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Providing coverage of Alaska and northern Canada's oil and gas industry
October 2006

Vol. 11, No. 43 Week of October 22, 2006

Alberta oil sands in slowdown mode

Government, industry leaders explore ways to spread construction over a longer period, reducing competition for labor, materials

Gary Park

For Petroleum News

From a helter-skelter, head-spinning rate of growth, the Alberta oil sands may be taking the first, tentative steps into an era of a more manageable, measured pace of expansion.

In a convergence of events, governments and industry are working on ways to ensure the sector moves forward in an environmentally friendly, sustainable and innovative fashion, without bringing plans for more than C$100 billion worth of projects to a sudden halt.

Some of the answers could be available by late November when the Oil Sands Multi-Stakeholder Committee, which has been traveling Alberta to gather views on how the oil sands should best be produced, delivers a report to the ministers of energy, environment and sustainable development.

That will coincide with the election of a new premier to replace Ralph Klein, an event that appears certain to result in a shift in direction for the oil sands.

Meanwhile, sources within the Alberta government have told Petroleum News that a more collaborative approach among traditional rivals could see the construction of major projects spread over a longer time so that companies are not in constant competition for labor and materials.

There are reportedly the beginnings of informal deals among oil sands developers to ensure that projects are not always overlapping and driving costs even higher.

More collaborative approach surfacing

A hint of that more collaborative approach surfaced Oct. 11 when Imperial Oil Chief Executive Officer Tim Hearn agreed there is the need for a slower pace of development, noting he had previously said the sector is “overheated and probably we all need to take a more measured approach.”

That thinking is echoed by former Alberta Premier Peter Lougheed, respected as the province’s elder statesman, who has taken his most public profile in more than 20 years since he left politics.

He suggested the notion of developing one project at a time would be accepted by the industry provided the Alberta government gave advance notice of any changes in rules.

What can’t happen is “abrupt change,” Lougheed said, while adding: “That doesn’t mean that you can’t start new policy directions and have a more measured approach.”

Jim Dinning, widely regarded as Klein’s likely successor, has increasingly made his case for managed energy growth on a “measured, paced basis.”

At the same time, he has cautioned against heavy-handed government interference in the plans of companies that have committed billions of dollars to the oil sands region.

Call for ‘sustainable development’ from Suncor

The multi-stakeholder committee heard in September from Gord Lambert, vice president of sustainable development at Suncor Energy, that the “path forward must be based on a vision of sustainable development.”

He said that requires a greater government-industry commitment to handle future challenges, such as the growing environmental impact of accelerating oil sands production.

Lambert said one example of how collaboration can work is a joint initiative called the Integrated CO2 Network to increase the capture and sequestration of carbon dioxide, the leading source of greenhouse gases. He said Suncor, along with industry and government partners, hopes to see the establishment of a large-scale capture and storage network that has the potential to lower CO2 emissions by 20 million metric tons by 2020. By injecting CO2 into mature oil fields to promote enhanced oil recovery, Albertans would receive an added benefit from their natural resources and a source of revenue to offset the costs of operating the system, Lambert said.

Retrofits won’t happen yet

But there is still some distance to go in promoting CO2-enhanced recovery, John Dielwart, president of ARC Energy Trust, told an investor conference in September.

He said that until CO2 emission controls are in place, major emitters will not embark on costly, complicated refits of their plants. Dielwart said the economics of CO2 recovery do not work under existing regulations, which means many millions of barrels of light oil are being left in the ground in Alberta.

Bob Taylor, an oil and gas engineer, recommended establishing an Alberta center for project excellence, which would seek “collaboration throughout the sector. We have to make sure that each development opportunity we’re looking at doing is done the right way, not just the fast way.”






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