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Oil sands vital on world stage
Gary Park For Petroleum News
It was pure coincidence, but a flurry of declarations endorsing the future of oil sands production even amid a shift to low-carbon energy sources was accompanied by progress on three new projects in northern Alberta.
Highly rated energy analyst Daniel Yergin, chairman of IHS CERA, Cambridge Energy Research Associates, told the World Energy Congress in Montreal that bitumen from the oil sands will be essential to world energy security in coming decades.
He doubts that the hydrocarbon share of world energy consumption will drop from its current 80 percent to much below 70 percent over the next 20 years as demand grows in “absolute numbers in both conventional and unconventional.”
Yergin said the Canadian oil sands figure large in that forecast by making a “big contribution both to North American energy security and the stability of global markets.”
“If the oil sands were a country, they would be, and they are, the number one source of oil imports for the United States.”
Although oil demand is “likely to decrease” in North America and Europe there will be “great, tremendous growth” in China and India as incomes rise.
“It’s very sobering to realize that much of the world’s energy infrastructure that will be needed to meet demand in the year 2030 has not yet been built,” Yergin said.
“It tells you what a very big job is ahead and building (the infrastructure) is itself an energy-intensive activity.”
His own firm has projected world energy demand will rise by 32 percent to 40 percent over the next 20 years, requiring capital investments in the trillions of dollars and posing a “dramatic challenge to all the energy industries.”
Analysts see opportunities Kim Sandhar, an analyst with Calgary-based investment banker Peters & Co., said there are investment opportunities in companies with long plays in heavy crudes and the oil sands, despite the increased viscosity, density and sulfur content that makes production and refining more difficult.
He noted that although heavy oil assets held by Canadian Natural Resources are not vital to its operations, they do provide capital flexibility and solid returns.
“While the company’s heavy oil assets receive little attention relative to its oil sands development projects, they offer some of the most attractive netbacks and rates of return of any play in Western Canada, while providing significant free cash flow.”
George Toriola, an analyst with UBS Securities, noted that Imperial Oil is becoming geared toward growth from long-life assets, access to technology developed by its parent company ExxonMobil and a safe dividend that has increased steadily over the past 15 years.
He said the heavy oil and oil sands sectors are expected to contribute 83 percent of Imperial’s production by 2013, compared with 75 percent today. New sands developments Those upbeat assessments have been accompanied by a series of new oil sands developments:
• Royal Dutch Shell said Sept. 15 it has started production at a 100,000 barrels per day expansion of its Athabasca Oil Sands Project, adding to its established 155,000 bpd, although capacity will not be reached until 2011.
• Devon Energy has sanctioned the company’s third in-situ project at its Jackfish leases and, pending regulatory approval, expects to bring the phase onstream in 2015 at a cost of US$1.2 billion, targeting 35,000 bpd. Like the two earlier phases, Jackfish 3 has an estimated 300 million barrels of recoverable oil. Construction of Jackfish 2 is 85 percent complete and is scheduled for startup in late 2011. Devon is also working on delineation drilling in its joint venture with BP at the Kirby-Pike oil sands leases, which are expected to boost its net oil sands output from 100,000 bpd to 150,000-175,000 bpd by 2020.
• Total E&P Canada, a unit of the French multinational, received regulatory approval to build and operate a 300,000 bpd upgrader near Edmonton, although the company said it needs time to study the seven conditions before determining its next steps. The plant includes plans for carbon dioxide recovery facilities to recover and sequester CO2. Plans include construction in three phases, with Phase 1 of 150,000 bpd scheduled to start operations in 2014. Total’s regulatory application estimated the upgrader cost at C$7 billion-C$9 billion in 2007 dollars, with two-thirds allocated to the initial phase. It is part of Total’s plan to invest C$20 billion in the oil sands over the next decade.
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