The Canadian Oilpatch Technology Guide Volume 6

tech guide

PM40069240

VOL 6. 2014 I CANADIAN OILPATCH TECHNOLOGY GUIDEBOOK

veloxUNVEILED

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Savanna’s new triple rigs are designed as a triple threat to their competitors: speed, safety, and an economical performance

features at a glance • Higher hookload*

than comparable rigs (600,000 lbs)

• Rig up and rig down times faster than conventional rigs

• Craneless technology • Category 4 steel • “Hands-off” approach to rigging in and out

• 300-foot, X + Y

walking capability

Inset: Full frame screen capture of the computerrendered Velox 360 rig currently being built in Nisku, Alberta. The Velox branding was added after the initial video was used as part of a business case in support of a development for a new rig design.

Bottom: Frames from the Velox 360 promo video. The slick, Hollywood-quality video is available for viewing at the links listed at the end of the article.

T

he uber-cool promotional video for the new Velox line of triple rigs is, in a word, slick.

Even before the new rigs had a name to craft a brand to, Savanna began working with a local video production house, Uplift Media, on pre-production for an animated video that would highlight the rigs’ key features. Members from Savanna’s Technical Services Group, and Sales and Marketing teams sat down with Uplift and began to brainstorm a concept that would help showcase these new triples as living up to Savanna’s vision of defining leadership in global energy services.

While the animation began to take shape, so did a desire to differentiate these new rigs in the marketplace.

It was decided that a unique brand should be considered to help these rigs stand out from the crowd, and with that Western Sky Creative, a Calgary company with extensive oil and gas experience, was contacted to help develop a name.

Western Sky presented several options and the consensus amongst upper management was that from the options presented, the Latin-based word Velox

* Specific to the Velox 360 shown here

had a memorable sound to it, the distinctive “x” ending offered interesting design possibilities, and — best of all — the word itself means “rapid” or “swift,” key qualities that would be exploited in selling the new rig design to customers north and south of the American border.

So why the need for a new rig design?

In late 2011, discussions emerged at Savanna about how they could be competitive in the Bakken Play, a geographic area extending through parts of Montana, North Dakota, Saskatchewan, and Manitoba that held great promise for oil and

gas exploration. To help determine the ideal rig for the Bakken Formation, Kyle Swingle was brought in as a rig design consultant in October 2012 as someone familiar with the plays in that region and the rig type needed to be competitive in such a resource environment.

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S

Savanna Energy Services Corp. www.savannaenergy.com

Swingle and the growing design team at Savanna settled on some unique considerations for the new line of rigs: • Quicker mobility to and from resource areas (two days for rigging in/out instead of five to 10 offered by the competition) but with slightly higher hookload capabilities than the competition.

• Craneless technology.

• 300 foot, X + Y walking capability.

• 7500 psi system.

• Use Category 4 steel. It is better for low temperature environments and most of the industry is not doing this.

• Take a “hands-off ” approach to rigging in and out; a design where rig workers don’t have to put their hands in unsafe positions.

Velox branded Stephen Lougheed, Manager of Capital Projects at Savanna — and one of the early engineers assigned to the new rig development — says that the promotional video put together by Uplift answers the

basic questions: Why are we building this? What does this have over the competition?

Lougheed adds, “…we boiled it down to ‘faster,’ ‘safer,’ and a ‘higher hookload’ than what rigs that size have historically been able to accomplish.”

The initial computer-animated video was exciting enough to sway Savanna executives, and now with the new Velox brand added to the Hollywood-worthy video, it is expected to gain traction on social media and be used as a key sales tool in the Canadian and US markets.

For more information on the new Velox rigs, contact velox@savannaenergy.com or www.savannaenergy.com. youtube To view the video, scan the QR code at the bottom of this page or go to www.youtube.com/user/SavannaEnergy.

This page: A CGI view of the plush doghouse control centre.

An engineering schematic drawing showing the general layout of equipment and amenities for the Velox 360.

CONTENTS

// AUGUST 2014 I VOL.6

EDITOR’S NOTE I 6 Funding Innovation

SHOW ME THE MONEY I 8 Venture capital is beginning to focus interest on start-up technology firms in the O&G sector

TRAVERSING THE I 12 ‘VALLEY OF DEATH’

12

Government funding programs support new technology

PRODUCTION I 16 Launch Of The Unmanned Era Robotic aircraft set to transform oil and gas industry

DRILLING I 20 Soaring To New Heights Oilsands producer sees heli-portable drilling as a game changer on several levels

FRACTURING I 23 Less Flaring, More Cash Flow Separator sends gas to sales pipeline instead of flaring after CO2 fracture treatments

DATA MANAGEMENT I 26 & SOFTWARE From High Tech To The Oilpatch Wi-Fi pioneers invent technology for collecting wireless seismic data in real time

20 ADVERTISERS Calfrac Well Services Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OBC EV Canada Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 FB Industries Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Galaxy Broadband Communications Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

TIGHT OIL & GAS I 28 Innovation For Horizontal Multi-Fracs SMEs are stepping up to the plate with new tools, systems and software

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E D I TO R’ S N OT E

FUNDING INNOVATION

N

ew Technology Magazine devotes much ink to covering the pioneering, sometimes game-changing inventions and innovations that have left their mark on the Canadian oil and gas industry, making the sector one of the world’s most technologically advanced on the planet.

But less attention has been devoted to one of the most important aspects involved in getting those innovations to market—the financing needed to get them to the commercial stage. Often, funding an idea or invention is a bigger challenge than perfecting the invention or innovation itself.

Traversing the so-called “Valley of Death” between the concept and its commercial acceptance claims many a good idea to the detriment of the industry itself, which may have benefited tremendously from the advancement.

Certainly, trekking through that valley can be a risky endeavour, with no guarantee of success at the other end. Early research and development (R&D), lab scale and field scale testing, ongoing equipment and labour costs, piloting with an established producer and final market acceptance can easily eat away millions of dollars and years of dogged perseverance on behalf of the inventor/ innovator. Unsurprisingly, failure rates are high.

So how can we improve the rate of success?

Certainly, picking winners and losers early on is no easy task, but by giving more of the best ideas a head start through the valley—even with the expectation many will not reach the other side— we can give more a fighting chance of reaching market success.

That is where avenues like venture capital funds and government assistance programs can have a real impact, a subject we examine in our feature stories in this year’s issue of the Tech Guide. Venture 6

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capital funds and government assistance in their various forms can have a real impact on getting new ideas to market and in generally helping create the environment for innovation and entrepreneurship that is such a strength in western economies compared to those economies lacking a mature culture of innovation.

One great example of that is the shale gas and tight oil revolution that has transformed the North American oil and gas industry. While often portrayed as the result of the single-handed drive of Mitchell Energy & Development Corp. in the Texas Barnett Shale, where Mitchell experimented for years before perfecting the horizontal, multistage fracking technique that led to the revolution, companion government programs and assistance were vital in enabling Mitchell to reach that point.

In a series of investigations and interviews with historians, gas industry executives, engineers and federal researchers, the Oakland, Calif.–based The Breakthrough Institute “uncovered the historical role of the federal government in the development of cost-effective shale gas extraction technologies.” In a 2012 report, it states, “We consistently found that innovation and progress in the development of hydraulic fracturing and other key gas recovery technologies arose from public-private research and commercialization efforts. From basic science to applied R&D to technological demonstration to tax policy support and cost-sharing partnerships with private industry, federal programs proved essential to gas industry engineers in figuring out how to map, drill, and recover shale gas—and, most importantly, how to do it cost effectively.”

Mitchell Energy itself also acknowledged the importance of government backing and research. “The DOE [Department of Energy] started it, and other people took the ball and ran with it,” said Dan Steward, Mitchell Energy’s former vice-president. “You cannot diminish DOE’s involvement.”

As the Canadian oilpatch deals with public concerns about its environmental impact and continued social licence to operate, maintaining a climate that fosters innovation is vital to improving its performance in future years as production, and potential impacts, increase.

While just a fraction of those ideas that receive funding or technical assistance are likely to successfully cross the Valley of Death, that may be all it takes to lead to the next revolution in energy development.

CANADIAN OILPATCH TECHNOLOGY GUIDEBOOK www.newtechmagazine.com

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F E AT U R E

e m W o h s

y e n o M e Th Venture capital is beginning to focus interest on start-up technology firms in the O&G sector

By Gordon Cope

E

very day, enterprising inventors come up with exciting new ways to help the oil and gas (O&G) sector, from cutting down on the amount of energy needed to produce hydrocarbons to cleaning up tainted water, capturing CO2 and monitoring emissions.

One of the main obstacles stopping them from conquering the world, unfortunately, is start-up money, or seed capital. The O&G sector invests well over $50 billion annually in capital expenditures, but most of that goes to big projects like the oilsands or unconventional resource plays—very little ends up flowing to technology start-ups.

Canada’s Venture Capital & Private Equity Association (CVCA) represents the majority of private equity companies in Canada, with over 2,000 members and $105 billion in capital under management. That capital is divided into two

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groups: private equity (PE) and venture capital (VC).

PE is typically money raised from pension funds and other large-capital reserves and invested in tranches of several hundred million dollars. PE investment in the O&G sector is in the order of several billion dollars annually. It tends to seek out passive participation in lower-risk infrastructure and large-scale projects.

VC, on the other hand, is typically funded by high–net worth individuals looking to invest a few million dollars in highrisk, high-reward scenarios. In Canada, VC placed approximately $2 billion in small companies in 2013, over half of which went to IT start-ups. “IT gets the most private investment because it has the fastest growth,” says Mike Woollatt, chief executive officer of the CVCA. “There is no manufacturing involved, so you can

go from idea to IPO [initial public offering] faster.”

According to the CVCA, pure VC in O&G is quite small in Canada—about four investments per year, with a total size of $15 million to $30 million. “The O&G industry is very large; a $1-million investment doesn’t get a big slice of a $1-billion project, so VC isn’t interested in the finding and producing side of the business,” says Woollatt.

There are several public funds created by federal and provincial departments (like Alberta Enterprise Corporation), and corporate capital venture funds (such as Enbridge Inc.’s alternative and emerging technology fund) that champion both internal and outside research and development (R&D) efforts. But governments and large corporations tend to focus on their core mandates—neither sees helping start-ups as a central enterprise.

FE AT UR E

There is a growing ray of sunshine, however. “VC is looking for businesses where they can have a significant portion and then use their advice and help to do the heavy lifting that adds value,” says Woollatt.

“The biggest opportunities for VC funds in O&G will be around new technologies that improve the ways that companies find and extract O&G. That’s where they will make a significant dent, finding technologies that are great ideas that can be scalable in a way that makes meaningful impact.”

Solazyme Inc., which makes oils from algae; Axine Water Technologies Inc., which uses an electrochemical process to remove organics from waste water; and Inventys.

Being based in Silicon Valley means that the company is surrounded by potential start-ups, but to Roda, the location of a company is largely immaterial. “Roda’s goal is to bring to reality technologies that [lessen] climate change, natural resource depletion and water issues,” says Miller. “It has to be fundamental technology, and, if it works, it has to have a big impact on the

seed money. “Most start-ups don’t ever reach the stage where they receive seed money,” says Miller. “They can’t go anywhere without it; we give them the money to start.”

The first round of seed money is in the million-dollar range or less. “Later rounds are in the $1 [million] to $5 million range, with later rounds in the $20-million-plus range,” says Miller.

How much control does an entrepreneur have to relinquish in return for startup money? “The percentage of a company that a VC takes is dependent on many

THE ART OF THE DEAL Chrysalix Energy Venture Capital, based in Vancouver, has approximately $250 million in three funds spread over 20 companies.

The focus of the company is to engage in early-stage investment with firms that have technologies confronting the world’s most important energy and environmental issues. Chrysalix has invested in several O&G technology start-up companies, including GlassPoint Solar Inc., the maker of solar-powered steam generators used in enhanced oil recovery, and Inventys Thermal Technologies Inc., a manufacturer of CO2 capture systems based in adsorbing materials (see sidebar).

Jean-Michel Gires is one of Chrysalix’s partners. Currently based in Calgary, Gires spent over two decades with Total Group, helping establish the company’s cor­porate VC fund, and finishing his career as president and chief executive officer of Total E&P Canada Ltd. “At Chrysalix, we develop a close relationship with potential customers of the technology in order to understand their challenges and pain points, and we work with our companies to bring significant technologies forward,” says Gires. “We act as matchmakers.”

Not all VC funds investing in Canada are based in this country. Roda Group is headquartered in the heart of Silicon Valley in Berkeley, Calif. Dan Miller, an engineer with more than three decades of experience in both high-technology manufacturing and Internet companies (he helped found Ask Jeeves) is the managing director at Roda.

Miller and partner Roger Strauch formed Roda in 2005 in order to help seed-fund start-up companies that were looking to commercialize clean technologies that address climate change, depleted natural resources and water. Companies that they have provided seed and early-stage money to include

“ In many ways, I feel like a pioneer, but I have a great belief that [venture capital] will improve and multiply in Canada as its value gets recognition.

Come back and ask me again in three years, and I will have a whole different story to tell you.”

— Jean-Michel Gires, partner, Chrysalix Energy Venture Capital

world.” Both Axine and Inventys are based in Vancouver. “Inventys was the first Canadian company we invested in,” says Miller.

Now, for the grim reality: the vast majority of start-ups that approach VC funds are rejected. “At Chrysalix, we might see 1,000 deals a year,” says Gires. “Of that 1,000, we may decide on four.”

The criteria that allow those lucky few to gain VC investment can change from fund to fund. “We are engineers by background,” says Miller. “The principal participants of start-up companies that interest us usually have [an] engineering or science background, and have worked in their area of expertise for some time. The old [saying] about ‘You don’t invest in technologies, you invest in people’ is true.”

The one key commonality among VC funds is that a start-up company must be developing something that others want. “We are always interested in new technologies, but we also want to see how it can solve some pain point in a manner that will entice a customer to pay a significant price for it,” says Gires.

The first—and most important—stage of VC investment is commonly referred to as

factors, including the initial value, potential market, competitors, et cetera,” says Woollatt.

“VCs generally would like to have more than 50 per cent ownership so that they can control management decisions.”

Unlike corporate or government funding, which tends to take a passive role in management, VC investment is directly involved. “Most VC investors are on the board, but we take a more hands-on approach than most funds,” says Miller.

“Most new companies don’t have a lot of resources; we use our skills in marketing, business development, finance and management to help in a mentoring sense.”

“We engage with our companies,” says Gires. “Not only in matchmaking with potential customers but business development, sorting out technologies and marketing. Small companies are short of everything and need to be helped.”

Regardless of how much sweat and financial equity they contribute, most startups do not survive. “About 80–90 per cent of all companies that VCs invest in end up failing,” says Miller. “There are numerous reasons why they fail—the market is C A N A D I A N O I L PAT C H T E C H N O L O G Y G U I D E B O O K • V O L 6 2 0 1 4

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F E AT U R E

Money Follows Innovation Novel CO2 capture technology attracts venture capital funding THE AMOUNT OF CARBON RELEASED during the production of bitumen is one of the most contentious issues facing the oilsands. Because energy is needed to coax the viscous hydrocarbon out of its sand matrix (either through the use of steam for in situ or the comprehensive washing process in mining), its average carbon emission per barrel is higher than conventional crude. Environmentalists call it “dirty oil” and seek to curtail oilsands production through protests against pipelines, such as Keystone XL, that might carry bitumen to market.

One way to reduce bitumen’s environmental footprint is through carbon capture and sequestration (CCS). CO2 can be stripped from a plant’s flue gases, concentrated and shipped via pipeline for disposal or enhanced oil recovery (EOR).

The complication, of course, is that CCS systems are expensive to build and operate. Conventional capture systems rely on cooling the hot flue gases so that CO2 selectively condenses out, or using solvents. Such systems are expensive to build and can consume as much as 20 per cent of a plant’s energy. Capital investments for an upgrader or coal-fired plant can exceed $1 billion. In all, analysts reckon the cost of CCS can approach $100 to capture and sequester one tonne of CO2.

Inventys Thermal Technologies Inc., a Vancouver-based company, has come up with a method that is far cheaper to build and operate. VeloxoTherm is designed to strip CO2 from any plant chimney using an intensified temperature swing adsorption process. The heart of the system is a proprietary compound of ceramic carbon that is fashioned into a large rotating drum.

As the flue gas is passed through the drum, the CO2 gas adsorbs onto the surface. The drum then rotates into a separate chamber where low-quality steam is used to strip the concentrated gas away.

Because of its simple design and operating process, Inventys claims that the VeloxoTherm system uses significantly less energy than conventional CCS, and this, combined with low capital investment, results in a capture cost of about $15 per tonne of CO2. In addition, Inventys notes that the VeloxoTherm system is less than one-tenth the size of competing systems and is small enough to retrofit to existing power plants by connecting it directly to the flue stack.` While Inventys is being supported by Sustainable Development Technology Canada, Alberta’s Climate Change and Emissions Management Corporation and the National Research Council, it might never have reached its advanced level of product development were it not for the financial backing of several independent VC funds.

Dan Miller is the managing director of Roda Group, a VC fund based in the Berkley, Calif., Silicon Valley that invests in new technologies. “We learned of Inventys when investigating another company that was looking to capture

not there, or it’s hard to reach. Sometimes it takes longer than expected to bring to market, and investors move on.”

How do VC funds decide which ones to drop from their portfolio and which ones to persevere with? “In the near term, there are various measures of success, including showing that the technology works, 10

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CO2 from the air,” says Miller. “We found Inventys to be much further along.

In the case of Inventys, they had a lab test, and with our seed money, they were able to create a working prototype.”

Other money soon followed. Jean-Michel Gires recently retired as the president and chief executive officer of Total E&P Canada Ltd. “At Total, we saw many different types of projects for carbon capture, and in a way, were a little deceived. We were told 10 years ago that the costs would fall dramatically, but that hasn’t been the case, and there is some disillusionment with CCS.” Gires is now a partner with Chrysalix Energy Venture Capital. When Inventys approached, the company found attentive ears. “Their technology was not completely new, as adsorbents have been tried before, but the configuration of their system intrigued me,” says Gires. “It increased the efficiency of the process and reduced the costs. They had an interesting road map and a good team. We entered with Series A funding.”

Inventys has built a demonstration pilot plant in Burnaby, B.C., and the company has reached an agreement with NOVA Chemicals Corporation to install a VeloxoTherm unit in its petrochemical plant in Joffre, Alta. The captured CO2 will then be used in a nearby EOR project.

In the near future, Inventys sees its market potential in areas with a cash stream, such as EOR. Large-scale adoption at power plants and large emitters like the oilsands will likely wait, however, until legislation sets a viable carbon price throughout North America.

STEAM/AIR

VENT (N2)

FEED (FLUE GAS)

PRODUCT (CO2) SOURCE: INVENTYS THERMAL TECHNOLOGIES INC

LOW-COST CARBON CAPTURE Inventys says its VeloxoTherm intensified temperature swing adsorption process for the post-combustion capture of CO2 from industrial flue gases can capture CO2 at a cost of as little as $15 per tonne.

taking on business partners to test and utilize the technology, achieving investment follow-on rounds and finding external investors,” says Miller.

In the longer term, ultimate success is when the company is acquired or goes public with an IPO. “That’s the endgame, when you achieve liquidity,” says Miller.

“Success is usually measured by how much of a big exit you make,” agrees Gires. “You always want the $1-billion exit [in market capitalization] and maybe one or two at around $100 million. That kind of success is really a fund-maker.”

VC funds follow a general rule of thumb: if you’re going to lose nine times

F EATUR E

out of 10, the 10th has to be 10 times a success in relation to your investment. “When Solazyme was publicly launched, their market capitalization was around $1 billion,” says Miller. “The original valuation was a tiny fraction of that.”

Is Canada a better environment for VCs than the United States? “We found that Canada has great support systems in the form of R&D tax credits and O&G-specific support organizations,” says Miller. “Inventys has financial support from a number of funds that are not available in the U.S.” “Chrysalix travels throughout North America to search out opportunities,” says Gires. “Canada itself is a smaller market than the U.S., which is much better VCfunded. VC still hasn’t reached critical mass in Canada; much will depend on corporate venture capitalism, which is at a level I saw in [the European Union] 10 years ago. It will help VC progress to the next generation.”

Regardless of geographical location, start-ups face common challenges. “Small technology companies always have to be very efficient, as it usually takes longer and costs more money to develop something right from the start,” says Gires. “They have

to understand the step-by-step process to take something from the idea stage to commercialization.”

Other challenges are related to the O&G sector itself. “O&G is conservative,” says Gires. “They have a very structured way of making decisions. They have large, capitalintensive projects. They want to work with established technologies and not so much technologies at early stages.”

Nevertheless, says Gires, O&G companies face significant production and environmental challenges where they need better solutions. “It is the job of the VC to understand the cultural differences between large oil companies and startups and act as matchmaker,” says Gires.

“We understand how to position the technology package and how to integrate it into a bigger project so that it is valued by all players.”

Both Miller and Gires have advice for start-up entrepreneurs. “Check out the market for your technology; just because it works doesn’t necessarily mean you should pursue it,” says Miller. “Try to develop your technology as far as you can with your own resources; the further along you are, the easier it is to raise VC.”

“There are many entrepreneurs who are beginners and don’t have a good pitch,” says Gires. “My advice to inventors and entrepreneurs is to practise your pitch. In one hour, you have to be able to explain your value proposition in a way that makes us excited.”

“Look for industry partners who are willing to help either advance your idea through testing or buy the first module,” says Miller.

“O&G companies often need to find a solution to a problem and can help explain to you their problem in the real world.”

While VC funding in the O&G sector is dwarfed by other sectors, industry participants expect that to change. “Over the next two years, the amount of VC funding will grow something like $100 million,” predicts Gires.

In the meantime, Roda, Chrysalix and other VC funds will continue to explore O&G’s potential. “In many ways, I feel like a pioneer, but I have a great belief that VC will improve and multiply in Canada as its value gets recognition,” says Gires. “Come back and ask me again in three years, and I will have a whole different story to tell you.”

“It’s rewarding and fun to see technologies come to market,” says Miller.

“But you have to have a strong stomach to be a VC investor.”

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Traversing the ‘Valley of Death’ Government funding programs support new technology

By Carter Haydu

L

ong before the Absolute Extreme Burner was a high-efficiency, emissions-reducing, industrialcombustion burner system ready for deployment in Canada’s oil and gas sector, it was the brainchild of Darsell Karringten— and one that required funding support in order to move from conception to commercialization.

“We were five years into the project before our first grant, and that’s about when we found ourselves in the proverbial startup ‘Valley of Death’ period of time between moving from [research and development] to generating revenues,” says the president and chief executive officer of Absolute Combustion International Inc. “The major investors were open to funding us, but due to the fact that we were an unproven pre-revenue technology

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company, that money was going to cost us a lot.”

Fortunately for Karringten and his innovative Absolute Extreme Burner design, Alberta Innovates – Technology Futures (AITF) recently provided his company with a $300,000 Product Demonstration Fund grant to help the promising technology pass safely through the dreaded Valley of Death.

Bill Teeple, executive director of investment and transaction with AITF, says that funding was part of a matching program for companies fairly high up in their technology readiness level (TRL), as Absolute Combustion needed support to field test a 2.5-million-British-thermal-unit boiler with Canadian Natural Resources Limited.

“In the area of supporting small or medium-sized businesses either directly or through some of our regional innovation partners, like TEC Edmonton or Innovate Calgary, we have about $50 million per year available for our programs,” Teeple says, adding AITF also offers smaller funding amounts for companies that are very low on the TRL scale, including various voucher programs.

“We have two voucher programs. One is the micro-voucher program that goes up to $10,000 to help companies that need a small amount of money to buy some piece of equipment.

“Then there is our major-voucher program that goes up to $100,000 and helps companies in that early stage where they’re proving their concepts and maybe developing initial prototypes, securing their intellectual property by filing patents, and doing advanced market research to ensure there is a market for their technology.”

Robindra Mohar, vice-president of business development at Absolute Combustion, says along with the product demonstration program, AITF innovation vouchers have been key for development of the company’s business, with those funds going toward the application of additional patents as the company gets closer to commercialization.

“We are certainly looking at all funding programs, but it is just a matter of timing.

Often we need capital, because most of these programs are matching funds to some degree. We do some of our own fundraising, and once there is money there, we can go after some of these funding programs.”

For example, Mohar says Absolute Combustion is also pursuing matching programs out of the National Research Council’s Industrial Research Assistance Program (IRAP) because the company currently has the funding to match.

Bogdan Ciobanu, IRAP vice-president, says the program provides funding to over 3,000 small to medium-sized enterprises

PHOTO: ABSOLUTE COMBUSTION INTERNATIONAL INC.

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(SMEs) a year. Additionally, there are over 7,000 SMEs that receive advisory services, information, and linkages to a network of national and international partners from IRAP. He says IRAP serves several businesses involved with oil and gas.

“Many of our clients are in the energy sector in general, in oil and gas in particular. They are located in the West, but also in central and eastern Canada. We don’t limit our support to certain sectors but are responsive to innovative, dynamic companies in all industrial sectors.”

While the maximum IRAP contribution is $1 million per year, the average IRAP contribution is around $100,000, depending on the proposed project and on the client’s needs.

Before providing funding for technological innovation, Ciobanu says IRAP thoroughly analyzes the company, its managerial strengths, financial capabilities, knowledge of the market and, of course, the innovation project proposed. The program can support up to 80 per cent of salaries and up to 50 per cent of contractor fees, but typically does not cover more than 50 per cent of the total project cost.

“The company must also invest its own resources in the project and assume a significant part of the risk.’’

Through its unique model, based on the presence of its 242 industrial technology advisers (ITAs) in more than 100 offices across Canada, IRAP can provide funding and advisory services to innovative early-stage and established SMEs in all industrial sectors across the country, including oil and gas.

The ITAs have very strong business experience, according to Ciobanu, and the best way to apply for IRAP support is to contact a local representative, with contact information available through the program’s website.

He says, “ITAs have science, technology or engineering backgrounds. They are engineers or scientists who started their own companies or worked in senior management positions for SMEs.”

TECHNOLOGY FUNDS HELPING COMPANIES CONNECT WITH POSTSECONDARY, EXPERTS This year’s overall IRAP budget is $281 million, with approximately $240 million going toward direct contributions to SMEs under different programs, including a new one launched in April called Business Innovation Access Program, in which companies are linked with the best sources

EXTREME BURNER Almost ready for the oil and gas industry market, Absolute Combustion International’s near-flameless Absolute Extreme Burner reduces fuel consumption, greenhouse gas emissions and production downtime.

The technology was developed with start-up assistance provided by provincial and federal government agencies.

of technical and business expertise that reside in Canadian universities, colleges and research organizations.

“It’s a voucher-like program through which IRAP provides up to $50,000 to SMEs to cover the partial cost of the contract with a university, college or research organization,” Ciobanu says, adding IRAP also provides funding for SMEs to hire post-secondary graduates to work on innovation projects.

According to Teeple, AITF also has industry associate programs whereby it funds individuals to go into companies for two years to support research and development (R&D), as well as commercial applications.

For example, if a company is building a prototype or proving out a technology and it finds a post-doctoral student coming out of the universities of Alberta or Calgary who could help accelerate the technology’s journey to market, AITF will help make that happen.

“Normally, the company has already identified the candidate, and so we vet that candidate and we vet the quality of that application, and we can provide up to $124,000 over the two-year period to fund these people,” says Teeple.

“That is a very, very popular program in Alberta, because these companies are past

the point of using their credit cards, family and friends to fund their companies, and yet they need additional technology help, and they can’t afford it. Therefore, this is a very popular program for all SMEs that are trying to start up.”

Thanks to the AITF Product Demonstration Fund, Mohar says the Northern Alberta Institute of Technology (NAIT) has worked with Absolute Combustion, helping the company hire technicians required to automate its burner technology.

“We basically ended up hiring an entire NAIT team, from product manager to [program logic controller] that helped us code certain algorithms for the burner management system.”

The goal of Absolute Combustion is to go to market to enter sales and solve real and validated market needs, which would hold the company up entirely, Mohar says, and management expects that to occur in the relatively near future.

However, because there are so many applications for the Absolute Extreme Burner in the energy sector alone, Mohar believes the company will remain in a constant state of innovation, requiring constant R&D, which means it will be eligible for R&D funding programs well into the future.

MAPPING A ROUTE THROUGH THE MULTITUDE OF FUNDING PROGRAMS: WHY NONDILUTIVE FUNDING MATTERS In order to help companies identify and access the government program that is most relevant to them, IRAP launched its Concierge Service in December 2013, C A N A D I A N O I L PAT C H T E C H N O L O G Y G U I D E B O O K • V O L 6 2 0 1 4

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Near-Flameless Burner Could Be a Game Changer: Inventor The heat-transfer efficiency of the Absolute Extreme Burner—with its near-flameless, clean-burning combination of eight unique system features—could be a game changer for certain market applications, especially with heavy oil producers using fire-tube applications such as larger line heaters, separators and treaters, says the inventor of the technology.

“Our fuel pressures are very low,” says Darsell Karringten, president and chief executive officer of Absolute Combustion International Inc. “One of the other challenges [heavy oil producers] have in most applications is the pressures of the fuel, as 19 psi [pounds per square inch] is normal, and very rarely can you find some of them down as low as 12 psi. Even there, though, it looks like a flame-thrower. Some of them are above 19 psi.

“We are between two and four psi, and nobody can figure out how we can get the combustion pattern that we do, based on those lower fuel pressures.”

Because of his system’s “secret sauce” design, Karringten says the only thing that comes out of the burner’s tail end is hot air, which is not only environmentally preferable to burners that expel pollutants but also prevents the collapse of fire-tubes due to flame impingement. Furthermore, Karringten says the Absolute Extreme Burner’s efficiency does not fluctuate over time. “[A competitor’s] could be operating at 70–75 per cent efficiency, and then two weeks later it is down running at 50 or 60 per cent, and then a month later it could be running at 30–40 per cent.

“For ours, when you press that button and you come back a month later, it will still be operating in that same efficiency, plus or minus one per cent of where we set it,” he says, adding if a burner can use 87 per cent of the fuel fed into it, then the production capacity for the burner increases an additional 20–25 per cent.

“I haven’t seen another burner that looks like this. It has a flange on it like every boiler has, primarily. However, this is unique because it is a closed system—it doesn’t accept any draft air. Only the elements we put in it are the elements we utilize, which gives process engineers predictable performance and flexibility when designing for an entire life cycle of an oilfield application.”

Businessman spawns technology to pursue his own ‘green’ destiny According to Karringten, he and daughter Koleya Karringten—Absolute Combustion co-founder—were troubled by pollution and the environmental damage being caused by a world dependent on energy consumption. Like many inventors, Karringten says he awoke one night with the overwhelming desire to put pen to paper, compelled by a vision he had of the world’s cleanest burner technology.

“One night, I sketched out a preliminary drawing of what I thought would be the technology that might work. I took it to a master machinist and instrumentation technician and a design engineer.

We sat down and started rough-drafting it, and within two to three weeks we had the appearance of something on paper. We built and tested it—all of this within 120 days—and it worked. We started in May 2008, and by that August, we were testing our first one.”

With an entrepreneurial background in business and no certified engineering skills, Karringten says he just has an aptitude for tinkering with mechanical and business systems, seeing how they work and then improving upon them. He says business and inventiveness are complementary traits when trying to pursue an innovation.

“I spent a decade consulting organizations on leadership development, management development, strategic planning, time management and helping people set their priorities and work towards them. I brought all those skills to this venture.”

From there, he says, it was a matter of pulling an inspired and hard-working team together— one that shared his drive for a cleaner world, leaving a legacy for future generations.

Contact for more information Darsell Karringten, Absolute Combustion International Inc. Tel: 403-277-2297 Email: darsell@absolutecombustion.com Web: www.absolutecombustion.com

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Competition efficiency Day 1

70–75% efficient

50–60% efficient

Day 15

30–40% efficient

Day 30

Absolute Extreme Burner efficiency Day 1

87% efficient

87% efficient

Day 15

87% efficient

Day 30

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which guides companies toward the most appropriate programs available for their specific needs, whether it be at a federal, provincial or municipal level.

At a provincial level, the Ministry of Innovation and Advanced Education offers a connector service to help small companies and entrepreneurs navigate the diverse array of technology funding programs. Teeple says AITF is currently investing in a mapping program called “David Thompson,” named after one of Alberta’s early explorers.

“We hope by the end of this year to be able to offer the mapping service for folks who want to be able to come through our website and be able to find ways in which to navigate the innovation system. The ecosystem, both at the provincial and federal level, is difficult to navigate.”

Entrepreneurs depend on non-dilutive funding programs such as AITF and IRAP, Teeple says, because dilutive capital generally is not incentivized to take a chance on such early, risky start-ups.

“Maybe more than nine out of 10 of those investments will fail, and so those types of high–net worth individuals, syndicated angel funds or [venture capitals]

would have to hit a home run at least every 10–15 times just to survive if they were investing at that early a stage,” he says.

“Without some non-dilutive capital, there is no other way for them to continue down that process or up that TRL scale in order to commercialize products, and so that non-dilutive capital—whether it comes provincially, federally or from both through a co-funding program—is absolutely essential to get those companies to the point where they could become attractive to dilutive capital.”

According to Teeple, many SMEs working on innovations for the energy sector aim to enter the supply chain, which is difficult because of established processes that large companies already use.

“Unless you can demonstrate a significant difference both in those capabilities and the cost of improving those capabilities, it is very difficult to get a company interested.

“We work very closely with companies we think have what we call ‘game-changing technologies’ in the oil and gas sector that will encourage a large company to become a first mover. If they can become a first

Integrated

mover with this new technology, then normally other companies will look at that and potentially follow.”

In the fourth quarter of 2014, after six years of research and development, the Absolute Extreme Burner will go on sale commercially. According to Karringten, not only has AITF funding helped his technology pass safely through the dreaded Valley of Death, but it has also helped advertise the promise of his burner.

“We had already raised $2.5 million before we accepted a penny, but with the government support, people look at us totally different as a result of it,” he says, adding AITF would not have provided $300,000 to his company if the Absolute Burner was not worth it.

“They’re not going to do it if they didn’t think there was a possibility here.”

Contact for more information Industrial Research Assistance Program Tel: 1-877-994-4727 Web: www.nrc-cnrc.gc.ca/eng/irap Alberta Innovates – Technology Futures Tel: 780-450-5111 or 403-210-5222 Web: www.albertatechfutures.ca

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Launch Of The Unmanned Era Robotic aircraft set to transform oil and gas industry

By Carter Haydu

F

rom a distance, this small, hovering aircraft might appear to be the sort of remote-controlled gizmo one sees for sale at a mall kiosk, but closer inspection quickly reveals a sophisticated instrument—part of a revolution in unmanned technology geared to offer major advantages for the oil and gas sector.

“It’s just a whole new technology with a big influence on the type of industry with which we’re involved,” says Brent Wanless, president of Calgary-based UAV Geomatics, while directing and monitoring the flight path of his quad-rotor Aeryon Labs Inc.– built unmanned aerial vehicle (UAV) with a touch screen computer tablet in a field outside Calgary.

According to Wanless, when he first became interested in UAV technology a couple of years ago, he could perhaps envision some commercial applications, but there was not a lot happening. Since then, however, he says the demand for UAVs “has just blown up” as new software comes online and these global positioning system–guided devices become an increasingly popular instrument within Canada’s energy sector.

“I think most of it is just due to recognition of what it can do, the capabilities. One thing we promote, especially in oil and gas, is that we can provide a safer service in many applications.”

Sterling Cripps, chief operating officer at the Canadian Centre for Unmanned Vehicle Systems (CCUVS), says Canada is positioned to become a leader in the civilian and commercial application of rotor and fixed-wing UAVs, due largely to Canada’s

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geography and domestic petroleum industry, both of which offer many opportunities for robotic aircraft development.

“We have a chance here as Canadians to take the lead in this initiative if we get airspace set up. It’ll be the first of its type in North America open to commercial and civil development within a restricted airspace.”

Based at Alberta’s Medicine Hat airport, CCUVS made an application to Transport Canada and NAV CANADA for development of an area of approximately 700 square nautical miles in southeastern Alberta. The area, based out of the Foremost aerodrome, will be used to train and develop beyond-line-of-sight capabilities of commercial and civil UAV applications.

Cripps says NAV CANADA has passed its airspace assessment on to Transport Canada for final approval. He adds the ability to fly UAVs long distances is important for application in the oil and gas industry, considering the expansive and remote nature of much of the industry’s associated infrastructure.

Pipelines, for example, crisscross the continent, often through isolated areas.

“I know there is an element at stake that is interested in having UAVs doing partial patrol of those [pipelines], which they are very capable of doing by using electrical, optical sensors, LiDAR [light detection and ranging], radar and things of that nature that can detect hydrocarbons, heat leaks and the sorts of things associated with problems in a pipeline.

“The systems are out there and capable of doing the work, but we are bound by the regulatory process right now that says

it is not feasible to do that. So what the Foremost [airspace] is going to provide under CCUVS is that we will offer an area of restricted airspace for the purpose of companies to come, train and develop their operating procedures to the satisfaction of Transport Canada for flying beyond line-of-sight.”

While flight regulations have not always kept up with the new technology, changes are pending, Wanless says, adding his company is nonetheless finding itself very busy with the variety of tasks it can perform for customers in the oil and gas industry.

“We have done some pre-disturbance work where we fly in and look at the land ahead of time,” he says, adding his UAV has helped construction crews with clearing, drilling and during fracture operations in support of designing and minimizing the drilling footprint by providing a level of visual detail that was previously unattainable.

Those contracts UAV Geomatics has with several oil companies include monitoring during the entire wellsite progression cycle, as well as environmental monitoring.

“I just did a job where the objective was to calculate volumes when they cleared a big area, because they want to know the volumes coming out. On that same job, we’re going to do roadwork and map other facilities. The company will be rebuilding roads, and so you follow the road and map it that way.”

Brad Cadieux, superintendent of civil earthworks at Talisman Energy Inc., says so far his company is only just beginning to test UAVs for well pad layout and design.

“We know there is value in it, but it is just

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EYE IN THE SKY

PHOTO: UAV GEOMATICS

UAV Geomatics uses the quad-rotor Aeryon Labs unmanned aerial vehicle, directed by a touch screen computer tablet, for various oil and gas industry–related tasks.

very hard to quantify what the value is,” he says, adding the life cycle of drill pads is quite long, so it will take a while for the company to quantify the full potential of using UAVs. However, he says there is certainly a need to optimize well layout, and he is optimistic robotic aircraft can aid in that task.

“It is critical to make everything as compact, close and as tight as possible on the given size that we are dealing with, and the only way to do that is to have an as-built survey done or an aerial geo-reference photo.

The nice thing about a geo-reference photo is that it makes sense to all the different groups who look at it, because it is an actual picture and not just a schematic drawing.”

On multi-well pads where his company will be returning over several years, Cadieux says there is great benefit in using UAV technology, and he envisions the use of these aircraft eventually on all shale plays.

He says the technology could also prove very beneficial for Talisman once the company has finished producing at a particular well pad location.

“It definitely would be another piece of the puzzle for the reclamation folks [who need to] see the history of the site.

Of course, this kind of imagery would definitely help seeing the site as it goes through its life.”

According to Cadieux, the industry is just scratching the surface as to all the ways UAVs might be used, and he fully expects the technology to play a greater role in his company’s operations in the future. “I think there is the potential to take it to another level, where the data is much more useful for, maybe, corporate presentations and investor relations and that type of thing.”

CANADA COULD LEAD UAV REVOLUTION While there is a cluster of about 70 companies in the province working in various facets of the unmanned systems sector, Orest Warchola, senior director, U.S. trade and investment, with Alberta International and Intergovernmental Relations, says it is hard to calibrate the total size of the sector in Alberta. However, one thing he is fairly certain about is that growth is imminent.

“As soon as federal regulators develop regulations, standards and procedures to allow commercial flight operations of unmanned aircraft systems in national airspace, which currently requires special flight operations approval, the industry is poised for even further growth and development.”

Warchola says economic diversification and increased market access is a cornerstone of Alberta’s international strategy, and adding commercial and civilian unmanned aircraft systems opportunities into the mix will further enhance the growth, diversification and competitiveness of Alberta’s economy in the global marketplace.

“Building on the province’s aerospace and defense industry, which is significant in and of itself, we see the development of unmanned systems as a niche sector of the aerospace industry. As it further develops and attracts new investment into the

province, as an economic diversification strategy, the sector is expected to generate jobs, create revenue and provide investment opportunities for companies from outside Alberta to come here and establish operations.

“Frankly, much attention is being focused on Alberta already, and we’re beginning to realize the benefits.”

According to Warchola, a domestically fostered unmanned systems sector could offer Alberta another advanced technology sector worthy of trade and investment both within Canada and internationally.

“It will absolutely be an export niche industry. In fact, one of the strategies Alberta has recently engaged is signing a memorandum of cooperation to advance collaboration efforts in unmanned systems with the State of Nevada. The cooperation agreement was expressly intended to stimulate export and technology advancement opportunities for Alberta companies, while providing a platform for Nevada-based enterprises to explore partnerships, investment possibilities and explore collaborative business opportunities between Alberta and Nevada companies.”

For its part, Warchola says Alberta International and Intergovernmental Relations strategically deploys sector-specific trade and investment missions to develop, grow C A N A D I A N O I L PAT C H T E C H N O L O G Y G U I D E B O O K • V O L 6 2 0 1 4

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Dealing With The “D” Word Commercial UAV proponents quick to differentiate their aircraft from military drones

By Carter Haydu One challenge faced by those promoting the use of unmanned aerial vehicles (UAVs) in the oil and gas sector is a public perception that this sort of technology is a weapon of war.

The United States has come under considerable criticism in recent years for the use of armed UAVs—also known as drones—such as General Atomics’ Predator to spy on and kill enemy combatants in countries like Afghanistan, Pakistan and Yemen.

“People watch movies and TV and these action shows where they call in the drones or call in the Predator, and it gives you a sense that is what it is all about, but it’s not,” says Sterling Cripps, chief operating officer at the Canadian Centre for Unmanned Vehicle Systems.

“There is a very small percentage of [UAVs] that operate in that theatre compared to the rest of the world. [Military drones] are highly expensive, and the only types of people who could afford that sort of activity are governments.”

Orest Warchola, senior director, U.S. trade and investment, with Alberta International and Intergovernmental Relations, says it is important the public recognize that unmanned aircraft systems are not intended to invade people’s private lives or civil liberties. As issues and challenges related to the safe integration of unmanned aircraft systems into national airspace are addressed, commercial and industrial applications in a variety of sectors such as oil and gas, utilities, forestry, agriculture, environment and many more will be the focus.

However, while unmanned aircraft systems are absolutely not meant to interfere with the general public, he says they could be important tools for law enforcement.

“There are good examples of where the RCMP is starting to use unmanned aircraft systems for applications such as accident-scene or crime-scene reconstruction, effectively using the technology to provide that overhead visual of what happened. These operations are intended for very mission-specific applications, and as the public becomes more and more comfortable with unmanned systems, the safe use of these advanced technologies is expected to become the norm.”

While the development of military drones takes up a big part of the public consciousness around UAV technology in the United States, Jeremy Byatt, senior counsel of corporate affairs at ING Robotic Aviation, says he does not foresee a similar controversy with Canada developing its UAV industry for the oil and gas sector.

“It is more of an American issue,” he says, adding all he needs to do is show someone a photo of a commercial UAV and that person immediately realizes the growing Canadian sector is far different from what companies are doing south of the border. “They get it. People get it.”

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and open new global markets, which could further strengthen the provincial economy.

Through the promotion of focused trade and investment initiatives, the unmanned systems sector in Alberta is well positioned to capitalize on the burgeoning commercial and civilian unmanned systems market around the world, he says.

For example, government and industry officials attended the Association for Unmanned Vehicle Systems International Conference and Trade Expo Unmanned Systems 2013 in Washington, D.C. “A good number of Alberta companies attended and participated in a first-ever Alberta-Nevada Business to Business Roundtable to discuss business development opportunities, as well as exhibit their products and capabilities at the Unmanned Systems Exposition, the largest trade show of its kind in the world.

“So the province is promoting the industry by facilitating these trade and investment missions to key global markets and successfully doing so in collaboration with not only industry but academia as well.”

Although original equipment manufacturers are typically from other countries, Cripps says Canadians have a chance to lead in the UAV initiative, but it will require getting approval for that first-ever North American airspace to allow beyond-line-ofsight development and training for commercial and civil application.

“The world leaders [in UAV development] probably are the Americans, Israelis, British and Germans. Canada lags very far behind in this area, and that is primarily because of the lack of investment of government to this technology. You find it in the States and other places where it is heavily funded and heavily invested in.

“But where Canada does have strength right now is possibly the regulatory process and how we do allow flight for commerce. If you’re planning to fly and you want to make some money in Canada, you can do that.

You can’t do that in the States.”

Jeremy Byatt, senior counsel of corporate affairs with ING Robotic Aviation, says the U.S. legal restraints on UAVs beyond military purposes puts Canada in the position where it can take the lead in development of this technology for commercial purposes. The Ottawa-based airbornesensing solutions company, which developed its expertise through operational surveillance work with the Canadian military, is branching out into a range of commercial services with a focus to replace manned aviation. “We’ve identified three growth sectors, which are oil and gas, utilities and mining,” Byatt says.

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While he sees UAV technology playing an increasingly important commercial and civil role in Canada, he says it is also likely the developing world will prove an important driver of the robotic aircraft industry, in part because many such jurisdictions are not burdened with extensive air traffic infrastructure that might make the addition of a UAV fleet cumbersome.

In August 2013, for example, Keymerging Technologies Ltd., a Mombasa, Kenya–based high-tech security firm, purchased two Responder rotary wing, vertical takeoff and landing robotic aircraft equipped with cameras from ING, as well as a ground control system and ancillary equipment, to be used at various East African border points.

“If ING can perform so well while dealing with a client in Africa, I believe they will perform threefold, much better, while delivering their services to a Canadian user within Canada,” says Keymerging consultant Shuaib Sherman. He adds Keymerging’s government client was so impressed with the UAVs’ performance that his company is considering the purchase of further units.

As the industry moves from military applications to more work in the commercial and industrial realms, Byatt says unmanned aerial vehicles are geared to be a disruptive technology that will revolutionize the global economy, starting with Canada’s energy sector.

“If Canada wants to lead in this field, I think the best sector in which to do so is oil and gas, because it is important to the economy, it’s characterized by use of high technology and embracing new technologies, and that sector can lead by embracing things and working on changes of regulation, which they do all the time, to make these tools widespread for critical infrastructure inspection, pipeline monitoring, environmental monitoring and geometrics.”

However, while there is tremendous long-term opportunity for Canada’s commercial and civil UAV industry, Byatt notes there is also a limitation to the number of trained professionals who can operate and monitor the aircraft.

THE FUTURE OF UAVS While it is still in the early stages of development, David Snir, chief executive officer for WeWi Telecommunications Inc., says he believes the future of robotic aircraft in the oil and gas sector will come filled with helium.

“We’re developing something we call the ULTAR-SV, which is an unmanned lighter-than-air concept vehicle. It’s sort

of like a semi-autonomous blimp that is stealthier than other [blimps],” he says, adding radar equipment could be easily attached to one of these floating aircraft for the purpose of geological surveying in the oilpatch. “It is certainly something we are very, very interested in.”

According to Snir, the real benefit with an untethered blimp is that it is very quiet and it can stay in the air for long durations, whereas standard UAVs have

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PROD UCTION

Byatt says he envisions potential “UAV highways all over the place,” with aircraft flying back and forth on their own without any need for human involvement aside from initially telling those aircraft where to go.

According to Cripps, miniaturization would continue to be an important part of the future for all technologies, including UAVs. “The never-ending quest to make things smaller and more viable is always at the forefront, but we’re at a point now

“We have a chance here as Canadians to take the lead in this initiative if we get airspace set up. It’ll be the first of its type in North America open to commercial and civil development within a restricted airspace.”

— Sterling Cripps, chief operating officer, Canadian Centre for Unmanned Vehicle Systems

more restrictive fuel limitations. “A blimp could stay in the air for days. That’s the beauty of it.”

Carrying instruments people use for deep radar scanning is challenging for traditional UAVs, Snir says, because the cameras and equipment are quite heavy.

With a lighter-than-air vehicle, he says heavier equipment could be easily carried and a blimp can float sturdy for extended periods of time.

“So the equipment is very stable and you can have longer durations for exposures of the camera, and even add to that more autonomous calculations that could help geologists or the person mapping an area to make accurate measurements.”

Byatt says he is excited about the possibilities lighter-than-air vehicles might bring to the UAV sector. However, he notes there are a lot of up-and-coming advancements in rotor and fixed-wing UAV technology as well.

For example, he foresees fully autonomous operations in which one could plot a pipeline, type those coordinates into a computer, and the robotic aircraft would fly back and forth along the route for extended time periods with no need for human intervention unless something in the algorithm changes during operations. “When I say that is ‘advanced technology,’ we could do that in six months.”

where things are already quite micro-sized, and you can do quite a lot with what is out there in terms of size and weight.”

While it “might sound boring,” Wanless says one of the more important advances he envisions in UAV technology will simply be better batteries, which is a need he notices routinely with his own rotorpropelled aircraft.

“Battery life varies with the type of UAV and the weather conditions, especially wind and temperature. The [Aeryon Labs’] Scout UAV has about 20 minutes, which is typical of rotary UAV systems. Aeryon Labs has a new model that has a duration of about 43 minutes, which is exceptional for a rotarystyle UAV. A lot of the fixed wings can go 40–45 minutes, but they need that time for takeoff, turns at the end of lines and landing.

“So as battery increases, operational efficiency increases.”

Wanless says better sensors and multispectral cameras are certainly going to impact the UAV industry and its applications in oil and gas, allowing for everything from detection of heat leaks to vegetation analysis. He expects even smaller UAVs will soon be able to carry small gas sensors that could detect CO2 or hydrogen sulphide.

“Those things require lots of power and lots of memory, so there are lots of people looking at the potential of putting it on here, and we’re following that.”

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DRI L L I N G

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CENOVUS ENERGY

Soaring To New Heights Oilsands producer sees heli-portable drilling as a game changer on several levels

By Maurice Smith

TAKING TO THE SKIES

B

efore producers of in situ oilsands punch a single production well into the ground, they need to have a very good idea of where to aim the drill bit to maximize exposure to the reservoir.

That typically means drilling a veritable pincushion of preproduction stratigraphic test wells spaced over a wide area to properly delineate the resource. And in the Fort McMurray region of northeastern Alberta, that area can cover vast swaths of dense woodland, unmolested by such modern conveniences as paved roadways.

For oilsands producers, that means a short and costly drilling season, typically limited to about 100 days of winter when freezeup enables road building and the movement of heavy equipment to take place.

That was before Al Krawchuk, senior staff, SkyStrat drilling, and his drilling

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team at leading in situ oilsands producer Cenovus Energy Inc. began to take a closer look at how mining companies had long ago learned how to circumvent this hindrance—by taking to the air.

“On average, Cenovus drills between 400 and 500 stratigraphic test wells in our oilsands areas,” says Krawchuk. “My personal involvement in that was managing 25–30 rigs to come into a project area for a three-month duration and drill those 400 or 500 wells. So from a boots-on-the-ground standpoint, you would have a whole temporary workforce that was coming in for 90 days or 100 days, upwards of 1,000 people or more, and the related safety challenges and personnel and logistical issues—that’s the current standard in the industry.

“This was one of the main detractors from us becoming really efficient and safe

about what we were doing. We thought, ‘Wouldn’t it be great if we could get out of this cycle?’ And that was what was intriguing about looking at a different approach— and getting support from our executives to go and chase an idea to see whether or not we could succeed quickly or fail quickly.”

After some initial investigation, the team drew up a high-level plan in early 2010, he says. “We brought some mining experts in and we started to work with them very closely, and by April of that year, we completed our first pilot test to say this is feasible. We actually drilled some wells in our Foster Creek asset area down to a total depth of 550 metres, with similar technology to what the SSD [SkyStrat drilling rig] looks like today. After we did that, we all sat back and went, whoa, this is very interesting, but it’s going to take a whole lot of effort and wherewithal to push it to the point of more than just a pilot.”

In early 2011, Krawchuk left his job as a commercial drilling manager to focus solely on the SkyStrat rig project, “with strong support of our executive team,” he says. He and his team worked to integrate the best of the mining and oil and gas industries’ technologies.

As the team started to work more closely with the hard-rock mining experts, they “started to look through a different lens,” Krawchuk says. “That was one of the real enabling factors. If we started from a

PHOTO: CENOVUS ENERGY INC.

Built to be flown in to drill sites in pieces and assembled on site, Cenovus Energy’s SkyStrat heli-portable drilling rig creates significantly less land disturbance.

CENOVUS ENERGY

The SkyStrat drilling rig REDUCES water use by at least 50 per cent,

50%

25%

has a cost SAVING of at least 25 per cent,

2/3

50%

and is approximately two-thirds the SIZE of an average rig and WEIGHS 50 per cent less.

SOURCE: CENOVUS ENERGY INC.

typical oil and gas lens, I don’t think we’d have gotten where we are today.

“We took what you would call the best from the hard-rock mining world and the best from our traditional oil and gas world, and we tried to integrate those technologies to come up with something that wasn’t quite one or the other—that became what we call SkyStrat drilling.”

Like a mining rig, the hybrid rig would need to be broken into pieces weighing less than the 6,000-pound capacity of the helicopter—while incorporating those elements unique to the oil and gas industry.

The result is a rig that doesn’t look too much like either of its parent rigs.

“If you were to bring a mining guy out to the site, he wouldn’t recognize it because of the blowout prevention equipment.

Some of the solids control and waste management systems that we use—those are foreign to hard-rock miners. On the other hand, from an oil and gas standpoint, having equipment that is flyable is something else that wouldn’t be recognizable.”

Though he wouldn’t reveal exactly how deep the rig can drill, the relatively shallow nature of the oilsands means the rig’s already proven ability to drill to 550 metres makes it adequate to reach any of the company’s existing oilsands deposits.

It takes about 100 loads to deliver the SkyStrat—about two-thirds the size and one-half the weight of a conventional rig— and its related equipment, which includes mats to support it on often marshy ground.

A team of four to five people, working 24-7, takes four to five days to drill a well.

Prior to the chopper going in, Cenovus has hired local trappers with construction experience to trek in on foot and prepare the groundwork for the air drop. “Typically, they will work on our winter projects and build leases for us. They are very familiar with the forest and the terrain.”

They only need to clear a small area, he notes, since the overall footprint is significantly less than that of a conventional drilling rig and associated equipment.

Other aspects are also minimized. Early indications are that the use of the SkyStrat reduces water use by at least 50 per cent— not to mention a cost saving of at least 25 per cent. A 400-well drilling program costs about $400 million.

And there are less tangible benefits, Krawchuk says, such as reduced land disturbance by constructing fewer roads and an increased flexibility in the overall drilling campaign. “With the traditional method, you have to go in and build a large-scale project—you have to drill 50 wells or 100 wells in order for it to be economic, and ultimately, I think you end up drilling wells that you may not drill if you had the ability to adjust your drilling program real time.

[Using SkyStrat,] we are able to strategically develop our resource base and ultimately get more information for less disturbance and less money.”

Following commissioning work in late 2011 and early 2012, when seven wells

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DRI LLING

were drilled at the company’s Christina Lake in situ oilsands project with ground transport, the company began fully heliportable drilling operations.

“Once March hit and the roads came out, so did the rig. Around mid-June 2012, we flew it into our Steepbank asset area and we drilled 11 wells, 100 per cent heli-supported,” says Krawchuk. As of last fall, the company reported the completion of 24 wells over the 2013 summer drilling campaign.

With the ability to now run a summer as well as a winter drilling program, a heliportable rig can drill about 50 wells per year. A second SkyStrat rig under construction will give Cenovus, which has over 500,000 hectares of oilsands leases, the capacity to do about 100 air-supported wells annually, about a quarter of its stratigraphic well drilling program.

Working with fabricators in the Edmonton-Calgary corridor for its second rig, Cenovus is incorporating some learnings from the first. It’s also sourcing equipment, sometimes from unrelated industries, from around the world. “As we get further down the development curve and are understanding what requirements are nice to have and need to have, we are keying in on some unique equipment. We just brought some equipment in from Italy, actually. If it is out there, we will find it and we will apply it.”

Krawchuk credits his team for pushing the project through to this stage to create something truly unique. “There are people who have a passion for trying to do things in a different way and improve the current footprint of what our industry is doing, and I think if I can communicate anything, I really want to reinforce that message,” he says.

And he thinks the first two rigs are only the tip of the iceberg. “We do plan to share this [technology] with the broader industry as we work through some of the outstanding issues, third-party rights, patents and legal issues.” Krawchuk believes there may also be export opportunities. Heli-portable drilling has been used in Papua New Guinea and parts of South America, the Middle East and central Asia, he notes.

“Ultimately, we would like to see this widely deployed in the industry. We think it is a game changer as far as what it is able to bring, from a benefits standpoint, to all oilsands operators, not only Cenovus. So we are actually very excited about what that opportunity looks like.”

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FERUS |

F RACTURING

Less Flaring, More Cash Flow Separator sends gas to sales pipeline instead of flaring after CO2 fracture treatments

By Pat Roche

PHOTO: FERUS INC.

C

ompanies want quicker cash flow.

Governments want less natural gas flaring. A new technology promises to achieve both goals by enabling wells fractured with CO2 to be put on production—instead of being flared—during fracture flowback operations.

In 2013, Ferus Inc., which supplies liquid CO2 and nitrogen to the oil and gas industry, did the first Canadian test of its separator, which removes enough CO2 to allow post-fracture production to meet sales pipeline specifications. That way producers don’t need to flare the initial production after a well has been fracture stimulated with CO2. Ferus believes that eliminating flaring—and the social, environmental and regulatory headaches that go with it—will encourage producers to do more CO2based fracture treatments.

While water-based fracture stimulations are in the spotlight for opening up today’s big shale plays, CO2-based fracture treatments are still widely used. “Typically, 40 per cent of all fracture treatments in western Canada use nitrogen or CO2 in some format. We’ve got records back at least two or three years, and that percentage has not changed significantly,” says Murray Reynolds, director of technical services at Ferus.

In the Deep Basin region of Alberta and British Columbia, for example, water may damage the formations, so operators tend to use so-called “energized” frac fluids— those based on CO2 or nitrogen. However, one of the drawbacks of CO2 fracturing has been the need to flare.

FLARING REDUCTION Ferus Inc.’s CO2 separation system improves the economics of wells fractured with CO2 by reducing the CO2 content of post-fracture production to a level that meets pipeline specifications, thereby allowing sales gas to be tied in earlier and reducing flaring.

Depending on treatment facilities, the maximum concentration of CO2 allowed in sales pipelines can range between two per cent and 10 per cent. That means the initial production following a CO2-based fracture treatment can’t be put into a sales pipeline because the CO2 content is far too high. As a result, the initial flowback after a CO2 fracture is typically flared until the CO2 content becomes low enough to meet pipeline specifications.

“In the case of a large CO2-based fracture treatment in the Montney Formation, for example, it could be 10–14 days before the CO2 concentration drops below 10 per cent,” Reynolds says. And depending on the pipeline specifications, 10 per cent may not be low enough. In the meantime, natural gas and natural gas liquids are being flared.

Flaring means gas that could be generating cash flow is being wasted. Neighbours regard gas flares as noisy, polluting eyesores.

Governments anxious to reduce oil and gas flaring aren’t likely to encourage it.

After declining for several years, the volume of gas flared in Alberta rose in 2012 for the third year in a row, and the Alberta Energy Regulator’s 2012 report indicates well testing contributed to this increase.

And what happens if the volume of gas flared reaches the maximum allowed on C A N A D I A N O I L PAT C H T E C H N O L O G Y G U I D E B O O K • V O L 6 2 0 1 4

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F R AC T U RI N G

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FERUS

the flaring permit before the CO2 level falls enough to be acceptable for the sales pipeline? A producer can keep reapplying for flaring permits, but if the regulator is trying to reduce flaring, this isn’t the best solution.

CANADIAN DEBUT Devon Canada Corporation faced exactly this dilemma roughly one year ago.

The company had drilled a horizontal gas well near Grande Prairie in northwestern Alberta. The well was to be tied into a third-party pipeline with a five per cent CO2 limit. But following the fracture treatment, the well flowed back on cleanup until its government-mandated flaring limit was reached, but the CO2 content was still too high to meet the pipeline specification. So the well was shut in for several months.

When Devon Canada decided to test Ferus’s CO2 separator on this well, it wasn’t flying blind. Devon Canada’s parent company, Oklahoma City–based Devon Energy Corporation, did the first worldwide test of the concept on a well near Hammon, Okla., in the winter of 2005. The portable CO2 separator’s history, rationale and operation are described in a paper Reynolds presented at the Society of Petroleum Engineers’ (SPE’s) Unconventional Resources Conference– Canada in Calgary in November. Many wells in western Oklahoma and the Texas Panhandle area were being fracture stimulated with CO2-based fracture fluids, and the CO2 content couldn’t exceed four per cent under the sales pipeline specification. This resulted in significant flaring during the flowback operation.

The captured CO2 is currently vented to atmosphere, but Ferus plans to eventually recover the CO2, so the operator, who has already purchased the gas, can reuse it for other fracture treatments. Since the concept was first tested in 2005, the unit has operated throughout Oklahoma, northern Texas and Wyoming on more than 100 wells, says Rodney Ku, Ferus’s manager of business development.

While Devon Energy had a positive experience with the separator, the model used in the United States was a simpler version of the Canadian unit, which has been winterized and modified to comply with Canadian regulations, says Warren MacPhail, Devon Canada’s head of drilling and completions technology development.

According to the SPE paper, the initial CO2 content was about 50 per cent, but it fell to about 30 per cent within the first 18 hours and about seven per cent at the 24

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however, Devon Canada sold its conventional gas assets in western Canada.)

WATER SAVER Earlier this year, Ferus released a new study that found that—all things being equal—CO2 and/ or nitrogen–based fracture treatments in the Montney tight gas formation used 79 per cent less fresh water and yielded better production and economic results than slickwater simulations.

79% less fresh water used

end of the test. Initially, the gas stream was flared until the separator was able to achieve the desired CO2 reduction. After 24 hours of operation, the CO2 content stabilized below the five per cent limit, meeting pipeline specs.

The initial inlet flow rate was about 1.5 million cubic feet per day with a sales gas rate of about 800 thousand cubic feet per day. Total sales gas shipped was 15.5 million cubic feet, but there were several periods of downtime during the 21 days it took to complete the test. These were required to de-wax the tubulars as wax tended to build up, inhibiting gas flow. Small volumes of hydrocarbon liquids and water were produced with the gas. During the test, there was no downtime associated with the operation of CO2 separation equipment, the SPE paper says.

“We’re satisfied that we proved the technology, and we’re happy with how it worked,” MacPhail says of the first test of the Canadian unit. In early 2014, he said Devon Canada would consider using the separator again if and when it used a CO2based fracture fluid.

“So it gives us an option. And that was sort of the goal—to make sure we had an option to reduce our flaring if and when we have the opportunity.” (Shortly after,

WHY USE CO2?

In some formations, such as the Bakken in southeastern Saskatchewan, water-based fracture fluids can be used with no ill effects. But in the Deep Basin formations of Alberta and British Columbia, nitrogen- and CO2-based fracture fluids are often used.

The primary reason is that the Deep Basin formations tend to be very “under-saturated,” or contain minimal water. If these formations are fractured with water-based fluids, the water is imbibed into the near-fracture area and impairs the rock’s permeability to hydrocarbons. Hence, all Deep Basin formations are a target market for CO2-based fracture fluids, says Reynolds.

While there’s much gnashing of teeth in the media about carbon capture being prohibitively expensive, privately held Ferus routinely captures CO2 as part of its commercial operations. The CO2 Ferus sells to oil and gas producers in Canada is captured from major Alberta emitters, such as the fertilizer industry in the Fort Saskatchewan area and gas-processing facilities such as the Rimbey and Elmworth gas plants.

Because the Canadian CO2 sources are all anthropogenic, using the gas as a fracture fluid doesn’t put any new CO2 into the atmosphere. In the United States, a significant amount of the CO2 used in oil and gas operations comes from wells drilled specifically to produce CO2. In Canada, using CO2 as a fracture fluid actually reduces the amount that ends up in the atmosphere. “Roughly 30 per cent of the CO2 pumped during fracture treatments is sequestered in the formation and never recovered,” Reynolds says.

One of the biggest advantages of CO2based fracture fluids, he adds, is avoiding the environmental issues associated with consuming finite freshwater resources.

“We can displace 80 per cent of that fresh water,” he says. By using fracture fluids that are 80 per cent nitrogen and/or CO2, only 20 per cent needs to be liquid, which is typically water or methanol. Because CO2 has only one-third the viscosity of water, it has limited proppant-carrying characteristics. So CO2 fracture fluids are typically pumped with a polymer-based gel; hence, water use is never reduced to zero.

Earlier this year, Ferus released a new study that found that—all things being equal—CO2- and/or nitrogen-based fracture treatments in the Montney tight gas formation used 79 per cent less fresh water and

FERUS

yielded better production and economic results than slickwater simulations.

The study, A Comparison of the Effectiveness of Various Fracture Fluid Systems Used in Multistage Fractured Horizontal Wells, was done in a dry gas area of the Heritage Montney field in northeastern British Columbia. The conclusions are based on public data from 45 multistage fractured horizontal wells with at least 18 months of production history. The well breakdown by fracture fluid type was 11 slickwater, 12 binary foam (both CO2 and nitrogen), 12 CO2 foam and 10 nitrogen foam.

The SPE paper concluded the foambased fracture fluids provided more effective fracture lengths and conductivity while using only 75 per cent as much downhole fluid volumes as slickwater fracs. The foambased fluids also used 32 per cent less proppant tonnage per well. Fracture fluid cleanup was almost immediate for the wells stimulated by foamed fluids versus several months for the slickwater group.

Meanwhile, there are situations where the CO2 separator could be used even if the foamed fluid isn’t CO2-based. For example, the gas in the Horn River shale play contains

up to 20 per cent CO2. So the separator could be used to remove that naturally occurring CO2 during flowback operations.

IS WATER REALLY FREE? One of the downsides of CO2 is that you have to buy it, but water is free, right?

“Careful on that,” Reynolds says, arguing the competitiveness of CO2 with water can depend on the fracture designs. The Montney study found total completion costs were about 23 per cent less for the foambased fluids, partly because the foambased fracture treatments can be smaller.

As for the perception that water is free, Ferus estimates the real cost of water in central Alberta is roughly $90 per cubic metre. That takes into account the cost of sourcing, trucking, heating and storing, as well as the processing, trucking and disposal of flowback water.

Reynolds acknowledges that water is cheaper in the Montney play, depending on the sources. He says one senior producer spent $35 million on a water-supply system that takes water out of the W.A.C. Bennett Dam in northeastern British Columbia to feed its Montney operation. “So they’ll be able to supply water cheaper on a per-unit

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F RACTURI NG

basis, but that $35 million has to go into the cost of the water somewhere.”

Also, Reynolds notes the cost of waterbased fracture treatments may be underestimated if the calculation is confined to the completions budget. Slickwater wells that consume 7,000–12,000 cubic metres of water may continue to produce water for six or eight months, but the cost of trucking and disposing of that water comes out of a producer’s production budget, not the completions budget.

Reynolds acknowledges freshwater demand is reduced by recycling some of the fracture flowback water, but he notes recycling also has a cost. “If you truly include all of the costs related to water, it’s not incredibly cheap. And that’s why our energized fracture fluid systems can compete based upon price and, in some cases, be even cheaper,” he says. But the main benefit, he adds, is in the reservoir. “You get less damage in the [fracture treatment] and better production.”

ContaCt for more information Murray Reynolds, Ferus Inc. Tel: 403-695-3893 Email: murrayreynolds@ferus.com

2013

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DATA M A N AG E M E N T & S O F T WA R E

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S R D I N N O VAT I O N S

From High Tech To The Oilpatch Wi-Fi pioneers invent technology for collecting wireless seismic data in real time

By Pat Roche

I

n the Dark Ages of the early 1990s, before most people had even heard of the Internet, two Calgary inventors came up with a new technology for wireless communication. In 1994, Michel Fattouche and Hatim Zaghloul were granted a U.S. patent for something called wideband orthogonal frequency-division multiplexing (OFDM).

“It took us about 10 years to make sure that this patent was established,” Fattouche recalls in an interview. “OFDM technology is now everywhere. It’s in Bluetooth. It’s in Wi-Fi. It’s in cellular.”

But in the 1990s, Fattouche and Zaghloul struggled to have their invention taken seriously. The company they started in 1992, WiLAN Inc., rode the crest of the dot-com bubble, but almost went under when it burst.

“It took us 10 years for people to start to accept the technology,” Fattouche says. “By that time, it was very hard to compete with the big companies that took over the technology without giving us any royalties.” So WiLAN converted from a product company to a patent-licensing firm, hired lawyers and demanded the tech giants pay up.

In 2011, everyone settled except Apple Inc. (which still hasn’t licensed WiLAN’s technology for 3G), says Fattouche, who is still a WiLAN director and a major shareholder. Companies that agreed to pay licensing fees to WiLAN include Samsung Electronics Co., Ltd., Dell Inc., HewlettPackard Development Company, L.P., HTC Corporation, Cisco Systems, Inc., ASUSTeK Computer Inc. and BlackBerry Limited.

In its year-end 2013 financial results, WiLAN, which is now based in Ottawa, says

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279 companies have licensed its technologies. While the details of individual licences are confidential, WiLAN says royalties from these licences generated revenue of $82.21 million in 2013. Licensees include makers and sellers of products like 3G/4G/ WiMAX base stations, 3G/4G/WiMAX handsets, laptops, routers, xDSL infrastructure, Bluetooth-enabled devices and digital television receivers.

Meanwhile, Sayed-Amr “Sisso” El-Hamamsy, a former president of WiLAN, and Fattouche, now a professor in the electrical and computer engineering department at the University of Calgary, along with two other former WiLAN engineers—Ron Murias and Rashed Haydar—set out to solve another wireless challenge. (Zaghloul had left WiLAN by then to pursue other ventures.)

SHOOTING BLIND Late last decade, El-Hamamsy and Fattouche were persuaded by a geophysicist friend to turn their wireless technology talents to the real-time transmission of seismic data as it is being shot.

The traditional way to view seismic data during acquisition has been via cables connecting geophones strung out over the survey area. But stringing out tonnes of cable is unwieldy, and the environmental footprint is huge. So in recent years, manufacturers produced cable-free receivers that can record seismic data. But the downside was that geophysicists couldn’t see the data in real time. In industry parlance, they were shooting blind.

Not being able to see the data during acquisition meant problems—such as noise— wouldn’t be detected until after the shoot.

Then the only recourse would be to reshoot, adding significantly to the survey cost.

So why can’t cable-free geophones transmit data in real time? El-Hamamsy and Fattouche quickly learned of three big obstacles:

1. Direction of data flow In most networks, data flows mostly from the base station to the field units. For example, when you touch a link to a website on your wireless device, you are only sending a tiny bit of text—that web address—to the base station. Most of the traffic moves in your direction in the form of the photos, web pages, video and music that you are downloading. Although we may upload photos, for example, the proportion of data downloaded dwarfs the amount sent. But in a seismic survey, the data flow is reversed.

The central location sends commands, but the multitude of geophones send back vast volumes of data.

2. Data synchronization Remember what happens in civic emergencies when everyone tries to phone at the same time? Not everyone gets through.

That’s because networks are designed on the assumption that only a fraction of users will access the network simultaneously. In seismic surveys, all the data gets generated at the same instant—for example, when a dynamite charge is detonated. So the network must be able to handle the maximum

S R D I N N O VAT I O N S that can be produced. In some cases, this could be as much as 320 megabits per second. By comparison, your typical cable Internet connection can probably do up to 10 megabits per second if most of your neighbours aren’t also using it.3

3. Ease of deployment Cellular networks take months of planning and construction. Base stations are designed to last for years. In contrast, seismic surveys need to be rolled out in days, mostly by unskilled crews and often over difficult terrain.

IDEAS MESH El-Hamamsy and Fattouche began working on the problem about six years ago. Their solution was to use what’s called a hybrid mesh network. Mesh networking is where each node, or point on a network, not only captures and disseminates its own data, but also relays data from other nodes.

Mesh networks were in development in the late 1990s during the tech boom, but funding evaporated when the bust occurred, so not many viable applications were created.

One way to understand a mesh network is to look at what it isn’t.

A cellular network is the opposite of a mesh network. If two people are phoning or texting each other, they can only connect through a base station—even if they are in the same room.

But in a mesh network, if the nodes were close to each other, they would connect directly. If they weren’t close, the signal would hop to the closest node, then to the next closest and the next closest, until it found its destination. There is no base station. All the nodes talk to each other and use each other to move data from one point to the next on an ad hoc basis. If two nodes are too far from each other to connect directly, they can connect via nodes that are in between.

On a cellphone network, if you lose your line of sight from the base station, you lose the signal. But on a mesh network, you can connect with whatever node is closest.

CONCEPT TO REALITY Once they decided a mesh network could solve the problem of viewing data from cable-free geophones in real time, the inventors formed Calgary-based SRD Innovations Inc. to develop the technology.

El-Hamamsy is president and chief executive officer; Fattouche is chief technology officer.

What SRD created is a software solution built on customized off-the-shelf Wi-Fi

hardware. (The Wi-Fi radios are made in China and sold by a U.S. company.)

“The work is all done on the software,” Fattouche says of the mesh protocol software that lets the Wi-Fi radios talk to each other. In July 2012, El-Hamamsy and co-inventor Ron Murias were granted a patent (U.S. Patent No. 8217803 B2) for part of the software, and other patent applications have been filed.

SRD’s trademarked name for the mesh protocol software is hyMesh Wireless. This is what PhDs hired by SRD work on. The company is privately held, and its research is supported by federal and Alberta government funding.

The hyMesh radios can be used for conventional seismic or microseismic.

The latter is often used to monitor fracture stimulations because the operators need to know if the fractures are being created in the target zones.

IN THE FIELD SRD’s use of a wireless mesh network to relay data in real time “looks like a breakthrough,” says John Giles, president and chief executive officer of iSeis, a Ponca City, Okla., builder of seismic recorders.

While there are other systems on the market, Giles says the ones he is aware of require someone to physically assign which box will talk to which. The SRD boxes, on the other hand, “automatically detect the shortest route to the central unit,” Giles says, describing the hyMesh auto-routing capability. “So they automatically find their neighbours and actually determine what route to follow without any user intervention.”

Perched on tripods to maximize signal reach, the hyMesh radios are deployed by the seismic crew when they lay out their geophones. SRD calls it a drop-and-go deployment. LEDs immediately indicate whether the device is connected to the network. If one can’t connect, a relay is used to provide the connectivity.

However, crews shouldn’t take the drop-and-go part too literally. “They still have to set up some antennas on the prospect and make sure everything is working,” Giles says. “It’s more than just hooking up a battery and a box.”

If seismic contractors want the hyMesh technology, iSeis will sell it as a package with the seismic recorders it builds.

Giles has had a few sales of the SRD radios but says adoption of new technology takes time. And there’s a trade-off.

Without the radio and associated gear, the recorders are cheaper, lighter and require less battery power—but you don’t see any real-time data, he notes.

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DATA MANAGEMENT & SOF TWAR E

Giles is also president of Ponca City– based Seismic Source Company, which builds control electronics for sources such as dynamite or VibroSeis. He says he has been selling seismic equipment for more than a quarter century.

“After you make your first sale, it takes about three years in this industry for it to really take off,” he says. “You usually make a few sales, then a year or so later, a few more, and then finally it starts getting written into specifications for some of the crews. That’s where it actually starts taking off.”

One iSeis customer that bought 20 of the hyMesh units is Breckenridge Geophysical, Inc., a small contractor based in Breckenridge, Texas.

Breckenridge’s other systems are cable-free units that record but don’t send back data in real time. “And so there’s no way for us to monitor noise or to QC [quality control] our data,” says JR Nelson, a technical support specialist with the company. “We’re very comfortable with it and confident in it, but some clients want to see something.”

So far, Breckenridge has used SRD’s hyMesh units in conjunction with the record-only boxes. If the portion of the data being displayed in real time is high quality, then the clients can have more confidence they are getting good data on the units that don’t have real-time capability.

Also, the radios are used to check for noise—for example, in the wheat fields of Kansas where Breckenridge does a lot of work.

“The clients up there are very particular about wind noise.... It seems like when the winds get up around 20–25 miles an hour, it generates abtout 60 or 70 Hertz noise on your geophones,” Nelson says. “With this signal system, we can put a line out right next to our regular receiver lines that the client can see. And we added a bar graph that’s calibrated in microvolts.”

He hasn’t encountered any major downsides with the technology. One issue was getting the mesh radios a little higher off the ground, “but they’re working on that also as we speak,” he said in late March.

Nelson is also impressed with SRD’s desire for feedback, its continuous improvements to the technology and its responsiveness to problems, even during off-hours. “For our purposes, it works really well,” he says. “We’re happy with it.”

ContaCt for more information Sayed-Amr El-Hamamsy, SRD Innovations Inc. Tel: 403-616-5441 Email: sisso@srdinnovations.com C A N A D I A N O I L PAT C H T E C H N O L O G Y G U I D E B O O K • V O L 6 2 0 1 4

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Innovation For Horizontal Multi-Fracs SMEs are stepping up to the plate with new tools, systems and software

By Godfrey Budd

W

hen it comes to the need for an oilpatch equivalent of the proverbial better mousetrap, it is almost, but not quite, as if the mice were the ones that came up with the goods. Time and again, it seems, it is the small- to medium-size enterprises (SMEs) that step up to the plate with an innovative tool or software program. There has to be a reason why service majors keep buying service sector SMEs. The era of horizontal drilling and multistage fracking has seen costs per well skyrocket. It has also been a game changer for many aspects of field operations—from assigning priorities for drilling programs to methods and new technologies for multifrac completions. Service sector SMEs keep meeting the challenges.

Some issues, of course, hardly change.

They might become more urgent, though, in a higher-cost environment. Drilling rate of penetration (ROP) is perhaps a case in point.

When Wavefront Technology Solutions Inc., with expertise in fluid flow technologies for enhanced oil recovery, developed a rapid pulse tool (RPT) for cavitation induction, it teamed up with Sicotte Drilling Tools Inc., a Canadian supplier of custom drill bits and specialty downhole tools founded in 1976.

The partnership makes sense as the two companies’ respective technologies are complementary when it comes to the RPT, says Dave Herman, vice-president of business development at Sicotte.

Cavitation, which involves the formation of liquid-free zones or bubbles in a liquid,

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usually occurs when a liquid is subjected to rapid changes of pressure that cause the formation of cavities where the pressure is relatively low. When subjected to higher pressure, the voids implode and can generate an intense shockwave. Herman points out that the steel propellers of ships and boats become pitted because of this action.

The authors of the Society of Petroleum Engineers (SPE) paper 162726 applied this principle using a tool designed for the same purpose as the RPT. But the device described in the paper included an impeller, piston and an impeller shaft, unlike the Wavefront/Sicotte RPT, which has no moving parts. The device, called a hydraulic-pulsed cavitating-jet generator, did, however, perform along the lines that cavitation theory had suggested. “The combination of hydraulic pulsation jet and cavitating jet can change the flow field at bottomhole and the rock stress state to enhance rockbreaking and cuttings-cleanout efficiency and improve the penetration rate of deep drilling,” according to the SPE paper.

The authors of the paper, which received approval in April 2012, note that “a large number of field tests of hydraulicpulsed cavitating-jet drilling technology with multiple drilling assemblies have been conducted.”

Various fluid densities and depths were used in a series of field tests, and the deepest well was 6,062 metres. “As a result, the average ROP was enhanced by approximately 16.7 per cent to 104.4 per cent,” the authors state.

“The paper describes the same pressure our tool uses. Ours is less complex, more durable and does the same thing,” Herman says.

As drilling mud flows through the RPT, internal flow dynamics create a vortex inside the tool, causing a pulsing action that results in cavitation bubbles at the formation face, and the energy released at the bubbles’ implosion assists in rock fatigue.

“The cavitation tool has three effects on the bottomhole: hydraulic pulse, instantaneous negative pressure and cavitating erosion,” Herman says.

Benefits include reduced hydraulic chip-down and better hole cleaning. “It’s also believed to improve extended reach, help with better steering and remove dead zones in the flow pattern,” he says.

The key utility, though, of the RPT, which is staged between the mud motors and the drill bit, is its ability to improve ROP. It was commercialized in 2013 and various companies have been using it.

Depending on the well, rig and other factors, metrics from Talisman Energy Inc. have included ROP increases ranging as high as 94 per cent.

DRILLING STABILITY Control, stability and a precisely calibrated direction are among the essentials of horizontal drilling, but the question can be, how much should you spend? “If you want three-directional control, you go to rotary steerable. If you’re on a tighter budget and want some control on a horizontal,

AR R IVAL • P ULS E • D R ILLF O R M

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BUILDING EXPERTISE Through extensive research and development, many small- and medium-sized companies, such as Calgary-based Sanjel Corporation, have developed new multistage fracturing technologies.

you use a stabilizer in the bottomhole assembly, between the mud motor and the measurement-while-drilling [MWD] tool.

The VersaStabe works in combo with the mud motor. There are other adjustable stabilizers. Now we’ve introduced a shorter version, the VersaStabe Jr.,” says Shane Bachmeier, president of Arrival Oil Tools Inc. The Calgary-based company develops and manufactures downhole drilling tools.

The basic concept of the VersaStabe is a hydraulically actuated stabilizer that is designed for use in a 2-D directional drilling application to help control the inclination in extended-reach or horizontal wellbores. “The stabilizer is for sliding and rotating applications. The VersaStabe Jr. is 78 inches long compared to a version that is 125 inches long. The shorter one allows the sensors in the MWD to be closer to the bit, which is always important,” Bachmeier says.

The new product is being introduced in Canada, but has some history offshore that can be shown to potential clients, he says.

PHOTO: SANJEL CORPORATION

DIRECTIONAL DRILLING Pulse Directional Technologies Inc. (PDT), also Calgary-based, is an outfit focused on downhole directional drilling tools. “We’re a large R&D [research and development] company that builds MWD and LWD [logging-while-drilling] tools that are compatible with a tensor-style platform,” says Steve Braicher, president of PDT. Noting that General Electric (GE) is the largest manufacturer of MWD products, he says, “Our product line is fully compatible with GE.” One of the recently introduced products from PDT that can work with a tensorbased platform is a retrievable propagation resistivity tool, sometimes called an RPRT. “These are out there in the industry, but we’re the only independent that sells an RPRT. Our tool is fully retrievable so that even if the BHA [bottomhole assembly] gets stuck, we can retrieve the costly tool and leave the collar in the hole. That’s a big selling feature, especially in the land-based market. The Omega [resistivity tool] is fully compensated, which enables you to work

in all types of drilling fluid from water to oil,” Braicher says.

The company’s new Omega replaces an earlier tool that worked only in water, known as a “short normal.” The new tool can be operated in tandem with gamma, directional sensors, annular and other real-time updates. “It’s not restricted to running propagation resistivity only. It’s a multi-platform tool with a modular design. The tool is about 10 feet long and the modular design allows you to add other technologies without having to purchase another platform tool. You can add gamma, directional, annular pressure, real-time vibration, etc.,” Braicher says.

He emphasizes that the Omega had a very specific dual purpose—fully retrievable with a very competitive price point. The company, he says, typically rolls out a new commercial product each year.

Drillform Technical Services Ltd. is another firm with a focus on some of the

particular service and product requirements of the horizontal sector. “As we go deeper into the horizontal, there’s a need for specialty drill pipe, and it’s more costly.

In the past, the cost of damaged pipe was the cost of doing business,” says Tracie Reed, vice-president, business development, at Drillform.

The company has just launched an automated drill floor wrench called the Bulldog 90. The hands-free unit has 18 standard dies to grip the pipe evenly, reducing tool joint wear, and can handle pipe sizes from 3.5 inches to 8.25 inches.

“There are four independent spinners in the top part of the tong. No one else has that. It helps to deliver consistency of torque and minimize slippage,” Reed says.

Its fully enclosed sensors play a role in protecting the pipe, one of the key benefits of automation combined with the unique die configuration.

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D I S T R I B U T I O N N O W • EF F I D R I L L • X I T E C H N O LO G I ES • PA C K ER S P LU S • S A N J EL • E X T R EM E EN G I N EER I N G

line has been designed for pressures up to 12,000–13,000 pounds per square inch.

“The concept is to handle high-pressure differential downhole,” says Themig.

Another new product is the QuickPORT 5. With this system, which is designed for QuickFRAC, an operator can do two to five stages at a time, with greater frequency along the drill stem. An option with QuickPORT 5 is that at a later date, an operator can return to close off a designated section of the well.

STACKING UP Sanjel’s SUREstack multistage fracturing system allows the operator to retrieve the inner components of the sleeve in one trip, thereby avoiding the need for the milling required by conventional ball-drop systems.

At the other end of the drill stem is an innovation called XPL+ from ProOne, Inc. and marketed by DistributionNOW. “Everyone wants to drill faster and cheaper, and this fits the bill nicely. It can deliver sixfigure savings per well,” says Kevin Cote, business development lead for drilling and well servicing at DistributionNOW, recently spun off from NOV Wilson.

Described by Cote as “earth-friendly,” the downhole drilling fluid treatment has been on the market for about two years and has been used on about 600 wells in the United States. “We can use XPL and then don’t have to use invert mud. It makes water-based mud behave like oil-based mud—in fact, better,” Cote says.

He says that XPL is a natural for shale plays as invert mud is often required in shale laterals. The patented XPL is partly derived from plant-based oils.

DATA MANAGEMENT Beyond the niche issues of some shale formations is the more widespread challenge of organizing terabytes of data generated in today’s complex operational environment of directional drilling operations. Critical data is dispersed across diverse file formats, media and locations.

Companies need to somehow extract the critical information and metrics from the mass of data to assess past performance and optimize future programs.

“Our software is a way to bring together well log data, BHA, bit data and rig instrument data—raw data—and turn it into reports. For example, with a drilling 30

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parametric comparison report and a rig activity status report, you can quickly identify where the inefficiencies are,” says Olu Adedipe, president of Effidrill Solutions Inc. The company has been selling its product and services for about two and a half years, but “our website is more of a data hub for clients. Clients can go in remotely and obtain data and interpretations,” he says.

Some reports can take as little as 0.3 seconds to run. A bigger one took 19.2 seconds to develop a report on seven wells. Adedipe points to another report that analyzed 27 days’ worth of data on one well.

By tying in time and depth curves with rig activity status, reports can be generated that flag inefficiencies. “The key to this is that you could have 100 wells, and once the data for them is loaded, you can go from one to another without any backing out or reload[ing],” Adedipe says.

Companies are buying into new reporting and software solutions that present them with key information and objective metrics on a range of issues. Andy Newsome, vicepresident, drilling services, of XI Technologies Inc., says that as of July, 16 of the top 20 producers in western Canada are part of TourXchange. “This gives operators access to data—the digital drilling records of a range of companies—that they didn’t have before. The point of the data is to enable faster, cheaper, safer drilling,” he says.

A recently released product, Offset Analyst, was made possible from the data drawn from TourXchange.

Western Canada–based companies are continuing to make advances in streamlining the completions side of the equation. The new H2 line—“the next generation of packers and ports systems,” says Dan Themig, Packers Plus Energy Services Inc. president and chief executive officer—is designed to cope with some of the inter-well depletion issues. The H2

A third new product coming from Packers— described by Themig as futuristic—does not have conventional ball seats, but instead involves a dart system with magnetic counting ability, which is electronically actuated. “It’s the first in a line of smart tools with downhole electronics,” he says.

Sanjel Corporation has also been testing a dart system, which can be used on open or cemented holes, to actuate sleeves.

“The dart will pass non-target sleeves and only engage the selected target. So, either one or selected multiple sleeves can be actuated with a single dart,” says Darryl Firmaniuk, engineering manager with Suretech Completions Canada Ltd., a Sanjel Specialized Energy Service.

The company’s SUREstack multistage fracturing system, introduced about two years ago, has been attracting clients. It is a ball-drop system, but differs in that an operator can retrieve the inner component of the sleeve, including balls and ball seat, in one trip. The system eliminates the milling and drilling required for conventional ball-drop systems. “You can save up to 40 per cent of post-frac completion time,” Firmaniuk says.

Technologies first developed by SMEs in western Canada’s oilpatch are being adopted across the continent and beyond. XEM electromagnetic MWD, which was commercially launched by Extreme Engineering Ltd. in 2006, is a case in point. Extreme’s tools, especially XEM electromagnetic MWD, are used daily in horizontal plays in North America—the Marcellus, Utica, Fayetteville, Eagle Ford, Duvernay and Montney, according to the company.

“Up to the acquisition of Extreme by Schlumberger [June 2008], Extreme had received numerous honours, awards and accolades, including the coveted R&D 100 and ASTech [Foundation] Outstanding Commercial Achievements [in Alberta] in Science [and] Technology,” according to a page on the Extreme website.

PHOTO: SANJEL CORPORATION

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