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Heavy Oil Upgrading

A key solution for heavy oil upstream and midstream operations


A key solution for heavy oil upstream and midstream operations
FORWARD-LOOKING STATEMENTS: This document includes forward-looking statements, including
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, but are not limited to, statements concerning the potential benefits of
Ivanhoe Energy’s heavy oil upgrading technology, the potential for commercialization and future
application of the heavy oil upgrading technology and other technologies, statements relating to the
continued advancement of Ivanhoe Energy’s projects, the potential for successful exploration and
development drilling, dependence on new product development and associated costs, statements relating
to anticipated capital expenditures,
expenditures the necessity to seek additional funding,
funding statements relating to
increases in production and other statements which are not historical facts. When used in this document,
the words such as “could,” “plan,” “estimate,” “expect,” “intend,” “may,” “potential,” “should,” and similar
expressions relating to matters that are not historical facts are forward-looking statements. Although
Ivanhoe Energy believes that its expectations reflected in these forward-looking statements are
reasonable,, such statements involve risks and uncertainties and no assurance can be g given that actual
results will be consistent with these forward-looking statements. Important factors that could cause actual
results to differ from these forward-looking statements include the potential that the company’s projects
will experience technological and mechanical problems, new product development will not proceed as
planned, the HTL technology to upgrade bitumen and heavy oil may not be commercially viable,
geological conditions in reservoirs may not result in commercial levels of oil and gas production, the
availability of drilling rigs and other support services, uncertainties about the estimates of reserves, the
risk associated with doing business in foreign countries, environmental risks, changes in product prices,
our ability to raise capital as and when required, competition and other risks disclosed in Ivanhoe
Energy’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on
EDGAR and the Canadian Securities Commissions on SEDAR.
Our Company Profile

We are an international, heavy oil and gas company focused on pursuing long‐term 
growth in its reserves and production.  Core operations are in Canada, China, 
Mongolia and Ecuador, with business development activities worldwide.

We use technologically innovative methods and proprietary technologies in the 
development of heavy oil and other oil and gas assets, including the application of our 
patented, Heavy‐to‐Light (HTL) upgrading process.
p , y g ( ) pg gp

Ivanhoe Energy Inc.

Ivanhoe Energy  Ivanhoe Energy  Sunwing Energy  Ivanhoe Energy 


Latin America Inc. Canada Inc. Ltd. MENA  Inc.

Ivanhoe Energy 
Ecuador Inc.
HTL enables economic development of Heavy Oil

Upgrade Heavy Oil Eliminate Reduce Complexity


into Lighter Product Diluent & Integrate Facilities
 Lower Cap Ex

Maximize Minimize
Product Production
Value Costs

Minimize use of
Convert Byproducts Natural Gas
i t Usable
into U bl Energy
E

Completed Front End Engineering


Alliance with engineering & Commercial  Cost Estimation
project management contractor Readiness  Execution Strategy

Validated process yields


and proved scalability
The Global Heavy Oil Opportunity

• The IEA has estimated that heavy oil  • But, of the 1.0 trillion barrels of 
deposits
deposits ((< 20 API) contain nearly 50%
20 API) contain nearly 50%  oil produced to date only 1% has
oil produced to date, only 1% has 
of global, future recoverable resources. been contributed by heavy oil.

E ti t d R
Estimated Recoverable Oil
bl Oil Oil Produced to Date
trillions of barrels trillions of barrels

40
4.0 Conventional 2 3
Conventional, 2.3 10
1.0
Conventional, 1.0

2.0 Heavy, 2.0
0.5
Heavy, 0.01
0.0 0.0
IEA 
IEA – International Energy Agency
International Energy Agency
”Resources to Reserves—Oil and Gas Technologies 
for the Energy Markets of the Future”, 2005
Heavy Oil Production Challenges

• Large amounts of external energy required for production,
up to 25% of energy accounted for in the heavy oil itself

• High viscosity, requires diluent for transportation
• Low market value due to high content of residual oil
market value due to high content of residual oil

• Conventional upgrading solutions have large minimum 


scale & are not integrated with upstream energy demand 

Result

Stranded and Distressed assets worldwide


HTL Solves each Heavy Oil Challenge

Heavy Oil Challenges HTL Solutions

All byproduct coke & gas is converted on‐site to usable 
Energy Intensive
gy
energy in the form of steam or electrical power
i th f f t l ti l

Destroys asphaltenes, reducing viscosity by 99% and 
D t h lt d i i it b 99% d
High Viscosity
eliminating the need for diluent

Large Fraction HTL converts 90% of residual oil into lighter & more 
of Residual Oil valuable products

Traditional
Economic at scales as low as 10,000 ‐ 30,000 bpd; 
Upgrading
Typical CapEx ranges from US$ 12,000 
Typical CapEx ranges from US$ 12,000 ‐ $20,000 per bbl
$20,000 per bbl
E
Economically
i ll
(USGC basis)
Challenged
Fundamentals of the HTL Process

• Fast thermal cracking at low pressure

• Hi h i ld f
High yields of synthetic crude oil
th ti d il

• Conversion of all coke & gas into energy

• Effectively utilizes concept of thin films

• Non‐catalytic

• No hydrogen required
HTL Process Description

Prefractionation
HTL Process – Comparison to Crude Distillation Unit

Prefractionation HTL Prefrac. Products CDU Products


Atmospheric Distillate
Atmospheric Distillate Light Naphtha
Light Naphtha
Vacuum Distillate Heavy Naphtha
Vacuum Residuum Kerosene / Jet Fuel
Light Atmos. Gas Oil
Heavy Atmos. Gas Oil
g Vacuum Gas Oil
Light
Heavy Vacuum Gas Oil
Vacuum Residuum
HTL Process Description

Prefractionation Reaction Section
HTL Process Description

Prefractionation Reaction Section
HTL Process Description

Prefractionation Reaction Section
HTL Process Description

Prefractionation Reaction Section
HTL Process Description

Prefractionation Reaction Section
HTL Process Description

Prefractionation Reaction Section Product Separation


HTL Mechanically Similar to a Fluid Catalytic Cracker

• Over 450 FCC’s operating globaly

• Robust, thoroughly proven, and reliable

Reactor /
Stripper

HTL FCC

Regenerator
HTL Upgrades Residual Oil into Lighter SCO and Energy

Upgrade Heavy Oil Eliminate Reduce Complexity


into Lighter Product Diluent & Integrate Facilities
 Lower Cap Ex

Maximize Minimize
Product Production
Value Costs

Minimize use of
Convert Byproducts Natural Gas
into Usable Energy

Completed Front End Engineering


Alliance with engineering & Commercial  Cost Estimation
project management contractor Readiness  Execution Strategy

Validated process yields


Continued Process
and proved scalability
Improvement
Product Yields – Athabasca Bitumen Feedstock

Products 
SCO 85 wt% (92 LV%)
Coke 10 wt% converted
converted 
Feed Gas 5 wt% to steam
Athabasca Bitumen
Feed and Product Property Comparison

Athabasca Bitumen Upgrading, Feed and Product Properties

Bitumen SCO

o API 8.5 18.8


Viscosity @40oC, cSt 23,000+ 23

Sulfur, wt% 5.0 2.9


Nitrogen, wt% 0.7 0.4

Nickel, ppm 79 15
Vanadium ppm
Vanadium, ppm 209 27
Resid, 1000oF+, wt% 52 6
Feed and Product Composition Comparison

Athabasca Bitumen Upgrading, Feed and Product Composition

100%
95%
90% Naphtha, IBP‐375F
85%
80%
75%
70%
Kerosene, 375‐455F
olume %

65%
60%
55% Distillate, 455‐650F
D1160, vo

50%
45%
40%
35% VGO, 650~1000F
30%
25%
20%
15%
Resid, ~1000F+
10%
5%
0%

Athabasca Bitumen Synthetic Crude Oil
HTL enables Low Cost Production of Heavy Oil

Reduce Complexity
Upgrade Heavy Oil Eliminate & Integrate Facilities
into Lighter Product
Diluent  Lower Cap Ex

Maximize Minimize
Product Production
Value Costs

Minimize use of
Convert Byproducts Natural Gas
i t Usable
into U bl Energy
E

Completed Front End Engineering


Alliance with engineering & Commercial  Cost Estimation
project management contractor Readiness  Execution Strategy

Validated process yields


Continued Process
and proved scalability
Improvement
Lower Production Costs – Energy Integration

• Byproduct coke and gas converted within the HTL unit to steam

• Minimizes Natural Gas required for thermal EOR

2.4 bbls of High Pressure Steam 
produced by HTL…

… per 1 bbl
1 bbl of 
f
Athabasca Bitumen 
processed in HTL
Lower Production Costs – Integration of Facilities

SAGD CPF

SHARED
PRODUCTION OFFSITES, UTILITIES & 
FACILITIES INFRASTRUCTURE

• Oil Degassing • Tank Farm
• Oil Dewatering • Roads & Pipelines
• Waste Water Treating • Electrical Power
• Steam Generation • Source Water Treatingg
• Boiler Water Supply
• Air / Nitrogen Utilities
Lower Production Costs – Integration of Facilities

Integrated CPF
SAGD CPF

SHARED
PRODUCTION OFFSITES, UTILITIES & 
FACILITIES INFRASTRUCTURE HTL FACILITIES

• Oil Degassing
Oil Degassing • Tank Farm
Tank Farm • Heavy Oil Upgrading
• Oil Dewatering
Oil Dewatering • Roads & Pipelines
Roads & Pipelines • Steam Generation
• Waste Water Treating
Waste Water Treating • Electrical Power
Electrical Power
• Steam Generation
Steam Generation • Source Water Treating
Source Water Treatinggg
• Boiler Water Supply
Boiler Water Supply
• Air / Nitrogen Utilities
Air / Nitrogen Utilities
Minimize Infrastructure Investment & Operating Expenses

Production Field Production rate of lighter oil in decline 
Current Future due to depleting resources 
bpd 40 000
40,000 10 000
10,000
API 31 31
Marker Crude w/ Pipeline 
& Contract Specifications
Current Future
Production Field
Current Future bpd 80,000 80,000
API 28 17
bpd 40,000 40,000
viscosity 100 cP 3,800 cP
API 25 19

Heavy Production Field
Current Future
Main Oil Pipeline
bpd 0 30,000
API n/a 8

Future projects will bring heavy 
resources into production
Minimize Infrastructure Investment & Operating Expenses

Production Field
Current Future Downstream refiners limited by 
bpd 40 000
40,000 10 000
10,000 heavy oil processing capabilities
heavy oil processing capabilities
API 31 31
Marker Crude w/ Pipeline 
& Contract Specifications
Current Future
Production Field
Current Future bpd 80,000 80,000
API 28 17
bpd 40,000 40,000
viscosity 100 cP 3,800 cP
API 25 19

Heavy Production Field
Current Future
Main Oil Pipeline
bpd 0 30,000
API n/a 8 Pipeline facilities stressed due 
to increasing viscosity of oil
to increasing viscosity of oil
HTL offers a unique Midstream Solution

Midstream HTL upgrades heavy crude oil into lighter, transportable SCO and 
produces electrical power from excess energy

Gross production of Electrical Power ranges from 1 3 1.7 MW per mpbd


Gross production of Electrical Power ranges from 1.3 – 1 7 MW per mpbd of HTL capacity
of HTL capacity
Minimize Capital Intensity & Complexity of Upgrading

HTL Upgrader Distillate; < 1000 oF

Sour, 
HTL  Synthetic 
Distillation Unit
Distillation Unit
Heavy  Residuum Reactor/Reheater
/ Crude Oil
Crude
Integrated Energy 
Recovery Electrical Power
or
Steam

Delayed Coking Upgrader

Natural Gas Hydrogen H2 H2S Sulfur Recovery 


Sulfur
Plant Units

Distillate; 
;
o SSweet, 
t
Distillation < 1000  F Hydrotreating Synthetic 
Heavy  Unit Units Crude Oil
Crude

Delayed Coking
Residuum Coke
Unit
Minimize Capital Intensity & Complexity of Upgrading

A – Distillation Unit
H G B – Light Hydrotreating Units
C – Coking Unit
g
A D – Heavy Hydrotreating Units
E – Hydrogen Unit
F
C F – Sulfur Recovery Units
G – Coke Storage
H Sulfur Storage
H – Sulfur Storage

D B
E
Minimize Capital Intensity & Complexity of Upgrading

HTL economic advantage increases at smaller capacity due to a less complex facility 

70 000
70,000

60,000

50,000

40,000

$ / bbl
$ / bbl capacity,    
capacity, Delayed Coking Upgrader, Installed Cost
Delayed Coking Upgrader, Installed Cost
30,000
USGC cost basis
20,000

10,000 HTL Upgrader, Installed Cost

0
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000

Barrels per day Upgrading Capacity
Minimize Capital Intensity & Complexity of Upgrading

• HTL process is less severe than coking, and nets a higher liquid product yield
• Captures a majority of quality differential through the rejection of heavy, residual oil

Bitumen
100% 9 API
5% Sulfur
50% > 1000oF Resid

95%

HTL SCO
19 API
Product 3% Sulfur
Yield, vol% 90% 5% > 1000oF Resid

85%
Traditional SCO
28 API
0.5% Sulfur
0% > 1000oF Resid
80%
5 10 15 20 25 30

Product API Gravity
Commercial Readiness

Upgrade Heavy Oil Eliminate Reduce Complexity


into Lighter Product Diluent & Integrate Facilities
 Lower Cap Ex

Maximize Minimize
Product Production
Value Costs

Minimize use of
Convert Byproducts Natural Gas
i t Usable
into U bl Energy
E

Completion of Front End Engineering


Alliance with engineering & Commercial
 Cost Estimation
project management contractor Readiness  Execution Strategy

Validation of process yields


Continued Process
and proved scalability
Improvement
Technology Development History

Ensyn
 Canadian company –
p y developed Rapid Thermal 
p p
Processing (RTP) for conversion of biomass into liquids 
― 7 units operating commercially
― demonstrates robust time on‐stream
 extended core RTP process to heavy oils → HTL
 Ivanhoe acquired HTL process in April 2005
Technology Development History

Commercial Demonstration Facility (CDF)


Commercial Demonstration Facility (CDF)
 proved commercial scalability
 tested multitude of heavy crudes
 demonstrated high quality of products
 provided commercial design parameters
 showcased HTL in an operating field
Technology Development History
Feedstock Test Facility (FTF) Mission

• Improve HTL process – test design enhancements and modifications
• Provide product yield & quality data for commercial heavy oil feeds
• Expand upon & refine design parameters for HTL commercial units

30 ft
FTF to Commercialization

FTF Results provide a multi‐discipline design basis for commercial HTL facilities 

Safety Instrumentation
‐ HAZOP ‐ Instrument Selection
‐ Risk Assessments ‐ Control and Data acquisition
‐Training ‐ Cause and Effect 

Process
‐ Heat and Material Balance
‐ Design Philosophies

Mechanical
FTF Results HTL Commercial
‐Material Selection
‐ Mechanical Datasheets D i B i
Design Basis
Process Advancement Achieved through the FTF

HTL Performance Parameters for Athabasca Bitumen, 
before and after FTF Design Improvements

Before After

Once‐Through Residuum (1000oF+ in Product), lv% 40% 5%

Yield, Synthetic Crude Oil (SCO), wt% 75% 85%

Synthetic Crude Oil (SCO), lv% 81% 92%

Coke, wt% 16% 10%

C4 minus Gas, wt% 9% 5%

HTL capital intensity lowered by 10%, achieved through reduction in equipment sizing
HTL Commercial Deployment
Engineering and Project Execution Strategy

International provider of engineering 
& project management services

Project 
Operator & E
Execution
i
Tier 1
Internal HTL ‐ Engineering
Contractor ‐ Procurement
Licensor ‐ Construction
‐ Project Mgmt
Engineering Advancements – Field Integrated HTL

• FEED has been completed for Tamarack HTL
 blueprint for design of other field integrated HTL projects
 modularization strategy incorporated into the design
d l d h d
 Class 3 cost estimate (+25 / ‐20 %)
Midstream HTL Engineering Advancement

• Conceptual engineering completed for midstream HTL
 Tamarack FEED utilized as a blueprint for HTL core processing facility
 engaged world class vendors for desalter, water treating, &
d ld l d f d l & power generation solutions
l
 Class 4 (AACE) cost estimate and schedule (+35/‐30 %)
HTL enables economic development of Heavy Oil

Upgrade Heavy Oil Eliminate Reduce Complexity


into Lighter Product Diluent & Integrate Facilities
 Lower Cap Ex

Maximize Minimize
Product Production
Value Costs

Minimize use of
Convert Byproducts Natural Gas
i t Usable
into U bl Energy
E

Completed Front End Engineering


Alliance with engineering & Commercial  Cost Estimation
project management contractor Readiness  Execution Strategy

Validated process yields


and proved scalability