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Ramping up the Alberta oil sands Two startup companies roll out plans, with one seeking to raise C$750 million; France’s Total unloads regulatory frustrations Gary Park For Petroleum News
The push to exploit Alberta’s oil sands is in full swing, with two startup companies rolling out project plans.
Athabasca Oil Sands Corp., which recently sold 60 percent stakes in two of its leases to PetroChina, and Grizzly Oil Sands have their sights set on commercial production by 2015.
AOSC has also filed a preliminary prospectus to raise C$750 million from its initial public offering of common shares.
The company submitted an application to the Alberta Energy and Resources Conservation Board for the first phase of its MacKay River project, a thermal recovery operation designed to come on stream by late 2014 and yield a peak 35,000 barrels per day (14,000 bpd net to AOSC).
Based on an independent evaluator’s report, the best estimate of eventual output at MacKay is 150,000 bpd by 2021.
The MacKay lease consists of a contiguous land base with a gross 188,000 acres on leases that were purchased between 2006 and 2009.
It is the most advanced of AOSC’s projects. Since 2006, 132 delineation wells have been drilled and MacKay is targeted for a four-phase development.
500,000 bpd possible The company’s other principal oil sands assets are at Dover, Dover West, Birch, Hangingstone and Grosmont. PetroChina paid C$1.9 billion for shares in both Mackay and Dover.
AOSC estimates its total holdings could eventually produce as much as 500,000 bpd.
AOSC’s timetable is based on receiving regulatory approval in 2011-12 and completing construction along with the commissioning of facilities and startup in 2014.
To speed progress towards a regulatory application for the Dover project, AOSC is acquiring about 4.7 square miles of three-dimensional seismic data and drilling up to 52 delineation wells during the current winter. More wells will be needed to support the regulatory submission, targeted for late 2010.
Initial production is scheduled for late 2015, peaking in the range of 200,000-270,000 bpd from a gross acreage of about 148,000 acres.
Up to 12 wells this winter AOSC plans up to 12 delineation wells during the current winter program at Dover West (Clastic Carbonates), which is being lined up for commercial production in 2016, peaking at 165,000 bpd when fully developed.
Dover West (Leduc Carbonates) is before regulators for approval to perform short-term, steam-based injection cycles followed by a production cycle in two wells expected to be drilled in the 2010-11 winter to establish production capability. A 3-D seismic data acquisition program will be conducted in the area designated for the pilot project.
A pilot application is due to be filed in 2011 and the first commercial development phase is possible as early as 2019.
AOSC has a net 389,000 acres in a joint 50-50 venture with ZAM Ventures Alberta in the Grosmont area, where four wells have been drilled and cored after yielding encouraging results and five more wells are expected to be drilled in the current winter program.
According to the company prospectus, independent evaluators have assigned about 14 million barrels of probable reserves, 26 million barrels of possible reserves and 7.1 billion barrels of contingent resources to AOSC’s assets following completion of the PetroChina deal.
GMP Capital, one of two co-leaders of the initial public offering, with nine other companies in the syndicate, said it views the plan as signaling new life in the markets, with companies financing for growth rather than to repair balance sheets.
GMP Capital Chief Executive Officer Kevin Sullivan said the AOSC target of C$750 million is one of the largest initial public offerings over the last several years in Canada and “will give us a sense for the market’s desire to commit new money.”
He described the offering as “an interesting project for use of proceeds in order to attract capital.”
Grizzly plans submitted Grizzly has submitted its plans to start an 11,300 bpd project that is expected to produce an average 10,000 bpd over a 30-year period, using steam-assisted recovery technology, said Oklahoma-based Gulfport Energy, which has a 25 percent interest in Grizzly.
Gulfport said the Algar Lake project was chosen as Grizzly’s first oil sands development because of its “clean pay interval, low geologic risk and proximity to established infrastructure.”
It is near existing projects such as Japan Canada Oil Sands’ Hangingstone operation and the Great Divide project by Connacher Oil and Gas.
McDaniel & Associates, Grizzly’s third-party engineering firm, estimated Algar Lake will produce about 89 million barrels of bitumen, coming onstream 18 months after approval, which the company hopes to receive by mid-2011.
Each new phase is budgeted to cost about C$120 million, with additional pad development costs of C$35 million every five years for each phase.
Total frustrated Not every participant in the oil sands is in an upbeat mood, with France’s Total venting its frustrations at the ERCB over delays in public hearings into a bitumen upgrader facility near Edmonton,
The regulator dropped dates in February and March and set May 18 to open the hearings, which Total attorney Martin Ignasiak said in a letter to the ERCB adds to “significant delays that have already been imposed on this application.”
“In addition to the (money and human resource costs), companies like Total will consider these delays as precedents that add uncertainty to the regulatory process for other projects in Alberta, which in turn will affect future investment decisions.”
Total said it has been asking for hearings ever since an environmental assessment was approved last August.
It said “steps must be taken to assess and rectify the types of delays that have been experienced,” offering to work with the ERCB to “ensure” the processing of an application for its Joslyn North bitumen mine is “not subject to the same delays that have been experienced with the (upgrader proposal).”
An ERCB spokesman said the board is following standard procedures, which require applicants to prove “there is a sound and valid reason that would impact the quality of the hearing.”
He said the ERCB has a duty to see that all parties are “on level ground when the hearing begins,” which requires final decisions on whether to give standing to two parties, whose initial application was rejected.
Total’s proposed 150,000 bpd upgrader, designed to double capacity in a second phase, must await approval of the 200,000 bpd Joslyn North mine, which is expected by late 2011. The two operations are part of an integrated project.
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