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An economic indicator called simplethermal-efficiency parameter (STEP) was developed to evaluate the per-formance of a steam-assisted gravity-drainage (SAGD) project. A dynamicmodel called STEP-D was developed foruse as an economic indicator under thechanging conditions of the economiclimit of the instantaneous steam/oilratio (SOR) and the price of heavy oil.

IntroductionThe economics of a SAGD project isrelated to several production-perfor-mance parameters. The most signifi-cant are SOR, cumulative steam/oilratio (CSOR), ultimate recovery factor(RF), and project life. STEP is based onCSOR, calendar day oil rate (CDOR),and RF for the time corresponding toan SOR of 4.

STEPs usefulness as an economicindicator was validated qualitativelyas well as quantitatively. STEP was

introduced to optimize SAGD operat-ing conditions in Athabasca-, ColdLake-, and Peace River-type reservoirsin the Alberta oil sands. This economicindicator was modified to evaluate theperformance of a SAGD project underselected reservoir parameters and opti-mal operating conditions. STEP wasfound to be a useful qualitative as wellas quantitative economic indicator inevaluating SAGD performance.

In reality, the economics of a thermalproject depends strongly on the eco-nomic limit of SOR and heavy-oil price,

poil.These variable parameters are usedin the economic evaluation of fieldprojects. In this research, a dynamicmodel, STEP-D, was developed for useas an economic indicator under thesechanging conditions. For the STEP-Dcalculation, the economic limit of SORwas varied from 3 to 6 and thepoil fromU.S. $15 to $30/bbl for three oil-sandsreservoirs in Alberta.

Development of a DynamicEconomic IndicatorInitially, STEP was used to evaluatethe performance of a SAGD projectunder optimal conditions. It was pro-posed as a simple economic indica-tor, to be used instead of net presentvalue (NPV), while determining thebest SAGD operating conditions. Thesimulation results showed that NPV hada linear relationship with RF and CDOR,but a decreasing exponential relation-ship with CSOR.

For use as a quantitative economiccriterion, STEP was modified, leadingto the following equation.

(RF/0.5)(CDOR/0.111)STEP = . (1)

(CSOR/3)2.4

The economic limit for each SAGDperformance parameter is assumed to be3 for CSOR, 0.111 m3/d/m of horizontalwell length for CDOR, and 0.5 for RF.The validation of STEP as a quantita-tive economic indicator showed that

STEP is greater than 2 in the case of aneconomical SAGD project. The econom-ics calculations assume that a project iscost-effective as long as the SOR is belowa value of 4.

Capital costs have not been takeninto account in this procedure, on theassumption that they are similar forall the cases studied because the samewell configurations and development

plan are considered. NPV calcula-tions considered only the cost of steam($5/bbl) and price of bitumen ($20/bbl),at a 10% discount rate.

To develop a dynamic STEP model,STEP-D, the original STEP equationwas modified as follows.

SORELa

poilSTEP-D=STEP

(

)

(

), (2)

4 20

where SOREL=economic limit ofSOR, and a=1+1/kv, where kv is verti-cal permeability.

For the STEP-D calculations, the pre-vious simulation results for the threetypical oil-sands reservoirs in Albertawere used. NPV has a linear relation-ship withpoil. A linear relationship alsoexists with the economic limit of SOR;however, the slope of the line is higherat high reservoir kv than at low perme-ability. Therefore, the exponent a was

introduced into the STEP-D equationto take into account this dependence ofreservoir kv to have the highest correla-tion coefficient between STEP-D andNPV. Because an SOREL of 4 and oilprice of $20/bbl were assumed for theSTEP calculations, these two values areused as the base case for the dimension-less STEP-D calculations.

Evaluating SAGDPerformance With STEP-DSTEP-D calculations were based on theprevious simulation results for reser-

voir-thickness sensitivity in three typicalAlberta oil-sands areas: Athabasca, ColdLake, and Peace River. Two-dimensionalnumerical simulations were performed.The operating pressures depended onthe depth of each reservoir. The numeri-cal grid size was 1 m in the width andthickness directions and 900 m alongthe horizontal well. The reservoir widthwas assumed to be 100 m for all cases.

This article, written by TechnologyEditor Dennis Denney, contains high-lights of paper SPE 100525, A DynamicEconomic Indicator To Evaluate SAGDPerformance, by H. Shin, SPE, ShellCanada Ltd., and M. Polikar, SPE, U.of Alberta, prepared for the 2006 SPEWestern Regional Meeting, Anchorage,810 May.

Dynamic Economic Indicator To EvaluateSAGD Performance

RESERVES/ASSET MANAGEMENT

For a limited time, the full-length paper is available free to SPE members at www.spe.org/jpt. The paper has not been peer reviewed.

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Athabasca-Type Reservoirs. Thereservoir parameters and operatingconditions for the simulations werekv=2.5 darcies, bitumen viscosi-ty=1,000,000 cp, injector-to-producer

(I/P) spacing=5 m, and maximuminjection pressure=1500 kPa. As theSOREL increased, the NPV valuesincreased, but the STEP values didnot increase because the STEP valuecalculations assumed an economiclimit of SOR=4. With the dynamicmodel of STEP, a linear relationshipexisted between NPV and STEP-Dwith a correlation coefficient, R2, of0.93, as shown in Fig. 1. Most of theAthabasca-type cases, except one hav-ing a reservoir thickness of 15 m andan SOREL of 3, seem to be economical

(i.e., NPV is higher than $10 millionand STEP-D is larger than 2). In the15-m-reservoir-thickness case, STEP-D yielded a value less than 2, whichwas assumed as an economic cutofffor this study.

Cold Lake-Type Reservoirs. The reser-voir parameters and operating conditionsfor the simulations werekv=1.25 darcies,bitumen viscosity=60,000 cp, I/P spac-ing=10 m, and maximum injection

pressure=3100 kPa. As the SORELincreased, the NPV values increased, butthe STEP values did not increase becausethe STEP-value calculations assume anSOREL=4. The dynamic model of STEPhad a linear relationship between NPVand STEP-D with a correlation coeffi-cient of 0.95. If STEP-D must be greaterthan 2 for an economical SAGD project,then all the cases of reservoir thick-ness of 15 m were not economical. Foran economical SAGD project having areservoir thicker than 20 m, the SORELhad to be greater than 5 withpoil higher

than $25/bbl.

Peace River-Type Reservoirs. Thereservoir parameters and operatingconditions for the simulations werekv=0.65 darcies, bitumen viscosity=

200,000 cp, I/P spacing=10 m, and max-imum injection pressure=4500 kPa.As the SOREL increased, the NPV val-ues increased, but the STEP values didnot increase because the STEP-value

calculations assume an SOREL=4. Asshown in Fig. 2, the dynamic modelof STEP showed a linear relationshipbetween NPV and STEP-D with a cor-relation coefficient of 0.98. If STEP-D isgreater than 2 for an economical SAGDproject, then all 15-m-reservoir-thick-ness cases are not economical for PeaceRiver-type reservoirs. For an economi-cal SAGD project having a reservoirthicker than 25 m, the SOREL shouldbe greater than 5 for apoil of $25/bbl. IfSOREL is greater than 6, a SAGD proj-ect may be economical with a reservoir

thickness of 20 m at the higher poil of$30/bbl.

Correlation of NPV and STEP-D for All Three Reservoir Types. The rela-tionship between NPV and STEP-D

Fig. 1Correlation of NPV and STEP-D for Athabasca-type reservoirs.

Fig. 2Correlation of NPV and STEP-D for Peace River-type reservoirs.

Fig. 3Correlation of NPV and STEP-D for all thecases.

Fig. 4Economic classification with STEP-D.

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for all three areas was investigated.Fig. 3 shows the linear relationshipbetween NPV and STEP-D with anR2 of 0.93 for all the cases of reservoirthickness studied in the three Albertaoil-sands areas.

The reservoir parameters requiredfor an economical SAGD performanceleading to a STEP-D greater than 2

are different for each oil-sand reser-voir. Athabasca-type reservoirs, whichhave an average kv=2.5 darcies, showthat STEP-D is greater than 3 for a15-m-thick reservoir. Peace River-typereservoirs, which have a lower per-meability of 0.65 darcies, show thatSTEP-D=1 for a 30-m-thick reservoir.Cold Lake-type reservoirs, which havea permeability of 1.25 darcies, showthat STEP-D is higher than 1 for a20-m-thick reservoir. Ultimately, the kvof the reservoir should be higher than1.25 darcies for an economical SAGD

process. Field trials of SAGD in PeaceRiver were relatively unsuccessful, atleast in part because of the low kv.Cyclic steam stimulation was selectedas the preferred recovery process forthis field.

To use STEP-D as a quantitativeeconomic indicator, the STEP-D valuesless than 3 were plotted against NPV

for the three typical oil-sand reser-voirs to determine its economic-cutoffvalue (Fig. 4). Capital costs were notaccounted for in this study, so a posi-tive value of NPV is not sufficient toimply an economical SAGD project.A previous full-scale economic evalu-ation proposed that STEP be greaterthan 2 for the economical SAGD sce-narios. From the results of this study,it is proposed that STEP-D is a valu-able dynamic economic indicator fora SAGD project given the followingcriteria: STEP-D