A pseudo-SAGD scoping model for evaluating economic viability of heavy oil projects

• An easy to use pseudo-SAGD scoping model is presented.
• Used model for evaluating performance and economic viability of a heavy oil project.
• Model results are comparable with the performance of two actual heavy oil pilot projects.

Unlike the Canadian heavy oil and bitumen resources, which are mainly produced using steam assisted gravity drainage (SAGD) process, production from many of the US heavy oil reservoirs relies on steam injection through vertical wells. To utilize existing vertical injection wells and other surface infrastructure, conventional steam flooding projects may be modified to operate in a pseudo-SAGD mode that use vertical steam injection and horizontal production wells. However a preliminary feasibility study is necessary to reliably analyze a single well pair as a stand-alone project before launching comprehensive simulation studies. For this purpose, a reservoir scoping model coupled with economic analysis template that is easy to apply and use by individual reservoir engineers, was developed. The scoping model was then used to evaluate the economic viability of a heavy oil lease in California.The scoping model developed in the present study is based on two well-known models namely the Jones model and the Sawhney, Liebe, and Butler model. The model results are comparable with the reported performance of two heavy oil horizontal well projects in the San Joaquin Valley, California, that used vertical steam injection scheme. The economic template is capable of handling a multitude of different scenarios. Any variable can be readily changed to allow users not only to forecast specific scenarios but also to see what variables will have greatest impact on project viability.The scoping model results suggest that the studied heavy oil lease can be effectively produced in pseudo-SAGD mode. Steam flood application with vertical injection wells at a rate of 246 barrels of cold water equivalent (BCWE/D) per well is determined to effectively promote oil production in a horizontal well at rates over 500 barrels per day (BOPD) for several years. The life span of the project is expected to be to 10 years with an initial capital investment of 6.5 million dollars. Even at relatively high minimal acceptable rate of return (MARR) of 42.5%, the project remains an economical venture with minimum oil price of $84/barrel at the beginning of the project with an annual increase of 2.5% in oil price during the project span. In a downside scenario of $50/barrel crude oil price and 40% tax on income, project can be still economically viable, if 22% or less MARR is acceptable.