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Oil sands extend global reach South Korea buys in for US$270 million, production by 2010; Eni said to be interested, with deal rumored by end of September Gary Park For Petroleum News
The Alberta oil sands have secured one more international flag and a second may soon be unfurled.
With the United States, France, China and Japan having already made a footprint in the sticky muskeg, South Korea is joining them and rumors have Italy next in line.
Korea National Oil Corp. or KNOC, South Korea’s state-owned oil company and the world’s fourth-largest crude importer, has bought out an oil sands property for US$270 million.
Chief Executive Officer Hwang Doo-yui said KNOC expects to start building a facility in 2008 and move to full-scale production of up to 35,000 barrels per day over 25 years in 2010.
The Blackgold Mine in the Cold Lake region of northeastern Alberta is being acquired from the Canadian subsidiary of Newmont Mining.
The Korean government said the lease has recoverable reserves of 250 million barrels.
Currently producing 115,000 bpd from 31 oil fields in 15 countries, Korea estimates the oil sands project will add 1.2 percent to its self-sufficiency once production starts.
It aims to hike that level from the current 4 percent to 18 percent by 2013.
A government official said “we don’t think global prices will fall below $40 per barrel so the oil sands projects will be successful.”
Eni expected to take oil sands plunge Meanwhile, Italy’s energy giant Eni is touted as the next global power to succumb to the lure of the resource.
An Italian newspaper lent weight to frequent speculation that Eni is on the verge of an agreement for a bitumen license, predicting a deal by the end of September, although it did not provide a location or identify a partner.
Eni was rumored to have held negotiations with Nexen in 2005 and was reported to have made a losing bid for Deer Creek Energy, which was acquired by France’s Total.
A possible target is MEG Energy, which raised C$1 billion in debt and equity this year and already has China’s offshore producer CNOOC as a 16.69 percent partner.
What Eni brings to the table is proprietary technology which it claims could upgrade raw bitumen into synthetic crude in a more efficient manner than other methods.
It said in June that it was testing the system on Alberta bitumen.
Eni’s Chief Executive Officer Paolo Scaroni said the technology could yield an economic gain of US$3 per barrel with oil prices at US$30.
But he also conceded that any investment Eni might make in the oil sands would have to be accompanied by construction of a parallel upgrader.
“It has to be an upstream/downstream investment rather than simply an upstream investment,” he said.
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