feb-09 22 28 79%

Mar-09 19 31 61%

Apr-09 17 30 57%

May-09 7 70 31 23% 46%

total 496 496 1311 38%

Reporting Period 230 230 517 44%

Jan '08 to June '09


c. Updated Incremental Reserves and Production

The process produced 7,044 e3m

3 (gross wellhead production) for the calendar year 2008, and 9,952

e3m

3 for the reporting period as outlined below in Table 2 and 2a. Reserve summaries for the two pools

along with the cumulative production and cumulative voidage replacement ratios are summarized in Table

3. To date, 12.9% and 12.2% of the pre-GRIPE recoverable gas in place (RGIP) has been produced by

the experimental scheme from the two pools. Figures 1a and 1b show cumulative injection, production

and voidage ratios per pool versus time.

Table 2. Summary of Produced and Injected Volumes: Calendar Year 2008

TOTAL Wabiskaw-McMurray X McMurray AAA

e3m

3 mcf e

3m

3 mcf e

3m

3 mcf

Injected 7,470 263,667 3,596 126,934 3,874 136,733

Produced 7,044 248,631 3,359 119,966 3,645 128,665

VRR 1.060 1.058 1.063

Table 2a. Reporting Period Summary of Produced and Injected Volumes: January 01, 2008 to June 01, 2009

TOTAL Wabiskaw-McMurray X McMurray AAA

e3m

3 mcf e

3m

3 mcf e

3m

3 mcf

Injected 10,527 371,599 5,076 179,168 5,451 192,431

Produced 9,952 351,301 4,854 171,324 5,098 179,977

VRR 1.058 1.046 1.069

Table 3. Cumulative Reserve and Production Summary

Pre-GRIPE (1993 - 2004) GRIPE (2005 - 2009)

OGIP

bcf

Prod

bcf

RGIP

bcf

Recovery

% OGIP

Total

Produced

bcf

Total

Injected

bcf

VRR

Res

Recovery

% RGIP

Recovery

% OGIP

Pool X 4.7 1.7 3.0 36 0.388 0.429 1.11 12.9 8.2

Pool AAA 9.8 6.0 3.8 61 0.464 0.519 1.12 12.2

4.7


Figure 1a and 1b: Cumulative Injection and Production versus Calendar Days

0.80

1.00

1.20

1.40

1.60

1.80

2.00

-

100,000

200,000

300,000

400,000

500,000

600,000

Cu

mu

lati

ve V

oid

age

Rat

io

Raw

Gas

Mcf

(cu

mu

lati

ve)

AAA Pool - Cumulative Injection and Production

Cumulative Injection

Cumulative Production

Cumulative Voidage Ratio

0.80

1.00

1.20

1.40

1.60

1.80

2.00

-

100,000

200,000

300,000

400,000

500,000

600,000

Cu

mu

lati

ve V

oid

age

Rat

io

Raw

Gas

Mcf

(cu

mu

lati

ve)

X Pool - Cumulative Injection and Production

Cumulative Injection

Cumulative Production

Cumulative Voidage Ratio


2. Pilot Data

a. Data Submission

I. Geological and Geophysical data

The geological interpretation of GRIPE is unchanged from that conducted by Paramount. There has been

no seismic or drilling activity conducted over the GRIPE pools since startup, and therefore, there is no

new geological or geophysical data to report. Below is a summary of the McMurray geology in the area as

well as a brief description of the two pools under evaluation.

The McMurray formation in the Surmont area was deposited on the sub-Cretaceous unconformity

developed on the Paleozoic Beaver Hill Lake carbonates and consists of a succession of

estuarine to marine sands and shales. The lower Clearwater Wabiskaw marine transgression

deposited glauconite rich lithic sands and shales on top of the McMurray. The estuarine

environment is characterized by channel type deposits including inclined heterolithic strata (IHS)

and mud clast breccias. The marine sands are characterized by coarsening upwards sequences

and marine muds and were only found in the upper part of the McMurray. Structural cross

sections through the McMurray AAA and Wabiskaw-McMurray X are outlined in Figures A1 & A2

in Appendix A.

Within the McMurray AAA pool gas is trapped in both the upper section of the McMurray channel and

within the overlying marine shoreface deposit. In the Wabiskaw McMurray X pool the gas is trapped only

within the stacked shoreface deposits.

II. Laboratory Studies

MEG continued Paramount’s efforts to formulate a new corrosion inhibitor to mitigate corrosion through

out the GRIPE system in the absence of process dehydration. The goal of the research was to obtain a

chemical that would protect the process piping but would not precipitate and plug the system. By

analyzing the liquid collected from the injection line it was determined that the primary mechanism driving

corrosion is Nitric acid, and by the low pH (1.97) observed in the liquid. Carbonic acid and oxygen were

also identified as corrosion mechanisms. The result of the study was a proposal to test Baker Chemical

CG09198 which is designed to coat the process piping, provide protection against low levels of oxygen

and operate up to 240oC. MEG transitioned the facility over to the new chemical on April 17, 2008. A

summary of the corrosion review report and analysis is attached in Appendix B.

III. Simulations

MEG has not performed any simulations since taking over ownership of the GRIPE process.


IV. Pressure Monitoring

Static gradients are conducted annually on the producers and injectors in each pool and on four offsetting

shut in gas wells to confirm pressure maintenance during the displacement scheme. ConocoPhillips

drilled and completed wells within each pool and equipped them with continuous pressure measurement

equipment. Reservoir pressures measured are summarized in Figure 2 and Figure 3 for the McMurray

AAA and Wabiskaw-McMurray X respectively. No significant change in pressure has occurred. The recent

March 2009 static gradient measurements indicate an increase in injection well pressure, which is likely a

result of continuous injection periods and near wellbore pressure transient effects, and it is not

representative of average reservoir pressure. The Conoco observation wells are felt to be key indicators

of pressure within the pools (since they are observation wells with no gas flow impacts on pressure) and

are relatively constant.

Other monitored wells locations are illustrated in Figure 1. Charts of observation well pressure data are

included in Appendix E.


V. Gas Composition Monitoring

The producing gas wells have been sampled routinely for produced gas composition. A summary of

analysis is included in Appendix F. The mole fraction of nitrogen for the four producing wells over the life

of the project is illustrated in Figure 4. Small nitrogen variations in samples early in the project life (2005 –

2006) are thought to be caused by air contamination during the sampling process. Three of the wells

have not seen a change in gas content to date, however, the 08-33-81-06W4 well has seen an increase

of nitrogen content indicating exhaust gas breakthrough. The nitrogen content of 8-33 increased to 1.5%

in December 2006, 2.0% in January 2007, and to over 4% in February 2007. During the suspended

operations period from March 2007 to March 2008 two samples measured approximately 20% nitrogen.

After the process was re-started in July 2008 samples in November and December 2008 continued to

show elevated nitrogen, with measurements over 30%. The 08-33 well was allowed to continue

production with elevated nitrogen levels (and the resulting low BTU heating value) because the overall

impact on the Kettle River gas plant was not enough to adversely change gas sales specifications.

0.00

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Sep

-05

Oct-

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r-06

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r-08

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08

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v-0

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Mo

le F

racti

on

Figure 4. GRIPE Producing Wells Mole Fraction N2


b. Interpretation of Pilot Data

I. Facility/Operational

The GRIPE facilities have been burdened by many corrosion related failures. Paramount recognized in

prior reports that an initial investment in exhaust gas dehydration could have prevented corrosion by

avoiding water condensation as the gas is transported to the injection wells. The injection pipeline also

has a relatively low operating pressure limit thus preventing operations at a higher pressure that could

prevent some of the condensation. The injection pipeline is made of composite fiberglass materials;

however the pipeline connections (couplings) and wellhead piping have required upgrading to stainless

steel to resist corrosion. Corrosion at the compressor facilities is also present with recent leaks that have

resulted in the suspension of operation (in May 2009).

II. Pressure Maintenance

To date, the GRIPE process has proven successful as a pressure maintenance scheme. The reservoir

pressure in both pools has been maintained and no significant changes in pressure have been observed

in the surrounding observation wells. Slight pressure differences have been observed in both pools

between the injection to producing wells and this is a result of near wellbore transient effects of injection

and production. (Refer to Figure 2 and Figure 3). The observation wells within the pools have maintained

a relatively constant pressure.

III. Recovery Potential of Process

To date 12% of the remaining recoverable gas in place (RGIP) has been produced under the

displacement scheme (Table 3). Reservoir simulations conducted by APA / Paramount estimated ultimate

recoveries of approximately 30% and 60% of the RGIP for the WM-X and M-AAA pools respectively. The

breakthrough of nitrogen at the 08-33-81-06W4 well is perhaps earlier than expected and is likely due to

reservoir specific characteristics. The 08-33 well is the closest distance well to an injector in both pools

and this proximity may explain the first breakthrough of nitrogen content. Also the Wabiskaw/McMurray X

pool zones are commingled production in the 08-33 well. The more regional nature of the Wabiskaw zone

likely contributes as a direct path for injection gases to travel. Another contributing factor for breakthrough

could be the result of static mixing of exhaust gases in the reservoirs. The operating history of the GRIPE

pilot is only 38% on run day basis, and gases are likely mixing within the reservoir during shut-in periods.

To date, the AAA pool has not indicated exhaust gas breakthrough. The AAA pool does not contain the

Wabiskaw zone and the McMurray zone is complex with various channel type deposits creating

potentially more rigorous paths for the injection gases to travel and may delay nitrogen breakthrough.


The GRIPE pilot has not yet determined the ultimate recovery from each gas pools as breakthrough has

not occurred at every well. However, given the breakthrough at 08-33, it appears that ultimate recoveries

are reservoir and process specific. Each pool’s architecture, well placements and exhaust gas injection

operation (run-time and rates) will affect the recovery and economics of a GRIPE type process. Further

GRIPE operation and testing is required to determine ultimate recovery potentials.

IV. Economics

The GRIPE pilot has not generated positive economics. Capital and operating cost has exceeded gas

revenues. Frequent repairs due to corrosion are the most substantial cost and impact on the operation.

A summary of cost and revenues are provided in this report. For this reporting period MEG’s operating

cost averaged $6.21/mcf and $3.99/mcf for capital cost for a combined total of $10.20/mcf. Gas Sales

revenue averaged $6.22/mcf.

3. Well information

a. Well lay out map

The GRIPE process consists of two pools, each pool with one injection and two producing wells. There

are 10 observation wells in the original approval, 6 wells were equipped with continuous pressure

monitoring and 4 wells require annual static gradients. Two of the 4 observations wells requiring static

gradients are currently licensed to Paramount Energy Operating Corp and are also producing from the

Clearwater formation. It is impractical to shut the wells in for extended periods to run the annual gradients

and as such MEG applied to have wells 11-17-81-05W4 and 7-15-81-06W4 removed from the approval

conditions. The ERCB approved MEG’s application in January 2008. The layout of the subject wells

under the original approval is outlined in Figure 1.

b. Review drilling, completion and workover operations and any difficulties encountered.

MEG has not drilled or completed any new wells for the GRIPE project since the transfer of ownership.


c. Well operations

I. Well list, Status and Schematics

Wellbore schematics can be found in Appendix C,

Injection Wells

00/12-27-81-06W4 Wabiskaw-McMurray X injector

00/07-14-81-06W4 McMurray AAA injector

Producers

00/11-12-81-06W4 McMurray AAA

00/07-13-81-06W4 McMurray AAA

00/08-33-81-06W4 Wabiskaw-McMurray X

00/11-34-81-06W4 Wabiskaw-McMurray X

Continuous Monitoring Observation Wells

00/03-18-81-05W4

00/14-20-81-06W4 Surface equipment was replaced (Mar. 09)

00/03-21-81-06W4

00/11-22-81-06W4

00/02-26-81-06W4 Solar panel replaced (Mar. 09)

00/09-36-81-06W4

Well requiring Annual Gradients

00/11-17-81-05W4 Removed from approval No 10100

00/15-02-81-06W4

00/07-15-81-06W4 Removed from approval No 10100

00/06-17-81-06W4

II. Spacing and Pattern

The GRIPE injection and production well spacing and pattern was defined by existing McMurray gas wells

drilled prior to GRIPE.


4. Production Performance and Data

a. Injection and Production history on a composite basis

The experimental scheme averaged 1,527 mcf/d of raw gas production on an operating day basis for the

reporting period. The M-AAA pool (Figure 6.) was overall slightly more prolific producing 837 mcf/d

compared to 779 mcf/d for the WM-X pool (Figure 5.) Production rates were controlled to achieve

reporting period voidage replacement ratios of 1.05 and 1.07 for the WM-X and M-AAA pools

respectively. The cumulative voidage replacement is 1.12 for the McMurray AAA pool and 1.11 for the

McMurray X pool as illustrated in Table 4.

25

765

768

926

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1322

1482

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287

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1065

1049

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692

29

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408

568

826

740

650

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99

614

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Cal D

ay

mcfp

d

mcf/

mth

Figure 6. Chard McMurray "AAA" Pool Production History

AAA Monthly Production

AAA Monthly Injection

Raw Daily Production (mcfpd)

44

78

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Cal D

ay

mcfp

d

mcf/

mth

X Monthly Production

X Monthly Injection

Raw Daily Production

Figure 5.Chard Wabiska - McMurray "X" Pool Production History


Table 4. Cumulative Voidage Replacement Ratios

Pool AAA Pool X

Cum Injected (smcf) 519,103 429,005

Cum Produced (smcf) 463,507 387,496

Est. Reservoir Pressure (kPa) 700 1050

Prod Vol Fact (rcf/scf) 0.140496 0.092603

Exhaust Vol Fact (rcf/scf) 0.141686 0.093802

VRR (Inj/Prod) 1.12 1.11

b. Injection and Production history on an individual well basis

Daily production and injection rates for each pool are shown in Figures 7 and 8.

0

500

1000

1500

2000

2500

Pro

du

cti

on

/ In

jecti

on

(P

rod

ucin

g D

ay m

cf)

Figure 7: Production and Injection Flow Rates - McMurray AAA Pool - Producing Day

11-12 Production 7-13 Production 7-14 Injection


0

200

400

600

800

1000

1200

1400

1600

1800

2000

Pro

du

cti

on

/ In

jecti

on

(P

ro

du

cin

g D

ay m

cf)

Figure 8: Production and Injection Flow Rate - Wabiskaw-McMurray X Pool - Producing Day

8-33 Production 11-34 Production 12-27 Injection

c. Composition of produced and injected fluids

As discussed earlier, the four producing gas wells have been tested routinely. Summary of gas analysis is

included in Appendix F.

d. Comparison of Predicted versus Actual well / pilot performance

The producing wells have performed as expected with rates similar to historical production. As the

reservoir pressure has been maintained, the wells have not experienced any change in deliverability.

e. History of Injection, production and observation well pressures and average reservoir

pressure

Reservoir pressures in both pools have been maintained.


5. Pilot Economics to Date

a. Sales Volume of Natural gas and Gross Revenue

Natural gas sales is the only revenue from the GRIPE process and during the January 2008 to June 2009

reporting period 274,595 mcf (7,779 e3m

3) of natural gas was sold generating $1,707,203 of gross

revenue (average gas price $6.22/mcf). Shrinkage ratio between raw gas and sales gas is approximately

25% as fuel gas is consumed for exhaust injection compression, sales gas compression and electrical

power generation.

b. Capital Costs

A breakdown of the operating and capital costs is summarized below.

For the reporting period of January 01, 2008 to June 01, 2009 MEG invested $1,094,299 of capital (or

$3.99/mcf sales) comprised of the following major component cost breakdown:

Pipeline and Riser Repair and Upgrades: $562,228 (partial project cost)

Cooler Repair and Upgrades: $274,596

UT Inspections, Corrosion Repairs/Mod’s: $128,184

Compressors : $129,291

Total $1,094,299

c. Direct and Indirect Operating Costs

Contract operating and gas processing fees for the reporting period were $960,627, or $3.50/mcf.

Maintenance cost totaled $744,685, or $2.71/mcf. Total operating cost was $1,705,312, or $6.21/mcf

d. Crown Royalties

Gas Royalties for the reporting period were $435,784 or 25.5% of the gross revenue


e. Cashflow

The GRIPE pilot had a net loss of $1,528,192 during the reporting period (Table 5).

Previous

Expenditures (March

2005 - June 2007)

Previous Expenditures

(June 2007 -

December 2007)

Reporting Period Expenditures

(January 2008 - June 2009)

Paramount MEG MEG

Operating 1,753,653$ 51,735$ 1,705,312$ 3,510,700$

Capital 9,228,225$ 13,929$ 1,094,299$ 10,336,453$

Total Project Cost 10,981,878$ 65,664$ 2,799,611$ 13,847,153$

Royalties 649,861$ 6,787$ 435,784$ 1,092,432$

Sales Volume (e3m3) 15,900 - 7,779 23,679

(Gas Revenue) (3,110,543)$ (29,161)$ (1,707,203)$ (4,846,907)$

Cashflow - Loss 8,521,196$ 43,290$ 1,528,192$ 10,092,678$

Table 5. GRIPE Cumulative & Report Period Project Costs and Net Revenue (2005 - 2009)

Total:

f. Explanation of Material Deviations from Budget costs

Repairs and maintenance on the cooler, compressor and related compression equipment were the

largest budget deviations during the reporting period.

6. Facilities:

a. Description of Major Capital Items:

A breakdown of the equipment used within the GRIPE Process is provided below

Compressor Skid consisting of:

Driver – Waukesha 7042 (1478 Hp at 1200 rpm)

Compressor – Mycom 3225 LLMC-LBL compound screw

Process Equipment – Inlet scrubber, 2 stage coalescing and gas separators

Storage Tanks of:

1 – 100 bbl heated and insulated fiberglass produced water tank

1 – 50 bbl heated and insulated fiberglass chemical tank

3 – 500 gallon steel tank

1 – pre-fabricated 500 bbl flare knock out with secondary containment

1 – 150 bbl tank at pig catcher


Auxiliary Components:

250 KVA EM generator driven by a Solar Gas Turbine

8.7 km of NPS 4 FlexPipe pipeline to the two injector wells (stainless steel couplings)

2 wellsite injection gas meter skids

4 production metering skids

1 emergency shower wash system

2 remote shower units including 500 gallon potable water tank and power generation

units

b. Capacity Limitation, operational issues and equipment integrity:

Exhaust gas injection capacity is limited to approximately 58 e3m3/d at 2,100 kPag dictated by

compressor size, the maximum operating pressure of the injection pipeline and reservoir performance.

Corrosion is the most significant factor that impacts the operation of the surface equipment.

c. Process flow, Site Diagram

The GRIPE Process is shown in the Figure 9. Exhaust gas is collected from the exhaust stack of a

natural gas fueled driver and is compressed to 2,100 kPag using a compound screw compressor. The

exhaust gas is cooled and water is separated in each compression stage. Oil coalescers are used to

recover compressor oil in the interstage and final discharge portions of the process. The facility process

flow diagrams are included in Appendix D. Included is a plot plan of the Kettle River 15-02-081-06W4M

facility and mechanical flow sheets.


Figure 9. Simplified Injection Process Flow of GRIPE Unit.


7. Environmental/Regulatory/Compliance:

a. Summary of Project Regulatory Requirements

II. Continuous pressure monitoring of the subject pools through 6 identified observation wells;

III. Monitoring the subject pool pressures through the 2 injectors, 4 producers and 4 surrounding

observation wells by measuring stabilized sandface pressures on a annual basis;

Approval received from the ERCB to remove the wells 00/11-17-081-04W4M and 00/07-

15-081-06W4M.

IV. Maintain a monthly voidage replacement ratio between 0.90 and 1.20 and a minimal annual

voidage replacement ratio of 1.05

V. Maintain a minimum bottomhole stabilized sandface pressure within the Chard McMurray AAA

pool of 725 kPaa.

VI. Maintain a minimum bottomhole stabilized sandface pressure within the Chard McMurray-

Wabiskaw X pool of 1075 kPaa.

VII. Submit a progress report to the ERCB on a bi-annual basis.

VIII. Approval extension to December 31, 2009 granted.

b. Procedures to address environmental and safety concerns:

MEG is committed to being an exemplary steward of environment and safety issues. MEG operates

under a comprehensive set of internal safety guidelines in all operations and adheres to industry

regulations and safety guidelines. Besides daily field operations and site inspection, a daily review and

logging of data with regards towards the performance of GRIPE (injection and production) is conducted.

MEG has taken several actions to improve upon the safety of the GRIPE process such as implementing a

scheduled ultrasonic thickness survey allowing MEG to proactively categorize potentially corroded items.

In June 2008, MEG installed two emergency showers at the injection sites in case of an accidental spill

onto an Operator during pipeline pigging. Air quality monitoring tests were also conducted at the

compressor site to evaluate the risk and impact on operating staff.

c. Plan for shut-down and environmental clean-up:

Currently, MEG has suspended the GRIPE process due to internal corrosion concerns raised during a

recent ultrasonic inspection survey. Once determined and, upon the conclusion of this experimental

project, MEG will devise a plan to recover the salvageable portions of the GRIPE process and properly

isolate and restore the facility and infrastructure to prescribed regulatory acceptance levels.


8. Future Operating Plan:

a. Project Schedule update, including deliverables and milestones

Paramount originally planned for a project lifespan of 2 – 3 years. MEG extended the pilot term until

December 31, 2009; since significant downtime had occurred.

b. Changes in Pilot operation, including production operations, injection process and cost

optimization strategies:

MEG took a proactive approach to dealing with the corrosion related issues associated with the GRIPE

process and has improved the run time between operational impacts by routinely pigging the injection

lines (together with the use of the modified corrosion inhibitor), scheduling routine ultrasonic thickness

surveys and replacing carbon steel items with stainless steel.

c. Salvage update:

The GRIPE Compressor is the largest portion of the capital salvage potential and is one of the key items

identified as readily salvageable.

9. Interpretations and Conclusions:

a. Difficulties Encountered and Lessons Learned:

The GRIPE pilot has confirmed the corrosion challenges associated with exhaust gas compression.

Nitrogen dioxide forms nitric acid in the GRIPE process and aggressively corrode carbon steel. Oxygen

and CO2 related corrosion are also present and compounded the overall corrosion mitigation efforts.

The GRIPE air cooler/exchanger design also confirmed that cooling exhaust gases requires proper

engineering design. The existing GRIPE design of combining the exhaust cooling in the same air cooled

unit as engine/compressor lubricating oil and glycol cooling created several operating challenges during

hot and cold ambient conditions. In hot summer conditions the unit could not achieve proper engine

cooling and in very cold winter conditions the exhaust gas cooling experienced water freezing and tube

failures. Separating exhaust cooling from other process duties (into separate exchanger units) is

recommended in future designs.


b. Technical and Economic Viability:

The GRIPE pilot has demonstrated the exhaust gases can be injected into gas reservoirs and sweep

remaining reserves while maintaining reservoir pressures.

The GRIPE pilot has not been an economic success due to corrosion related facility repairs and

excessive down time. However, given the facility learning, future GRIPE type processes could become

economic if applied to appropriate reservoirs in more favorable gas price environments.

c. Effect on Overall Gas and Bitumen Recovery:

It has been demonstrated that pressure can be maintained within the two pools enabling natural gas to be

produced, without significant changes in pressure which could affect bitumen recovery. Operational and

reservoir experience gained from GRIPE will enable MEG to better design future pressure maintenance,

re-pressurization and possible green house gas capture and storage processes that will have a positive

effect on overall resource recovery.

d. Assessment of Future Expansions or Commercial Field Application

Many shut-in pools exist within the Surmont area which may be suitable for a similar GRIPE pressure

maintenance or re-pressurization schemes. MEG is currently evaluating future options to utilize the

GRIPE type process in the Surmont area.

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