Middle East looks to Canada as heavy oil interest ramps up

The presence of the national oil companies of Bahrain, Kuwait and Saudi Arabia and IOCs Total and Chevron at the Heavy Oil World MENA Conference in Bahrain in June was testimony to the rapidly growing interest in developing the Middle East’s heavy crude deposits and to refine the oil for domestic use, saving more of the light crude for export.

"Middle East oil countries should increase production of heavy oil as oil prices remain higher and improved technology makes it easier" according to Bahrain’s oil minister, Abdulhussain Mirza. The Minister told delegates that "heavy oil reserves in the region were estimated at 1 trillion barrels, or 28% of total world reserves, but historically accounted for little more than 10% of production".

"The vast reserve demonstrates the importance of heavy oil as a future energy source, one that cannot be overlooked and, therefore, companies that position themselves early in the heavy oil business are likely to win the game," Mirza said, according to local news reports.

Bahrain recently signed an agreement with Mubadala Development, an Abu Dhabi state-owned firm, and Occidental Petroleum of the U.S., to boost heavy oil production in the Awali field, one of the oldest in the region and Bahrain’s only oilfield. Using advanced oil recovery technology and developing the heavy oil sectors of the field could double or triple its production from 32,000 barrels a day.

Heavy crude oil is distinguished from light crude oil because it does not flow as easily due to a higher specific gravity (usually defined as below 22 degrees). Oil sands and natural bitumen are also included in this definition.

Production and refining of heavy crude costs more than recovering and processing light crude. In the context of oil prices in the region of US$70-80 per barrel, production of heavy oil from oil sands in Canada’s Alberta province has an estimated break-even point of $35 a barrel but it is believed that Bahrain’s heavy oil could be recovered at a cost of between $8 and $9 a barrel.

However, "advanced technology and know-how in Canada could increasingly become the driver for exploiting the Middle East’s heavy oil" predicts HFI Group Managing Partner. Attending the Oilsands and Heavy Oil Technologies Conference in Calgary in July. According to Tracy Grills, President of the Canadian Heavy Oil Association "the outlook for future energy demand and improving exploitation technology has given out industry tremendous confidence in its future. In spite of the sudden economic challenges we experienced in 2009 the industry is looking forward to the ongoing recovery. Sustained development of technology will be key to enduring success, and we should look forward to investments in technology for sustained productivity growth."

Hugh Fraser who attended the Calgary event summarises his view of the Canada to Middle East connection: "There are estimated to be 1.7 trillion to 2.5 trillion barrels of oilsands in the Athabasca, Wabasca, Cold Lake and Peace River regions of Alberta, with further deposits in other parts of the western Canada sedimentary basin which also includes parts of British Colombia, Saskatchewan, Manitoba, Northwest Territory and Yukon Territory. There are now almost 30 operating oilsands projects with major operators including Suncor, Syncrude and the Shell led Athabasca Oil Sands Project. Thermal production methods such as cyclic steam stimulation (CSS) and steam assisted gravity drainage (SAGD) have been the key technologydrivers to date but solvent assisted production processes are seen as the next big leap forward. Canada is now internationally recognised as the world’s leading force in oilsands and heavy oil production and it is the obvious place for Middle East players to look for advanced technology and know-how".