Proposal to develop and document options for:

“Utilization of Heavy Oil Vent Gases”

May 10, 2000

Agenda

Introductions Making a Change Happen About New Paradigm Engineering Ltd. Proposal Overview Proposed Deliverables Why this proposal now? What is needed to make the project happen? Questions and Feedback Wrap-up and Next Steps

Gas Processing6%

Other1%

Conventional Oil Production

8%

Product Transmission

16%

Accidents and Equipment Failures

5%

Heavy Oil Production

29%

Gas Production35%

The Target for Change

Oil & Gas Methane Emissions

Ref: CAPP Pub #1999-0009

Heavy OilVenting

29%

Where Are We Now?

$50M/yr of methane vented from heavy oil sites• Equivalent to 5% of O&G Industry energy use

$20-$40M/yr of energy purchased for heavy oil sites

GHG emissions from heavy oil wells• 30% of oil & gas industry methane emissions; • 15% of oil & gas GHG emissions • Over 2% of Canada’s GHG emissions

GHG, Flaring and Odour Issues affecting our ability to develop new leases

Where Do We Want To Be?

Vent gas as a revenue stream Minimize purchased energy costs No purchased energy for wells that are venting Low tech low cost operations Achieved with minimum of waste

How Could We Get There?

Displace purchased energy sources Power from vent gases Compression for sale or reinjection Use gas and/or energy for EOR Convert methane to CO2

Tank vent treatment to eliminate odours

What Is Stopping Us?

Venting seen as an environmental problem, not economic opportunity

Capital budget for conversion set on a corporate relations basis

Payouts on systems beyond fuel displacement are long

Vent volumes are variable so tough to do single well economics or design facilities

No one has time to invest in studying potential options

How Can We Make Things Happen? Collaborate to define the options and the prize Work together to make the case for casing gas

utilization Co-operative and collaborative efforts on the gas

side of heavy oil Joint Industry Project (New Paradigm) to provide

focus

About New Paradigm Engineering Ltd.

Independent consulting company, Inc. 1991 Engineer “new paradigms” for industry Bruce Peachey, P.Eng. – President Colin Gosselin, E.I.T. – Technology Development Engineer Focus for last two years on reducing methane emissions and

developing new technology to support conventional heavy oil vent gas mitigation.

Previous work in collaborations: • Downhole oil/water separation (C-FER),• Novel EOR methods (C-FER and KeyTech), • Heavy Oil Pipelining Study (C-FER, SRC)• Climate change (CSChE),• PERD study on Hydrocarbons R&D (K.R. Croasdale & Associates)

New Paradigm – Bruce Peachey, P.Eng. Project Manager and Lead Engineer Past Experience:

• Principal New Paradigm Engineering (9 yrs), • Esso Resources (15 yrs):

» Sr. Facilities Engineer; » Technical Services Superintendent; » Project Engineering Section Head; » Project Engineer;» Technology Evaluations Engineer; » Heavy Oil Production Engineer;» Process Design (Gas Production/Compression)

Expertise – Gas Gathering systems/plant design; Heavy oil production; Steam generation; Operations; Project Management; R&D Prioritization; Innovation

Proposed Support for Vent Gas Utilization Study EMF Technical Services Inc. Holly Miller, P.Eng. Marlett Engineering Ltd. Jamieson Engineering Heavy Oil and Gas Producers Vendors (New and existing technologies) Extensive contact networks (PTAC, PTRC,

Universities, ARC/C-FER/PRI, CIM, SPE, CSChE)

EMF Technical Services Inc. - Calgary Electrical Power Generation and Distribution Cogeneration facilities (proposals and economics) Electrical and control systems design Engineering design and construction Oil and gas pipelines, compressor stations, pump

stations and processing Motivated and creative solutions

Holly Miller, P.Eng. - Edmonton

Contract Engineer – Project Development and Design

Past Experience:• Sr. Engineer with Polytubes (West) Inc. 4 yrs, • Esso Resources/Petroleum/Chemical (14 yrs):

» Sr. Operations Engineer, » Sr. Process Engineer, » Development Engineer

Expertise – Refinery energy conservation, heavy oil upgrader studies, Cold Lake Phases 1-6 Debottleneck, gas conservation plant operations and facilities upgrades, managed implementation of new reactive extrusion pipe manufacturing process

Marlett Engineering Ltd. – Edmonton Principal – Fret Marlett, M.Eng., MBA, P.Eng.,

FCSME Specializing in combustion and gas fired equipment Past Experience:

• Enbridge Pipelines Inc. (1 yr)• Northwestern Utilities Limited (24 yrs)

» Senior Engineer, Utilization and Research» Assistant Utilization Engineer» Assistant Transmission Engineer

Key roles:• APEGGA Rep – Gas Technical Council of the Alberta

Safety Codes Council (1997-Present)• Secretary, City of Edmonton Gas Approvals Board

(1974-1978)

Jamieson Engineering - Edmonton

Principal – Marnie Jamieson, P.Eng. Process Control, Materials, Process & Environmental

Engineering Past experience:

• AT Plastics (2 yrs), • Syncrude Canada (8 yrs), • Work terms Dow Chemical (Research), Esso

Resources (Operator), Environment Canada (Engineering Asst.)

Roles – Plant Engineer, Environmental Engineer, Applications Engineer, Corrosion/Materials Engineer.

Proposal Overview - Objectives

Evaluate options to utilize casing gas Assess criteria for successful application Pro’s and Con’s of the Options

• Technical • Financial • Operational• Implementation hurdles

Overall – Facilitate decision-making; leading to rapid and economic implementation of systems to reduce methane venting from Heavy Oil sites.

Work Scope – Focus Areas

Displace purchased fuel use (15%) Power generation and sales (30%) Gas collection and sales (30%) Use to Increase Oil Recovery (10%) Convert methane to CO2 (10%)

Mitigation of tank odours (5%)

Key Issues for Heavy Oil Venting Options Technology Issues

• Many options exist now but are not widely used. • New ones may be developed where needed

Producer Management Issues• Economic Solutions - Why Not Implementing?• Environmental Solutions – Define Priorities and

Resources Government/Regulatory Issues

• Rules to Level/Define Playing Field• Barriers to implementation• Carrot vs. Stick Philosophy

Displace Purchased Energy Options

Winterization

Low Pressure Fuel

Increase Efficiency

Tracing; Dryers; Anti-freeze; Fuel Heaters

Mini-compressors;Low Pressure Burners

Improve Tank Heating:Combustion; Heat Transfer

Co-gen (heat & power)

Power from Vent Gas

Easy Sites

Small Sites

Remote Sites

Pads with lots of gas;Near power lines

Single, high GOR wells;Near Power lines

Small local loads;Lights, Remote Control

Gas Collection and Sales

Fuel for New Wells

Local Sales

Sales to Pipeline

Similar to Winterization:Temporary flowlines?

Mini-compressors;Mini-dryers; Tie-in to

Existing lines

Low pressure collection;Central treating and Compression facility

Increase Oil Recovery

Pressure Support

Mini-EOR

One well per pad takesCompressed Gas

Small steam generators;Methane cycling

Collect gas for use in otherAreas (Royalty Free)

Large Scale EOR

Methane Conversion

Flares

Catalytic Oxidation

GHG Credits

Low cost, low liquidLow visibility flares

Portable, low visibility,Potential for use of energy

Requires auditableMeasurement of conversion

Mitigation of Tank Odours

Micro-incineration

Catalytic Oxidation

Other Options

Use casing gas; Incinerate tank vents

Low cost, low maintenance

Absorption; Adsorption;Active Dispersion

Schedule

Detailed schedule once participation confirmed. • Remain flexible yet meet deadlines.

Key dates:• Start May, 2000• Winterization Options by Sept 2000• Draft of Main Report by Dec 2000• Main Report by Year end 2000/1Q2001• If participation allows – extend work to follow-up

actions

Proposed Deliverables

Interim Report on Options to Displace Purchased Energy

• Analysis; Powerpoint Summary; One Page option sheets Draft Report

• Powerpoint format and workshop to review Main Report

• Full Document (2 copies)• Powerpoint format (paper and electronic)

Options (cost recovery basis)• Field presentations, extra reports

Benefits to Participants

Focused effort to quickly identify low cost, economic and safe options for use of vent gases

Reduces workload on in-house staff Provides leverage instead of everyone redoing the

same work Allows vendors to easily communicate information

on the options they can provide Helps define what can be achieved now and what

requires new technology

Why this proposal now?

Expansion of operations generates resistance from public

Pressure mounting to show voluntary progress Producers no longer in “survival” mode Options appear to be available and economic Producers are busy with producing Oil, not Gas Vendors with viable options frustrated Appears to be opportunity and interest in

collaboration

What is needed to make the project happen? Funding to do the Work Support from Producers Operating Information Support from Vendors Product Information Others

• Regulators Drive to change

Funding Proposed (For discussion)

Open to any organization on same terms• Reports to participants only

Current basis $15,000 per participant (at least 4 preferred)

• Can proceed with more or less but depth of analysis varies

After study 60% complete, new participants pay a premium (20%)

• Funding used to monitor developments Option to expand to thermal heavy oil venting

Questions and Feedback

Wrap-up and Next Steps

Confirm participants as soon as possible Finalize detailed proposal to level desired by

participants Begin work so benefits can be realized Other?

Contact Information

Advanced Technology Centre

9650-20 Avenue

Edmonton, Alberta

Canada T6N 1G1

tel: 780.450.3613

fax: 780.462.7297

email: info@newparadigm.ab.ca

web: www.newparadigm.ab.ca