PAPER 2000-paper no

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WHOC12-408

HTL Heavy Oil Upgrading Monetizing stranded heavy oil assets in remote locations CARLOS A. CABRERA, MICHAEL D. HILLERMAN, MICHAEL A. SILVERMAN Ivanhoe Energy This paper has been selected for presentation and/or publication in the proceedings for the 2012 World Heavy Oil Congress [WHOC12]. The authors of this material have been cleared by all interested companies/employers/clients to authorize DMG events (Canada) Inc., the congress producer, to make this material available to the attendees of WHOC12 and other relevant industry personnel.

Abstract

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Facilities can be economically constructed at smaller scale than conventional processes and operated at a fraction of the per-barrel cost. Reduced complexity as well as a smaller footprint allows HTL to be deployed to remote locations not accessible to conventional technologies. The HTL processing plant can be located upstream at or near the well-head and fully integrated with field operations. Alternatively it can be placed midstream to process heavy crude from onshore and offshore resources. The upgraded product can then be exported to refineries that have limited coking capacity. Utilizing extensive engineering experience from offshore and onshore installations, Ivanhoe Energy has recently made advancements in HTL design and modularization which further widen the gap between the cost of HTL and that of conventional upgrading facilities. This has been achieved through increasing the quantity of equipment, piping and instrumentation which is fully incorporated into optimally sized modules that will be fabricated off-site and transported to remote locations, thus minimizing on-site construction. This paper will provide an overview of the advancements made to HTL design as well as the economic and logistical benefits of modularization.

uch of the world’s heavy oil resources exist in remote locations where industrial infrastructure has not yet matured, the availability of construction resources is extremely constrained and production techniques continue to become more complex. As a result, the development of heavy oil remains economically challenged and deployment of conventional upgrading facilities to solve these challenges can be impractical. However, because of the global abundance of heavy oil deposits and rapidly depleting conventional oil supplies, heavy oil remains a strategic global hydrocarbon resource. A viable economic solution is needed to address the challenges of heavy oil development. Ivanhoe Energy’s innovative, proprietary and patented HTL upgrading process addresses the key technical and economic challenges of heavy oil development. HTL, or “Heavy-to-Light”, is a heavy oil upgrading process that converts heavy, viscous crude oil to lighter, transportable and more valuable synthetic oil. HTL allows the producer to capture the majority of the market value differential between heavy and light oil, and eliminates the need of adding diluent for transportation. In addition, by-products from HTL upgrading are converted to significant amounts of valuable energy that is captured and utilized on-site.

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were produced in accordance with the project specific modularization specifications, ensuring that lessons learned from past offshore and onshore modularized projects would be incorporated into the detailed design. Construction hours which would have previously been completed on-site can now be completed at an off-site fabrication shop, with improved productivity and safety. Before extensive modularization was applied, 50 percent of the total construction hours were estimated as being field executed. After extensive modularization, field hours were reduced to only 15 percent of the total construction hours. This shift facilitated significant capital cost savings, reduction of the construction schedule and allows Ivanhoe Energy to deploy the HTL process to locations which are extremely remote and unfavorable to traditional on-site construction methods. These modularization efforts are enabled by the relatively small footprint of the HTL facility as compared to conventional upgrading technologies.

Introduction Many heavy oil resources are left undeveloped because of the challenges encountered in producing and monetizing heavy oil. Heavy oil production typically requires:   

Heat source for extraction from the reservoir Diluent addition to allow transportation Large refinery investment for processing -- only to end up with a significant amount of low value coke as a byproduct. Ivanhoe Energy, an independent international heavy oil development and production company focused on pursuing long-term growth in its reserves and operations, is solving the challenges of heavy oil development through the commercialization of a proprietary heavy oil conversion process known as HTL. HTL, or ‘Heavy-to-Light’, is an upgrading process that converts heavy, viscous crude oil into lighter and transportable products. The process works through rapid thermal conversion of heavy oil, upgrading it to high value Synthetic Crude Oil, or ‘SCO’. All by-product coke and gas produced in the process is converted to significant amounts of valuable energy which is captured and utilized on-site. HTL captures the majority of the price differential between heavy and light oil and eliminates the need of diluent for transportation. Ivanhoe Energy is currently developing projects globally that utilize HTL to better optimize the petroleum supply chain. By selectively rejecting the lowest value components of crude oil efficiently at the production site versus at the refinery, substantial economic returns can be obtained.

Figure 1 – Plant Layout for 20,000 bpd unit (60m x 200m)

Drive toward Complete Modularization Having completed HTL development, scale-up and testing, Ivanhoe Energy is now engaged in the design and engineering of full-scale HTL facilities for commercial heavy oil projects. Modularization of equipment and systems has been identified as an important factor in reducing project schedule and cost. It is much more efficient to fabricate modules off-site and then transport to remote field locations than it is to fabricate on site where resources are severely limited. Industry attempts at modularization in the past, particularly for onshore projects, have generally fell short in terms of maximizing construction work at off-site locations. Project benchmarking has shown that this inadequacy was due to incomplete definition of modularization goals in the overall design philosophy as well as not having fully integrated modular constructability into the project execution plan during early development phases. As a part of developing the Basic Engineering and Design Package (BED) and executing the subsequent FEED phase for the Tamarack heavy oil upgrading project, Ivanhoe Energy commissioned an extensive modularization assessment with the intent of maximizing the amount of equipment and materials that could be fully constructed, inspected and tested prior to leaving an off-site fabrication shop. This required the development of a complete modularization strategy which included a technical design philosophy and project execution plan tailored to implement the highest degree of modularization possible. All project design and planning deliverables for both engineering phases

Several specific design enhancements were required in order to increase the portion of the unit that could be modularized. The most important challenge involved modularizing the HTL reactor and reheater system components. This section requires the majority of construction hours and if completed on-site would have to take place within a very small construction foot-print and at multiple elevations. The constructability benefits were obvious, but the challenge was significant as the reactor and reheater system components are close-coupled vessels where elevation and layout are critical to process functionality. With assistance from AMEC, a top tier engineering contractor with significant experience in modular design for onshore projects in Canada and offshore projects globally, the HTL engineering team has successfully designed the reactor and reheater system into modules which can be easily transported to the field. There, the modules will be erected and completed with a minimal number of field connections. Figure 2 shows how the HTL reactor and reheater system is constructed from several modular components. Total facilities for a 20,000 bpd HTL upgrader can be fabricated into about 65 modules weighing 150 tonnes each. These smaller modules can be transported by truck into remote locations for hook-up and completion. Alternatively, the plant could be constructed in several 2,000 tonne ‘supermodules’ at coastal fabrication yards and carried offshore, with a total module weight of approximately 10,000 tonnes.

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Figure 2 - HTL Reactor Modules (road transportable)

priced crudes available to the market. A significant portion of these lower priced opportunity crudes are heavy, but the high capital cost of constructing new units and significant yield losses incurred by conventional “bottom-of- the-barrel” conversion processes limit the ability of many refineries to process heavy crude oil. Once at the refining center, the heavy oil must typically be processed through a vacuum fractionation tower and a delayed coking unit where approximately 30 to 35 percent of the residual oil is converted to coke. Although heavy oil represents nearly half of the world’s total recoverable resources, current global production constitutes only 12 percent of the total oil supply. Furthermore, the production of heavy oil is a contemporary trend -- of the 1.0 trillion barrels of oil produced to date, a mere 0.01 trillion barrels has been contributed by heavy oil.2 Figure 3 - Global Oil Resources

Conventional 5.0

trillion barrels of oil

Modularization is now a key component of the project execution strategy and has been fully incorporated into the cost estimate and the design plan for all HTL projects. The ability to drive HTL projects toward complete modularization will open up access to stranded heavy oil in onshore and offshore locations which have not been commercialized due to heavy oil production and transportation constraints.

Changing the Petroleum Supply Model Historically, the petroleum industry supply chain has been divided into three discrete sectors; production, transportation and refining. Crude is produced from reservoirs and made ready for transportation, then transported via pipeline, ship, train or truck to refineries for conversion into fuels and other finished products. Production of heavier crude strains the current supply chain configuration. These crudes include those found in the Canadian Oil Sands, Orinoco Belt, Mexico, Middle East, Africa and many more locations. API gravities typically range from 6˚ to 16˚ and resources can be located onshore or offshore. There is often a requirement for heavy oils to be heated underground to reduce the viscosity such that it will flow to the surface. Thermal recovery methods can consume energy in amounts equal to 25 percent of the total energy present in the produced volume of heavy oil itself, detracting from project economics and increasing emissions into the environment1. After produced crude oil is dewatered, it must typically be diluted with a lighter hydrocarbon stream such that it will flow in a pipeline to the refinery gate. These diluents are typically naphtha or other light oils and can constitute 40 percent of the blended heavy oil stream, consuming valuable pipeline capacity. Furthermore, getting diluent to the production facilities requires dedicated pipelines. Operators incur the cost to build and operate the diluent delivery facilities and have to accept a reduction in pipeline capacity which could be otherwise be used to transport additional valuable crude. The downstream sector of the industry continues optimizing process schemes to take advantage of the lowest

Heavy

4.0

3.0

2.0

1.0

0.0

Global Recoverable Oil

Oil Produced to Date

The large disparity between total recoverable heavy oil resources and the amount that has actually been produced can be attributed to the many challenges encountered in producing and monetizing heavy oil. These challenges have left many global heavy oil assets economically and technically stranded. Historically, production operations have been limited to extraction of oil from the reservoir, crude stabilization, dewatering, blending and transportation. Upgrading the quality of oil has been limited to refining operations. Ivanhoe Energy’s HTL process provides a new approach to optimization of the crude oil supply chain, overcoming the constraints which otherwise leave heavy oil resources stranded. The integration of a selective and efficient carbon rejection process located at the production site, versus at the refinery, provides a heavy oil producer with a substantial economic incentive over the traditional limits imposed by the upstream vs. downstream configuration. The old paradigm of petroleum supply has been broken.

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oil recovery operations, this is no longer a significant hurdle to the development of heavy oil resources. When heating of the reservoir is not required for production, the excess energy can be converted on-site into electricity, supplying local or remote power demand. This configuration is particularly advantageous in the mid-stream upgrading scenario, where several heavy oil resources may be located a significant distance from the HTL facilities. Also, unlike conventional upgrading technologies such as hydrocracking and hydrotreating, HTL does not require the addition of hydrogen in order to achieve the desired improvements in product quality. This represents a significant cost of capital advantage in comparison with traditional technologies because of the reduced scale of the processing site and the fewer pieces of equipment required to complete the upgrading facility. In summary, HTL captures the market value differential between heavy and light oil by eliminating heavy oil residue and dramatically reducing viscosity. The process supplies its own energy needs by converting byproduct coke and gas into heat thus sustaining the upgrading process. Only a small fraction of energy available from coke and gas is consumed within the HTL unit and excess energy is converted into steam or power. The efficient design of the conversion process and elimination of costly hydroprocessing units provide HTL with a unique competitive advantage. Perbarrel construction and operating costs of heavy oil upgrading are significantly lower than competing technologies, and facilities are economic at greatly reduced scale. HTL enables viable exploitation of heavy oil and bitumen reserves where economics are otherwise challenged, and where environmental and transportation constraints prevent the development and marketability of heavy crude oil.

HTL Solves Heavy Oil Challenges HTL provides a solution to each of heavy oil’s challenges. Upgraded oil is more valuable than raw heavy oil and can be transported in pipelines without addition of diluent. HTL produces energy for field operations, and facilities are costeffective at smaller scales than conventional upgrading. The properties of the HTL product SCO, such as API, viscosity, metals, sulfur and nitrogen, are significantly better than the original heavy oil feedstock qualities. Upgrading with HTL nearly eliminates the residual oil (material boiling above 1000°F) originally present in the feed. This creates a SCO product that can be processed in refineries without producing large quantities of undesirable heavy fuel oil and without requiring the implementation of additional residue conversion capacity. The dramatic viscosity reduction allows SCO to be transported to refining markets without diluent, a constraint which the original heavy crude oil could not have overcome. Table 1 - HTL Upgrading Feedstock vs SCO Properties Property

Bitumen Feed

API Gravity Kinematic Viscosity, D445 @ 40oC, cSt D445 @ 100oC, cSt

8.5 23,000+ 161

SCO Product 18.8 23 11

Sulfur, wt% Nitrogen, wt%

5.02 0.66

2.91 0.40

Nickel, ppm Vanadium, ppm

79 209

15 27

HTL Principles

Figure 4 – HTL Product Yields

The HTL process uses a circulating transport bed of hot sand to quickly heat the heavy feedstock and convert it to a lighter, more valuable product. The underlying breakthrough of HTL is that the asphaltenes present in heavy oil residue are dispersed and deposited on the sand in a thin film. This is facilitated by the high sand-to-oil ratio and efficient feed injection zone mixing inherent in the patented HTL circulating fluid solids system. The HTL process requires less than two seconds total time from feed in to product out. The very short residence time is at the heart of the process, and allows conversion of the heaviest residue to high yields of lighter, lower viscosity and more valuable products with a minimum production of less desirable byproduct coke and gas. Mechanically the HTL process is very similar to Fluidized Catalytic Cracking (FCC), a common conversion process found at the center of every modern refinery. There are over 400 FCC’s in operation today, and the process has been commercialized globally since the 1940’s. Although configured similarly to an FCC unit, the HTL process requires a fewer number of equipment items and is noncatalytic, thus making HTL less complicated and easier to operate than FCC. The HTL process flow scheme is shown in Appendix A. HTL generates sufficient energy to sustain the upgrading process and provides a substantial amount of excess energy

Unlike coking, the HTL process does not accumulate large volumes of coke byproduct which must be stored or transported off-site. Coke produced in HTL is completely consumed by the process itself and converted on-site into energy. Since HTL provides the energy required for heavy

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which can be used to support field operations. Energy is generated and recovered within the HTL process via three routes which are summarized in Figure 5: the combustion of coke; the combustion of non-condensable product gases; and the recovery of latent and sensible heat from the product streams. In HTL, the heaviest fractions of the reactor feed are thermally converted to coke which is directly deposited onto the circulating sand particles. The sand is regenerated in the reheater where the thin layer of coke is removed through combustion with air. This provides the energy necessary to sustain the thermal upgrading reactions. The total amount of heat energy released from combusting coke is significant and exceeds the amount required to sustain the upgrading reactions. This excess heat is recovered through the generation of high pressure steam. Secondly, the upgrading reactions convert a small portion of the reactor feed to noncondensable product gas which is recovered and utilized as fuel gas in fired heaters and steam boilers. This supports the HTL unit’s internal energy demand, and also produces additional high pressure steam. Lastly, energy is captured from the product streams through latent heat and sensible heat recovery systems.

producer and upgraded in a location convenient to both the producer and the operator of the gathering terminal. Excess energy from byproduct gas and coke is converted on-site into electrical power which can be utilized to supply local electricity demands. Upgraded SCO is forwarded downstream to the transportation terminal, where it can be directly transferred to sales or utilized as a lighter diluent for blending with heavy production. The small footprint of HTL coupled with the low cost of installation makes HTL an attractive midstream solution. Fig.6 - HTL Integrates with Production, Supplies Energy

Fig.5 - HTL Generates Self Sustaining and Excess Energy

Path to Commercialization In 2005, Ivanhoe Energy acquired the petroleum rights of a patented process known as Rapid Thermal Processing (RTP) from Ensyn -- a Canadian based corporation that has commercialized the RTP technology producing renewable liquid fuels and chemicals from wood residues and other solid biomass. Ensyn has been successfully operating commercial RTP units for over 20 years. The RTP process, as applied to the upgrading of heavy oil, is patented and known as HTL or “Heavy-to-Light”. The technology was studied extensively during early pilot plant work and then validated by successful operation of a 1,000 bpd Commercial Demonstration Facility (CDF) in Bakersfield, California.

As discussed above, HTL fits naturally into heavy oil production schemes since all of the excess energy produced can be used to supply a substantial portion of the steam necessary for in-situ, thermal-enhanced oil recovery (e.g., SAGD). Figure 6 shows how HTL can be directly integrated into a heavy oil production operation. In many locations producers are faced with declining rates of local light crude oil supplies which have traditionally been used as blend stock to facilitate delivery of extra heavy oil production to markets. At the same time, these producers are also relying on increased volumes of heavier oil production to satisfy future export demand. These diverging production trends lead to crude oil quality that cannot meet pipeline and customer contract specifications and results in the market value of the heavy blends being severely depressed. Countries and companies alike are facing declining rates of benchmark crudes, and are seeking a way to replenish supplies of export volumes with crude oil that can meet historical quality specifications. HTL offers a unique opportunity to these producers by way of a midstream solution. HTL can be strategically located at a site where heavy oil production streams are gathered, such that the producer can eliminate or reduce the need for blending with large volumes of higher value crude oil. The heavy oil is received from the

CDF in Bakersfield, California

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Testing of heavy crude oils in the CDF proved the scalability of the HTL process and also provided key design information for the first commercial Basic Engineering Design Package (BEDP) and Front-End Engineering Design (FEED) of Ivanhoe Energy’s initial projects, including the Tamarack project in Alberta, Canada. In 2008, Ivanhoe Energy commissioned the Feedstock Test Facility (FTF) at the Southwest Research Institute in San Antonio, Texas to further improve the HTL process for a range of heavy oil feed-stocks. The FTF is designed to model the commercial HTL process, but at a reduced capacity, making it feasible to test smaller batches of heavy crude oils rapidly. Equipped with a state of the art process control and measurement system, the FTF maximizes quality of data collected, validating technology advancements being made to the HTL process and supplying critical data for commercial design.

Acknowledgement The authors would like to thank the management of Ivanhoe Energy for supporting the publishing and presentation of this paper. We would also like to thank our esteemed colleges at Ivanhoe Energy and the professionals within our contract support organizations for their many contributions.

Nomenclature AACE = BEDP = bpd = CADD = CDF = FCC = FEED = FTF = GHG = HTL = LCA = RTP = SCO =

FTF in San Antonio, TX

Association for Advancement of Cost Engineer Basic Engineering and Design Package Barrels of petroleum per day Computer Aided Drafting and Design Commercial Demonstration Facility Fluid Catalytic Cracking Front-End Engineering and Design Feedstock Test Facility Greenhouse Gases Heavy-to-Light Life-Cycle Analysis Rapid Thermal Processing Synthetic Crude Oil

References

Conclusion HTL affords many advantages to the heavy oil producer: 

Cost-effective upgrading, economic at smaller scales



Provides an upgrading solution which can be easily modularized and deployed to remote locations



Eliminates diluent requirement for heavy oil and bitumen transport



Captures the majority of the light-heavy crude price differential

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Produces energy for production operations, marginalizing the cost and environmental impact of external energy sources.

HTL is a simple and efficient process for field integrated or midstream heavy oil upgrading with features that enable viable exploitation of heavy oil and bitumen reserves where economics might otherwise be challenged and where environmental and transportation constraints may prevent resource development and crude marketing.

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1.

International Energy Agency, “Resources to Reserves—Oil and Gas Technologies for the Energy Markets of the Future”, Paris (2005): 75.

2.

International Energy Agency, “World Energy Outlook 2011”, (2011): 121.

3.

Cambridge Energy Research Associates, “The Changing Composition of the Barrel: A Moving Target through 2020”, October 2008.

Appendix A HTL Commercial Unit Process Flow Upon exiting the reactor, the product vapor is separated from the circulating sand in a single stage cyclone. The vapor is then quenched in order to prevent unwanted reactions and yield degradation. The upgraded product vapor is then forwarded to the product fractionation unit. In the product fractionator, vapor is further cooled, and the C5 and heavier components are condensed and collected. The upgraded liquid product is sent to product storage and blended with straight run distillates from the feed prefractionation unit. The combined liquid product is termed Synthetic Crude Oil (SCO).

The commercial HTL process (figure below) begins in the feed atmospheric and vacuum pre-fractionation towers, where light components are vaporized, separated from heavier fractions and recovered as liquid product. Valuable components with a boiling point less than 1000°F are collected and forwarded directly to product storage, while the higher boiling point residue is sent to the HTL reactor for upgrading. The residue is efficiently dispersed into the bottom of the reactor riser and is quickly contacted with the hot circulating sand where it undergoes a short-residence-time thermalcracking process.

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