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Oil sands junior rolls out C$7.4 billion plan North American Oil Sands eyes initial public offering in fall, regulatory filings in 2007 with 160,000 bpd operation by 2015 Gary Park For Petroleum News
North American Oil Sands Corp., the newest arrival on the Alberta oil sands scene, is wasting no time spreading its message and pushing ahead with plans for a possible C$7.4 billion development.
In the midst of a private placement of C$250 million, North American is now eying an initial public offering in the fall, regulatory filings in mid-2007 and a start-up phase of 10,000 barrels per day by 2008 on its way to a 160,000 bpd operation by 2015.
Company Senior Vice President Michael Langley told an energy conference in Toronto that growing in phases every 12 to 14 months is integral to cost-control efforts.
“This staging has the benefit of adaptability to markets,” he said. “It allows us to develop in manageable stages.
“We have a sound plan for staged growth and we have flexibility and optionality built into our plan. The project and capital can be managed in smaller chunks.”
Along with that strategy to limit the exposure to cost overruns that has burned so many oil sands megaprojects, North American’s plans include an upgrading plant to turn raw bitumen into refinery-ready crude.
Other leading operators such as Imperial Oil and Husky Energy are taking a time-out from their plans for upgraders.
Meanwhile, EnCana is exploring various upgrading options as part of its goal of producing 500,000 bpd from the oil sands by 2015.
Roger Biemans, EnCana’s president of the Canadian Plains region, told the Toronto conference that a “downstream solution” could result in conversion capacity in the United States Midwest or Houston to avoid the squeeze on construction labor in Alberta.
But Langley described upgrading as an “essential element” because it mitigates the price volatility of bitumen, reduces transportation costs and risks, provides alternative fuels for North American’s steam-assisted gravity drainage method of melting deep bitumen deposits and has the potential for integration with either SAGD or petrochemicals.
The upgrader component of the Kai Kos Dehseh project tentatively includes construction of a C$2.65 billion refinery to process 70,000 bpd by 2011, along with the initial production phase costing C$850 million.
While awaiting completion of the upgrader to deliver synthetic crude, North American expects to market bitumen blends.
The company estimates construction costs will represent C$46,000 per flowing barrel, which analysts put on a competitive footing with other similar projects.
OPTI Canada, in its Long Lake joint venture with Nexen, has estimated its costs at C$65,000 per flowing barrel and Syncrude Canada’s Stage 3 expansion is calculated at C$84,000.
However, variations in technologies being used make direct comparisons difficult.
Formed in 2001, North American has seized the spotlight in recent weeks after Paramount Resources traded a 50 percent interest in an oil sands venture for half of North American’s shares. Other major stakeholders include ARC Financial Corp., a Calgary-based investment company, and Ontario Teachers Pension Plan, Canada’s second-largest pension manager.
The Royal Bank of Canada and Toronto-Dominion Bank are overseeing North American’s current private placement of C$250 million and advising on a possible initial public offering of shares this year.
The investment community is bullish on the interest in the oil sands based on recent successes that saw MEG Energy arrange a C$700 million loan in March to fund its project and Toronto-based Markland Street Asset Management’s C$400 million oil sands fund that beat its minimum target by 60 percent.
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