Nexen confident entering growth phase

Canadian independent Nexen is pushing ahead with plans to double the output from its Long Lake oil sands joint-venture with OPTI Canada confident that the project’s advanced operating technology can cushion front-end cost inflation.

Chief Financial Officer Marvin Romanow said the capital budget for Phase 2 will be higher than Phase 1, which is scheduled to process its initial synthetic crude late this year and peak at 70,000 barrels per day.

He said Nexen expects to sanction Phase 2 soon after detailed engineering is completed in the first quarter of 2008 and discussions are already underway with engineering firms and contractors to continue expansion.

But he said Nexen has no intention of hazarding a guess at Phase 2 costs.

Houston-based Cambridge Energy Research Associates said in a February study that new oil and gas projects are facing 53 percent increases on a global scale for the cost of construction materials and to handle shortages of workers, vendors and equipment. Nexen Chief Executive Officer Charlie Fischer said Long Lake’s steam-assisted gravity drainage technology provides a built in edge of C$10 per barrel over similar projects.

He also said that sequential development of the second phase will provide some synergies from first-phase operations.

—Gary Park