Western Canada's biggest sour natural gas, sulfur, and natural gas liquids development project in 2 decades is on target to start up late this year. Shell Canada Ltd.'s $950 million (Canadian) Caroline project will produce 2 tcf of gas and associated products from the Swan Hills member of the middle Devonian Beaverhill Lake group. The price tag will reach about $1 billion, including some start-up costs.
The project is designed to process an average 300 MMcfd of gas. It will produce 17,500 b/d of pentanes plus, 4,100 metric tons/day of sulfur, 90 MMcfd of sales gas, and 28,000 b/d of NGL-ethane, propane, and butane.
A labor force that is peaking at about 2,400 workers is completing a network of processing plants, about 143 miles of pipeline, three field compressors, and other facilities covering an area of 161 sq miles.
Dilcon Constructors Ltd., an arm of Delta Catalytic Corp., Calgary, is the main contractor for the project. About 85% of the services and equipment for Caroline are coming from Alberta suppliers, 7% from suppliers elsewhere in Canada, and only 8% from non-Canadian sources.
Construction involved moving more than 1 million cu m of earth for site grading, installation of 186 miles of power cable, and 124 miles of instrument cable.
Caroline reserves represent about 10% of Alberta's remaining NGL, 15% of the province's remaining condensate, and 25% of remaining sulfur.
Shell drilled the Caroline discovery well in 1986. Fifteen successful delineation wells were then completed in the Swan Hills at depths of 11,800-12,600 ft. The field covers about 50 sections of land, or about 32,000 acres. Long term plans call for 20-30 producing wells.
Caroline, with estimated revenues of $10 billion during a 25 year life, will contribute about $5 billion in taxes and royalties to governments in that time. Operating costs will be about $40 million/year.
STATUS REPORT
Ben Magnusson, director of engineering and construction for the project, said Caroline is now more than 55% complete overall.
Some employees have moved into an administration building. Gathering systems, a sulfur pipeline, and a sulfur forming unit are virtually complete. Most of the remaining work involves completion of the main processing plant and compressor sites.
The project is on budget and on schedule. The biggest construction problem to date was an exceptionally wet spring and summer in 1991. That delayed the start of pipeline work, which had to be rescheduled into winter. The work is now complete.
"We're on schedule to start one of the processing trains before the end of the year. The second train will be in operation in first quarter 1993," Magnusson said.
SAFETY FEATURES
Caroline's sour gas has placed a premium on safety in engineering design and construction.
All wells in the project are designated as critical by ERCB because of high levels of hydrogen sulfide in their production. Average H2S content is 35.3%.
Sulfur recovery units and associated Shell Claus off gas treatment units are designed to achieve 99.8% recovery to meet new provincial guidelines. That is said to be among the highest recovery levels of any plant anywhere.
Produced water and plant waste water and chemicals will be recycled and reused in a design that achieves zero surface water discharge.
Among the project's safety features:
- Thickness of pipeline walls is twice the required minimum.
- Line block valves have been installed on all sour gas lines to reduce release of H2S in the event of a line break.
- Pipelines have been routed where possible to avoid residences in the sparsely populated area.
- Compressor stations will be installed for field start-up to reduce pipeline pressure.
- An inspection program will monitor pipelines to prevent corrosion related leaks or ruptures.
- A field system will continuously monitor operations and remotely shut in production if a leak is suspected.
Shell also agreed to carry out a health monitoring program of area residents that will be complete before the plant begins operating to provide baseline information on community health.
MARKETING PRODUCTION
Caroline's processed gas will be shipped to markets through the Nova Corp. pipeline system. NGL will move through Federated Pipe Lines Ltd.'s system, and condensates will be shipped via an Amoco Canada Ltd. pipeline to the Edmonton area for further processing or distribution.
Caroline NGL will provide about 40% of feedstock for a Dow Canada Ltd.-Shell fractionator project at Fort Saskatchewan, near Edmonton.
Liquid sulfur will be degassed at the plant and moved by pipeline to a new forming unit at Shantz, near the Harmattan gas processing plant operated by Mobil Oil Canada Ltd.
The 25 mile, 8 in. liquid sulfur line will be the longest underground line of its type in the world.
It will be encased inside a 12 in. water jacket that will maintain the sulfur at 124 C. It will be buried at least 6 1/2 ft.
All formed sulfur will be shipped by rail to Canada's West Coast for export.
Magnusson said the sulfur line engineering represents a combination of several existing technologies, including methods used in Scandinavia in large municipal hot water central heating systems.
The pipeline was tested in 800 m sections as it was built. Hydrotesting and commissioning are to be complete this month.
STILL PROFITABLE
Natural gas and sulfur prices have fallen since Caroline began construction 2 years ago, but the field will produce significant volumes of premium value NGL.
As much as 85% of projected revenues could come from sulfur, condensates, and NGL sales.
"When we look at it on the basis of our predictions, profitability will be reduced," Magnusson said. "But it will be close to a year from now before we get large streams of product coming out of here.
"Caroline is still a very profitable project but not as profitable as with the forecasts we had 3 years ago. Condensate prices are still good. Sulfur is one of those mavericks. You never know what will happen to it.
"If you believe past trends, we should be at the bottom of a trough now. If prices recover as we start up, we should do fine. Even if they don't, we're still a profitable project."
Magnusson said the objective now is to turn Caroline as quickly as possible from a revenue eater into a revenue producer.
COMMUNITY RELATIONS
Magnusson said a successful construction program is no longer enough for a project the size of Caroline. Developing good community relations in the small town, ranching, and recreational area north of Calgary was a major objective of a 3 year program by planners. The project was opposed by environmentalists and many residents in the area.
"We spent a lot of time making sure we understood community concerns and how we could improve the way we worked with the people in the area," he said.
"We listened to their suggestions, and they had some good ideas on how we could do things better. The relationship is turning out to be mutually beneficial."
Shell and its partners made sure that businesses in the area had an opportunity to be competitive and to bid on project work.
"You do things slightly differently," Magnusson said. "You don't just offer large packages of work so that only companies with significant financial resources can bid. We have split up work so local operators have a chance to bid.
"Quite often, we have an even more competitive situation on bidding because, for example, companies in the area don't have to pay travel costs. We have put about $80 million into the local economy to date, and about 30% of the construction workforce has come from the local community."
Caroline planners had to overcome local concerns that bringing in thousands of temporary workers would result in increased rowdiness and crime in the area.
"These guys don't deserve that kind of image any longer," Magnusson said. "They do their job and go home like the rest of us. These concerns have turned out to be a non-event. There has been virtually no negative social impact."
HUSKY'S ALTERNATIVE
In addition to working for local approval, Caroline owners faced exhaustive public hearings by Alberta's Energy Resources Conservation Board (ERCB) and a division in their ranks about how the field should be developed.
Husky Oil Ltd., the second largest interest owner with 11.6%, opposed Shell's original development plan, which called for expansions of two existing gas processing plants and construction of a new processing plant and other facilities, including a rail line for sulfur tank cars.
Husky called for an alternative development under which Caroline gas would be processed at Husky's 630 MMcfd capacity Ram River plant in the area.
Shell and its partners changed the original plan to propose one new processing plant and a sulfur pipeline. Husky dropped its opposition as soon as the ERCB ruled in favor of the development plan by the other interest holders led by Shell.
Husky said the fight for its alternative plan cost it $5-10 million, but the public was the Winner because the competing plans resulted in an intensive public review of all project aspects.
ERCB found that the Husky proposal had a number of advantages over the Shell plan: less environmental effect because of lower overall sulfur dioxide emissions by use of the Ram River plant, less traffic noise, less reduction in property values, and better resource conservation as a result of less plant energy consumption.
But the board ruled in favor of the Shell development. It said Shell's plans were advanced, safe, technically reliable, and backed by community majority leaders and most interest owners in the project.
ERCB also said the Shell project would incorporate future developments in an orderly way that could reduce pollution in the long run. it noted the Shell proposal had fewer safety risks because a shorter sour gas pipeline would be required.
Shell is operator with a 72% interest in the field. The company completed a deal in 1991 to buy an 8.5% working interest from Gulf Canada Resources Ltd.
Other interests are held by a number of partners, including Union Pacific Resources Ltd., Atcor Inc., Numac Oil & Gas Ltd., Mobil Canada, Norcen Energy Resources Ltd., PanCanadian Petroleum Ltd., Altana Exploration Co., and Precambrian Shield Resources Ltd.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
