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On the one hand, on… Husky, Nexen on opposite sides of cap-ex fence in Canada as analysts count on largest companies sticking close to ’09 spending Gary Park For Petroleum News
As Canada’s leading upstream companies start to unveil their 2010 capital spending programs, some appear more inclined to bide their time than others.
Analysts doubt the budgets of major players will do more than match this year’s anticipated outlay, although the Canadian Association of Petroleum Producers is projecting a 15 percent increase to C$40 billion, far short of the peak C$53 billion in 2006, but that forecast depends heavily on U.S.-based independents such as Apache and Devon Energy opening their wallets.
The pendulum so far has swung in two directions, with Husky Energy raising its 2010 spending to C$3.1 billion, up 20 percent from 2009, while Nexen has trimmed its plans to C$2.5 billion, C$600 million below what FirstEnergy Capital had expected and its lowest level in six years.
“What we’ve seen as we’ve prepared our budgets is that right across our industry there’s quite a measured approach to … the pace of investment,” said Nexen Chief Executive Officer Marvin Romanow.
“I would say this: some of our partners are very large companies and some are slightly smaller companies than us, but I see this trend in all of them.”
FirstEnergy analyst Martin Molyneaux noted that Nexen’s capital program is based on a price assumption of only US$50 per barrel for oil, lagging US$20 behind current levels.
Husky: upbeat thinking Husky Chief Executive Officer John Lau said his company is “poised to take advantage of the forecast economic cycle and to pursue business growth.”
That upbeat thinking includes C$1.285 billion in Western Canada, an increase of 65 percent over 2009 as Husky concentrates on heavy oil and the oil sands in Alberta, including continued progress on the Sunrise project tentatively set for sanctioning by Husky and its partner BP in 2010 and due on stream in early 2014 at an initial 60,000 bpd, and unconventional gas prospects in British Columbia.
Canada’s East Coast offshore, one of Husky’s core regions, will see spending taper off to C$4.85 million from C$590 million this year as efforts turn to ramping up production from the tie in of the North Amethyst satellite at the White Rose operation.
Southeast Asia will get a lift to C$660 million from C$520 million, including six to eight deepwater wells in the South China Sea and development of a new gas discovery.
The overall result could be solid production gains, with guidance for 2010 set at 306,000-330,000 barrels of oil equivalent per day from a forecast 306,000 this year.
Nexen is taking a less adventurous path, targeting output from its global operations — notably Canada, Gulf of Mexico, North Sea and Yemen — in the midpoint range of 225,000 barrels of oil equivalent per day, no more than when it was given its autonomy in 2000 by parent company Occidental Petroleum and nowhere close to the 300,000 boe per day it targeted in 2005.
Long Lake greatest challenge And the Long Lake oil sands project (35 percent owned by OPTI Canada) is the greatest current challenge facing Nexen as the operation strives to overcome startup problems and apply its patented technology to use the so-called “bottom of the barrel” bitumen to produce synthetic gas to power its upgrader and eliminate the need for natural gas.
While confident it has put most of the Long Lake troubles behind it, Nexen must still raise output from the current 17,000 bpd to the designed Phase 1 capacity of 60,000 bpd.
Until then, along with confidence in a sustained economic recovery and “more clarity on climate change regulations,” sanctioning of Phase 2 is unlikely to happen within the next two years, the company said. And with that the Long Lake dream of 360,000 bpd will be a long-range target.
Nexen, which assumed West Texas Intermediate prices will average US$70 per barrel, has assigned C$400 million of its capital budget to the oil sands in 2010, including C$100 million to cover its 7.23 percent stake in the Syncrude Canada consortium.
On a more positive note, it plans to spend C$200 million at its Horn River shale gas play, advancing technology and aiming to produce 50 million cubic feet per day in early 2011, followed by an 18-well super-pad that should double output and could boost volumes to 200 million cubic feet per day by fall 2011, drawing on reserves of 3-6 trillion cubic feet.
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