|
EnCana, ConocoPhillips form historic $11 billion joint venture in Alberta’s oil sands
EnCana and ConocoPhillips are breaking new ground by forming a US$10.7 billion partnership to produce and refine 400,000 barrels per day of bitumen from the Alberta oil sands.
It’s the grand strategy EnCana has been promising for months — a tradeoff of about 3 billion barrels of bitumen resources for access to treasured and scarce refining capacity.
In the process it leaves BP and Marathon, long seen as other candidates for a partnership, out in the cold, with both companies still looking for an entry point to the oil sands.
When BP unveiled plans in September for a US$3 billion upgrade of its Indiana refinery to handle greater volumes of oil sands production that was taken as a hint that it had the inside running with EnCana.
A 50/50 partnership EnCana and ConocoPhillips have decided to form a long-term integrated North American heavy oil business in a 50-50 partnership that has each company committing to spend US$7.5 billion on projects over the next decade, starting at a modest $200 million a year for the first few years, EnCana Chief Executive Officer Randy Eresman said in a conference call.
He said EnCana launched a formal process about a year ago to “identify the best industry partners for maximizing the value creation and recognition of our sizeable in-situ oil sands assets.”
The result is a downstream partner Eresman believes is a perfect fit.
Jim Mulva, ConocoPhillips chairman and chief executive officer, said the joint-venture provides a stable, long-term supply for the company’s U.S. refineries, building on current and planned heavy oil expansion work at the Wood River, Ill., and Borger, Texas, facilities. EnCana’s oil sands assets at its Foster Creek and Christina Lake projects have been independently evaluated at 6.5 billion barrels.
2015 goal is 400,000 bpd The new partnership aims to hike production from 50,000 bpd currently to 400,000 bpd by 2015.
It will then transport and sell a bitumen blend, roughly 50/50 bitumen and synthetic crude, at major Alberta trading hubs.
It will also expand heavy oil processing at ConocoPhillips refineries from 60,000 bpd to 550,000 bpd by 2015, with bitumen capacity climbing from 30,000 bpd to 275,000 bpd. Total throughout at the two refineries is targeted to grow from 450,000 bpd to 600,000 bpd over the same period.
The partnership may also add to heavy oil capacity at the two locations or in Alberta to match bitumen production.
Foster Creek is currently yielding 43,000 bpd of bitumen, five years after starting commercial operations, and expects to add 17,000 bpd in early 2007. Two additional 30,000 bpd phases are due on stream in late 2008 and 2009.
Christina Lake came on stream in 2002, is currently producing 7,000 bpd and due to reach 18,000 bpd in the second half of 2008.
—Gary Park
| 