Steam Assisted Gravity Drainage ("SAGD")

About 80% of the oil sands in Alberta are buried too deep below the surface for open pit mining. This oil must be recovered by in situ techniques. Using drilling technology, steam is injected into the deposit to heat the oil sand lowering the viscosity of the bitumen. The hot bitumen migrates toward producing wells, bringing it to the surface, while the sand is left in place ("in situ" is Latin for "in place").

An estimated one trillion barrels of oil in the Athabasca deposit are potentially recoverable with the present technology. Surface mining is only feasible for recovering up to 20% of the oil sands deposits, making SAGD the best known alternative for recovering the potential 80% of the remaining oil sands deposits.

SAGD is the most popular exploitation process where two horizontal wells are drilled approximately five metres apart. Steam is injected into the reservoir through the upper wellbore permeating the oil sand. The steam softens the tar-like bitumen and enables it to flow out of the reservoir and into the lower well. From there it's pumped to the surface.

Benefits of SAGD?

• The SAGD concept was invented by Roger Butler in 1978.
• SAGD utilizes two long (>500m) wells placed near the base of the reservoir.
• The upper injector and lower producer are spaced 5 metres apart.
• Constant pressure steam is injected into the reservoir, rises and condenses at the steam chamber interface.
• Mobilized bitumen and condensed water drain down to the producer, via gravity.
• The chamber grows both vertically and laterally as the cycle continues.
• High recoveries (>60%) are possible.
• One of the key components to successful SAGD production is to have thick competent cap rock (as in Kirby Lease) to contain the steam.

How it benefits Enerplus?

• Ability to maximize value by owning and operating ourselves.
• SAGD projects are of manageable size and scope to fit within Enerplus' portfolio.
• SAGD fits our resource play business model:
  • Large aerial extent with relatively low geologic risk.
  • Potential for repeatable large scale development.
  • Attractive long-term declines and RLI.
  • Optimization opportunities.

Phases of SAGD:

1) Start up/circulation - steam is circulated in both the injector and producer for 2-4 months to heat up the region between the wells. the SAGD process can begin once the near well region is mobilized and there is fluid communication between the injector and producer.

2) Ramp up - this is the first stage of SAGD. Injection and production rates are increasing as the steam chamber grows to the top of the reservoir. This ramp up stage can take 6-18 months depending on the operating conditions.

3) Plateau - this stage occurs when the steam chamber has reached the top of the reservoir and begins to spread laterally. This period is characterized by the best (peak) production rate. This peak rate period can last anywhere from 18-60 months depending on reservoir quality and thickness.

4) Wind down (of blow down) - when the SAGD steam chamber is mature and recovery is greater than 45% the operation goes into wind down mode. Production rates begin to decline due to the shallower drainage angle of the chamber interface. The Steam Oil Ratio ("SOR") at this time begins to increase due to lower bitumen rates and increase heat loss to the reservoir.