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Ivanhoe to use own technology in sands
Gary Park For Petroleum News
A unit of international mining company Ivanhoe Mines has taken a plunge into the Alberta oil sands, hoping to use proprietary heavy oil upgrading technology to develop a commercial project.
Vancouver-based Ivanhoe Energy is paying C$105 million for Talisman Energy’s interests in three oil sands leases, which could open the way to a C$1.8 billion project producing 30,000-50,000 barrels per day.
Ivanhoe Deputy Chairman Robert Friedland said the company has achieved its initial objective in the oil sands and “will now proceed full speed ahead.”
He said the resource assets will anchor the rollout of Ivanhoe’s heavy oil upgrading process, integrating established thermal recovery techniques with the first commercial test of its technology for processing, producing and marketing light synthetic sour crude.
Talisman has had the orphan leases on the market for the past two years.
Technology demonstrated on small scale at California facility Ivanhoe Energy, with a market capitalization of C$650 million and nominal production of oil and natural gas in the United States and China, said the success of its technology to convert heavy oil to transportable, partially upgraded synthetic crude has been demonstrated at a 1,000-bpd facility at Bakersfield, Calif.
It believes the technology can be applied to consolidate oil sands assets owned by smaller companies, estimating an upgrader would cost about C$60,000 per flowing barrel.
Depending on further analysis and regulatory approvals, Ivanhoe expects the first oil can flow within five years.
Based on an evaluation of the Talisman leases by independent reservoir engineers at Sproule Associates, contingent bitumen resources in two of the leases could range from 216 million to 394 million barrels of an estimated 752 million barrels of discovered petroleum initially in place.
Talisman will retain back-in rights of up to 20 percent in all of the leases for three years and will have the right of first offer to acquire any participation interests in heavy oil projects in Alberta that Ivanhoe offers for sale.
Raymond James analyst Justin Bouchard said the technology is the key to Ivanhoe’s hopes and the Talisman assets “get them off the ground in one fell swoop.”
He said the technology is lower cost and cost effective at levels that are more suited to smaller projects.
Ivanhoe recently signed a deal with state-owned PetroEcuador to use its technology for developing a heavy oil field in Ecuador that could yield 120,000 bpd in six years.
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