3 Intelligent Well Technology: Status and Opportunities for Developing Marginal Reserves SPE

Overview In terms of energy production, Canada is an important player on the world scene. Indeed, the country is the largest supplier of natural uranium, with about one-third of the global demand, a leader in hydroelectricity production and an

CANADIAN OIL PRODUCTION OVER THE 2020 HORIZON: INSIGHTS FROM THE NEW TIMES-CANADA ENERGY MODEL Project funded by the National Science and Engineering Research Council of Canada (NSERC) with strong support from Natural Resources Canada.

Kathleen Vaillancourt, Research Group in Decision Analysis (GERAD), Montreal, Canada, [email protected] Yuri Alcocer, École des Hautes Études Commerciales, Montreal, Canada, [email protected] Olivier Bahn, École des Hautes Études Commerciales, Montreal, Canada [email protected] Amit, Kanudia, KanORS Consultants, Delhi, India, [email protected] Maryse Labriet, ENERIS Environment Energy Consultants s.l. Madrid, Spain, [email protected] Richard Loulou, McGill University,Montreal, Canada, [email protected] Jean-Philippe Waaub, University of Quebec in Montreal, Canada, [email protected] important producer of oil, natural gas and coal. The United States are the main consumers of Canadian energy products counting for almost 98% of the energy exports. New opportunities are emerging for energy producing provinces to generate additional revenues from domestic or international exports. Energy security has become a priority on political agendas for non-producing regions with the increase of demand for transportation fuels in particular, simultaneously with the rarefaction of the world reserves. At the same time, due to increased public concern with climate change, the interests to develop or import renewable energy sources has increased significantly in these regions.

In summary, the energy systems of the Canadian provinces are much diversified; there are increasing opportunities for some of them to become significant suppliers, but also many energy security and environtmental issues to solve for most of them. In addition, a national energy strategy is missing in order to optimize the management of energy systems and the conception of energy policies. Our main objective is to analyze the evolution of conventional and unconventional oil production and exportations on the 2020 horizon in Canada, with their associated costs and GHG emissions. The development of the oil sector is analyzed under two socio-economic growth scenarios (from the most recent Canadian Energy Outlook) using the new energy model TIMES-Canada. The use of such a detailed technology- based model represents an interesting contribution to energy policy analysis in Canada.

Methods TIMES (The Integrated MARKAL-EFOM System) combines all the advanced features of MARKAL (Market Allocation) models, and to a lesser extent of EFOM (Energy Flow Model Optimization) models. Currently, MARKAL and TIMES models are used in more than 80 institutions in 50 countries for various purposes, including economic analysis of climate policies, energy policies and emerging technologies. The full technical documentation is available in Loulou et al. (2005). TIMES is a linear programming model that represents the entire energy system of a country or a region. Such a system includes the extraction, transformation, distribution, end-uses, and trade of various energy forms and some materials. End-use demands in the base case are based on socio-economic assumptions and are specified exogenously by the user in physical units over a future horizon. TIMES acknowledges that demands are elastic to their own prices., The objective function to maximize is the total surplus. This is equivalent to minimizing the total discounted system cost while respecting environmental and technical constraints. The main model outputs are future investments and activities of technologies at each period. The model tracks GHG emissions from fuel combustion and processes. The climate module starts from global emissions and successively computes the changes in CO 2 concentrations, in atmospheric radiative forcing from anthropogenic causes level and in the global mean surface temperature changes over pre-industrial level. Emission reduction is brought about by technology and fuel substitutions (which lead to efficiency improvements and process changes in all sectors), by carbon capture and sequestration (CCS) and by endogenous demand reductions.

The energy model TIMES-Canada: This project lead to the development of a technology rich model to support the assessment of energy and climate policy analysis in Canada and North America, using the advanced modeling framework of TIMES. TIMES-Canada covers the energy system of the 13 Canadian provinces and territories having their own reference energy systems, but linked together through energy, material and emission flows. The reference energy system of each province/territory is disaggregated into five consumption sectors (agriculture, commercial, industrial, residential, transportation).

In addition, the database covers electricity generation at the individual unit level for all existing and future power plants, heat production and cogeneration, as well as electricity trade within provinces and with the United States. The upstream 3 Intelligent Well Technology: Status and Opportunities for Developing Marginal Reserves SPE oil and gas sector database is an important element in the TIMES-Canada model as it represents one of the largest primary energy sources that feed the model. It includes detail information about conventional and unconventional fossil fuel reserves, primary extraction and secondary transformation processes (refineries, coke plants, etc.), domestic and international trade of crude oil, natural gas, coal and refined petroleum products.This sector has been evolving rapidly in recent years, namely with the development of the oil sands industry in Alberta (NEB, 2006). New modeling efforts were necessary to better model the recent information on the different technologies used to extract and transform the oil sands. Finally, the supply of various other energy forms is also modelled (potential, existing and emerging transformation processes, consumption technologies): solid biomass, biofuels, biogas, hydrogen, liquefied natural gas, etc.

The model database used for the analysis includes thousands of technologies used for energy production and consumption. The model is calibrated to the year 2007, using the most recent energy balances provided by Statistics Canada (2007). The model projects energy demand up to 2100, with shorter time periods until 2030, for energy policy analysis and technology assessment, and longer time periods afterward (until 2100) for climate scenario analysis. All costs are in Canadian dollars ($). The global annual discount rate has been fixed to 5%. Additional discount rates can be specified on a technology basis.

The energy model calibration: In order to calibrate the energy model TIMES-Canada, we needed to analyze the trends of the historic data and understand its future evolution under the “business as usual” (BAU) scenario. In the last 10 years, there has been an important decrease of conventional production. Two new sources, Eastern Offshore production and Oil Sands are compensating the decay of conventional oil. This two new developments represent a separation from the conventional cheap oil developments. The BAU scenario considers the most accepted trend for the future, today. In the case of the upstream primary energy sources, an in-depthp research was performed in order to achieve this accepted trend. Such research is base on a detailed evolution of all East Offshore and all Oil Sands projects, creating a bottom-up approach to build the supply of upstream primary energy sources.

Results The BAU is an interesting case if we follow current production trends but thanks to TIMES-Canada we could run different scenarios and see what the impact on the Canadian Oil production is. Three different reference scenarios on the 2020 horizon are tested, illustrating low, BAU and high Canadian socio-economic growth. We calculate and compare costs and GHG emissions of conventional and unconventional oil production under various sets of assumptions on:  The short term evolution (2010-2013) of the crude oil price, production and emissions from upstream operations;  The energy used for reserves extraction and transformation: illustrating the economic and environmental impacts of available options;  The domestic and international trade movements: taking into account provincial energy strategies (Québec, 2006; Northwest Territories, 2006; British Columbia, 2007 etc.) to implement technological constraints accordingly or to simulate economic consequences of different social choices on controversial issues such as a nuclear moratorium.

Conclusion Policy scenarios are analyzed under those two potential socio-economic growth scenarios to provide decision makers a reasonable range of technological answers to the energy needs and their associated costs and GHG emissions. In future works, the energy demands will be projected to the 2100 horizon using various socio-economic drivers, which are consistent with the storyline behind the B2 and A2 families of IPCC scenarios.

ReferencesBritish Columbia, 2007. The BC Energy Plan. A Vision for Clean Energy Leadership. p.39. CAPP – Canadian Association of Petroleum Producers. June 2010. Crude Oil: Forecast, Markets & Pipelines. Loulou, R., Remme, U., Kanudia, A., Lehtila, A., Goldstein, G., 2005. Documentation for the TIMES Model, Energy Technology Systems Analysis Programme (ETSAP), http://www.etsap.org/documentation.asp. NEB - National Energy Board, 2006. Canada’s Oil Sands. Opportunities and Challenges to 2015: an update. An energy market assessment. Northwest Territories. 2006. Energy for the Future. Energy Planning for the Northwest Territories. Québec, 2006. L’énergie pour construire le Québec de demain. La stratégie énergétique du Québec 2006-2015. Ministère des Ressources naturelles et de la faune (MRNF), 113 p. Statistics Canada (2007). Report on Energy Supply-Demand in Canada. Catalogue no. 57-003-XIE. Söderbergh, Bengt. 2005. Canada's Oil Sands Resources and Its Future Impact on Global Oil Supply. Uppsala University. UPTEC STS05 005.