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EnCana fires up oil sands
Gary Park For Petroleum News
EnCana has embarked on its new era with a flourish, disclosing that its pure-play oil sands spinoff, Cenovus Energy, will file plans for a technologically advanced project by mid-2010.
Company leaders told a conference call that the 80,000-120,000 barrel-per-day Narrows Lake project, close to the company’s existing Christina Lake project, includes the use of solvents such as butane or propane to extract bitumen and reduce greenhouse gas emissions.
Although a budget has not been released, observers expect the price tag will run to about C$2.4 billion.
Dave Mudie, a company vice president, said Narrows Lake will be developed as a “standalone project, so future phases may have slightly higher capital costs as a result.”
“We’re currently working on plans for two to three phases of 40,000 bpd each.”
Christina Lake’s two existing phases, with combined output of 18,000 bpd, have cost about US$18,000 per flowing barrel. Its next three phases of 40,000 bpd are forecast to cost less than US$20,000, although that could rise to US$30,000.
EnCana said it is close to commercializing a combined steam-assisted process with the steam-assisted gravity drainage used at Christina Lake.
Ratio could reach 2.5 The steam-oil ratio at Narrows Lake has a rating of 2 and could reach 2.5, while the steam-oil ratio at Christina Lake, leading up to eventual production of 200,000 bpd, has consistently ranged from 1.7 to 1.9.
(The steam-oil ratio relates to the amount of water that is converted to steam to produce one barrel of oil, which means that two barrels of water must be converted to steam and injected into the reservoir to extract one barrel of bitumen).
The steam-assisted process technology injects solvents with steam to improve recovery from deeply buried bitumen deposits and is being counted on to allow wider well spacing by steam-assisted gravity drainage operators, thus shrinking the environmental footprint and possibly improving the quality of oil produced.
Operating costs hinge on butane costs, but EnCana officials are confident they can recover 90 percent of the solvents injected into wells.
A major plus is the prospect of using less steam to extract bitumen, thus lowering greenhouse gas emissions.
Harbir Chhina, vice president of upstream operation in the integrated oil division, said the company’s intention is to “initiate expansion of an existing project or new development entry every one or two years.”
Expansion takes more time However, EnCana has conceded that it will need more time than earlier anticipated to complete expansions at its existing sites.
Foster Creek was targeted as the first steam-assisted gravity drainage project to reach payout by mid-2010, with the latest two phases raising plant capacity to 120,000 bpd, up 30,000 bpd from September, Mudie said. The regulatory process for the next three phases, each expected to add another 30,000 bpd, started in the second quarter.
Construction of Christina Lake’s third phase is 40 percent completed and output is scheduled to start in 2011, adding 40,000 bpd, while sanctioning of a fourth phase is expected in the current quarter, followed by the filing of three more phase applications later this year, with each contributing another 40,000 bpd.
The combined undertaking is aimed at total output of 400,000 bpd, originally set for 2015, but now extended to 2017 due to spending cutbacks over the last year.
In addition, EnCana needs more time to work on regulatory applications, as well as to submit an application for its Borealis project, which will likely need two years for approval.
Martin Molyneaux, an analyst with FirstEnergy Capital, said Cenovus is backed by a “dynamic group … upstream and downstream.”
He said the current projection is for Cenovus to start trading later this year in the mid- to high-C$20 range, although a detailed prospectus is still being awaited.
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