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Statoil’s choice: Alberta or Newfoundland?
Gary Park For Petroleum News
Statoil is rolling the dice on a gamble that has few if any parallels in the history of Canada’s upstream.
Troubled by rising costs in the Alberta oil sands, the company, owned 67 percent by the Norwegian government, is giving serious thought to directing its investment money to major new oil finds it has posted in offshore Newfoundland.
It will decide within three months whether to proceed or stall plans for a multibillion-dollar project to expand its existing Corner oil sands operation where it currently produces 15,500-18,500 barrels per day of bitumen from a steam-driven project called Leismer.
Stale Tungesvik, president of Statoil’s Canadian unit, said growth in northern Alberta could take a back seat to Canada’s East Coast, where they made a 600 million barrels discovery on the Bay du Nord prospect with Husky Energy and more wells are scheduled for this year.
A hint of what direction Statoil will take could emerge in February when it provides a strategy update, which could also reflect a “kind of reprioritization worldwide in our portfolio,” he said, while adding he is “fighting for both” the oil sands and East Coast.
Worldwide difficulties Statoil’s dilemma captures the worldwide difficulties facing mega-companies with Canadian operations as they try to decide between separating bitumen from the oil sands by injecting steam deep underground, or securing complex, high-cost rigs for ever-deeper offshore prospects.
Tungesvik said the industry is “investing more than ever, but we see that it’s much more costly to develop one barrels of oil today than it was earlier, so we are, like other companies, looking through our portfolio to see what we should do first” regardless of the rise in crude prices to $100 a barrel.
He also warned that companies such as Cenovus Energy and Suncor are “reluctant” to commit themselves to the oil sands at a time when there is deep uncertainty over the future of pipelines out of Alberta.
Activity has decreased “because people want to have some answers” on pipelines for their projects, while affected aboriginal communities are often left on the sidelines, making their decisions on oil sands development “really tough,” he said.
Canadian based corporate powerhouses such as Encana and Cenovus have reinforced that view in recent weeks by rolling out cautious capital spending budgets and serving notice that they are hoping to sell assets to raise the cash needed for their best prospects.
Tungesvik said Statoil is running the numbers on Corner, which could be its second oil sands venture following Leismer, where it hopes to double output to 40,000 bpd.
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