90 barrels shipped from nation’s first oil mine

It cost $50,000 a bbl — about twice the cost of a barrel from the Beaufort Sea or the Arctic Islands — but Devran Petroleum and Shell Canada have made their first shipment of oil from a unique underground oil mine near Sarnia, Ont. (About $4.5 million has been spent so far and 90 bbl were shipped).

By this time next year they hope to be producing 600 bbl per day at an operating cost of between $2 and $5 per bbl. By fetching $20 a bbl from a Shell refinery, 8 km away, Devran hopes to pay back its total initial investment of $6.5 million in about two years after commercial production starts.

There is enough oil on the 600-acre lease for at least six years of production, according to Devran, the operator.

About 130 m below the flat farmland here, Devran so far, has drilled a total of 11 horizontal B-size diamond drill holes out into a 7-m- thick layer of oil-saturated sedimentary rock of Devonian age. Oil from the formation was extracted at the turn of the century through conventional oil wells drilled from surface. But natural pore water pressures were depleted to the point where even pumping was no longer economic by about 1910.

Now the oil slowly seeps into the horizontal holes and is collected in an underground sump and pumped to surface where it is stored in 10,000-gal tanks. Wall rock in the 35-ft circular drilling station is black with oil and the black gold periodically drips from roof bolts in the back. This, says Devran Chairman James Wade, demonstrates the formation’s poor vertical permeability. Flow rates

The diamond drill (production) holes, totalling 11,000 ft vary in length from 50 ft to 1,900 ft and according to Gordon Strasser, an associate of Devran, about 38 U.S. gallons of total fluid is flowing from the 11 holes every hour.

That gives a production rate of 0.2 bbl per day for every 100 ft drilled. Devran, is aiming to get at least 0.5 bbl per day per 100 ft of hole before going into commercial production at a design capacity of 600 bbl per day. That will take a lot more drilling which should be completed in about 10-12 months. Total capital costs are expected to be $6.5 million. About $4.5 million has been spent so far. Delicate drilling

“The trick here,” says Mr Wade, “is to be patient so you can control the deviation of the drill holes to keep it in the pay zone. (A deviation of only 1 degree 12 feet over a hole length of 1,000 ft could put you out of the pay zone). The practical hole limit for this lease is 2,500 ft, so it calls for some unique diamond drilling.” Devran has custom-designed and modified a number of underground drilling components to minimize hole wander. N. Morissette Canada Inc. is the drill contractor.

When drilling is completed the mine could conceivably be run by one man who would monitor and maintain the pumps. Operating costs will include the cost of electricity, wages, trucking costs to the refinery and the cost of heating ventilation air in the winter.

A second shaft, Unit B, is planned by Devran. It will be located 3/4 of a mile to the northwest of Unit A. Several other leases in southern Ontario are being considered by the company. The technical knowledge learned at this unit will be applied to reduce capital costs on Unit B and subsequent mines in what looks like a bright, oily future for Devran.

The company was originally underwritten at 50 cents a share and now has about 5.5 million shares outstanding. They traded in Vancouver this week at about $1.20.