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Marathon signals oil sands ambition Company looks to swap refining for production, while EnCana has offered production for refining, expects September deal Gary Park For Petroleum News
Marathon Oil has been the headline grabber in the latest stretch of oil sands activity by reaffirming that it wants a role in developing the northern Alberta deposit.
Chief Financial Officer Janet Clark told reporters that the Houston-based company is eager to swap a chunk of its refining business for a stake of the production business, effectively thrusting EnCana into the limelight.
The big Canadian independent wants exactly the reverse of what Marathon is seeking having said repeatedly in recent months that it is looking to trade part of its planned 500,000 barrels per day of production for access to a refinery.
Clark said Marathon is working hard on what she described as a “very, very complex” deal, but is positioning itself by studying expansions of two U.S. Midwest refineries so that they can process heavier crudes from Canada to handle up to 420,000 bpd of Canadian output.
She said the rate that Canadian producers intend to ramp up volumes and the lead needed to increase conversion capacity to refineries points to a sense of urgency to find an outlet.
Without identifying anyone, Clark said Marathon is in talks with oil sands producers to put in place an integrated deal.
Similarly Marathon is on the lookout for more stable investment opportunities as Latin American countries take a more aggressive path to nationalization of their energy resources, creating a “hostile environment” for investors in that region.
EnCana: production for refining EnCana, having opted out of building its own upgrader in Alberta to turn bitumen into synthetic crude, saw one tentative deal with Valero Energy crumble earlier this year before embarking in what it calls Project Apple, offering as much as 50 percent of its production in return for refining.
It aims to make an announcement by the end of September, having indicated that talks have involved about 10 prospective partners and could result in as many as three partnerships.
In addition to Marathon, BP has surfaced as a possible solution now that it plans to spend US$3 billion to handle more oil sands volumes at its U.S. refineries.
EnCana has also talked about spinning off its oil sands business as a separate entity.
Three junior players pushing projects In other oil sands developments, three junior players have pushed ahead with projects:
• North American Oil Sands completed a private placement for total gross proceeds of C$325 million to advance a business plan which includes developing its Kai Kos Dehseh venture, which is chasing a peak 160,000 bpd of production to feed an upgrader capable of turning out 140,000 bpd of synthetic liquid petroleum products.
The company has filed an application with the Alberta Energy and Utilities Board for a 10,000 bpd demonstration project to establish its operating capability on its 226,560 acres of leases and 1.4 billion barrels of recoverable resources.
If successful it hopes to establish nine distinct hubs each yielding 10,000-40,000 bpd.
It has a tentative budget of C$7.4 billion, with the first phase coming on stream by late 2008.
• Connacher Oil and Gas obtained AEUB approval for its 10,000 bpd Great Divide project, six weeks after warning that concerns raised by a natural gas producer in the region were delaying progress.
It plans to recover 90 million barrels of bitumen over 25 years from a 7,000 acre lease.
Connacher already has a key element in place, having bought an affiliate of Holly Corp. to secure 8,300 bpd of refining capacity in Montana.
• Synenco Energy has asked the AEUB and Alberta Environment to approve the mining portion of its C$5.3 billion Northern Lights project which it is building with its 40 percent Chinese partner Sinopec.
It is seeking a green light later this year for a C$1.7 billion mine, aiming for 114,000 bpd of bitumen, starting in 2010. A C$3.6 billion upgrader will be constructed near Edmonton.
• On the emerging front, Pan Orient Energy has a deal to acquire 51 percent of privately held Andora Energy, which in turn allows it to transfer a 10 percent working interest in oil sands leases in the Sawn Lake area of Alberta from a wholly owned subsidiary to Andora.
The combined Andora/Pan Orient assets include a deposit of more than 400 million barrels of defined oil in place over an area of about 55,000 acres.
Andora Chief Executive Officer Tyler Cran said the agreement with Pan Orient makes his company the exclusive owner of the Sawn Lake property, strengthening its financial and managerial capacity and giving its private shareholders a “degree of liquidity.”
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