Operationally, a commercial Steam Assisted Gravity Drainage (SAGD) project differs in a number of respects to other production technologies such as primary or Cyclic Steam Stimulation (CSS). Firstly, the SAGD technology is unique in that when a SAGD well is shut in, the recovery process continues to operate. Heat continues to be transferred into the cold bitumen and bitumen continues to drain down into the pool of hot liquids at the base of the chamber. Secondly, the process involves the generation of a large steam chamber, which has considerable heat storage. Short-term variances in steam injection have little impact on chamber pressure and therefore temperature. These unique characteristics present a number of opportunities to exploit seasonal and short-term variations in bitumen and gas prices to the advantage of the SAGD operator.


As of December 2002, the announced or approved SAGD projects in Alberta have a cumulative predicted production of over six hundred thousand barrels of day of bitumen production1. The SAGD process is now clearly moving from an emerging technology to a commercial one. In light of its anticipated widespread application, an important area of study is the economic optimization of the SAGD operating practices.

So far, it had been the practice to operate SAGD wells under steady operating conditions. Saturated steam is injected into a horizontal well at high temperatures, typically 200–225 °C and at pressures between 1.5–2.5 MPa. Early attempts were made, in the Dover Pilot Phase A pilot to determine whether cycles of pressure lead to additional production rates from the process. It has generally been concluded that given the cold bitumen (in Athabasca) is essentially a solid, very little effect on SAGD production or recovery is obtained by pressure cycling. For this reason, operators typically maintain a fairly constant chamber pressure over time.

This paper contemplates the economic implications of manipulating the steam injection and bitumen production rates to coincide with seasonal variations or temporary extremes in commodity prices. The two commodity prices studied are the price of natural gas, which is used as fuel, and the price of bitumen. Upgraded bitumen is not contemplated in these evaluations.

Analytical models are suggested for the determination of the value added by timing of steam injection and bitumen production. A simulation model of Phase B at the Dover Project was used to estimate how Phase B would have reacted to variable injection and production. The Dover Project is the home of the first test of classical SAGD. The first commercial pilot, Phase B of the Dover Project, drilled in 1993, consists of three 500m long horizontal well pairs and is still on production. Yee and Stroich provide a complete discussion of the historical Phase B operations.2

Markets and Price Variation

Natural Gas

The price of natural gas varies by season. The demand for gas in the North American market is much higher in winter months because gas is used for heating.

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