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Providing coverage of Alaska and northern Canada's oil and gas industry
February 2010

Vol. 15, No. 9 Week of February 21, 2010

Foreign rivals bid for oil sands

Gary Park

For Petroleum News

BP and India’s Reliance Industries seem locked in a bidding war for control of privately held Value Creation, which controls extensive oil sands leases and a proposed upgrader to turn bitumen into synthetic crude.

Reliance opened the round Feb. 5 with a US$2 billion offer to take over Value, then BP surfaced — according to a British newspaper report — with a US$1.2 billion offer for a 50-50 joint venture with Value.

In a financial squeeze for the past year, Value has 186,000 acres of oil sands leases in northern Alberta, where it plans a 10,000 barrel-per-day demonstration project, followed by a 40,000 bpd commercial operation.

The Terre de Grace development was originally expected to deliver its first oil by early 2009, but the economic downturn has pushed that target date out to 2011.

Value is also the outright owner of BA Energy, which was forced in late 2008 to stop work on its Edmonton-area Heartland upgrader, designed to process 163,200 bpd of bitumen, while it hunted for partners in help finance the project.

An estimated C$500 million had been spent on the planned C$2.9 billion facility before inflationary pressures brought progress to a halt.

First Indian oil sands foray

A Reliance spokesman said his company has just identified what it views as a “new area of interest,” marking the first foray into the oil sands by an Indian company.

BP, which is in a joint oil sands production venture with Husky Energy to develop the 200,000 bpd Sunrise project has declined to confirm its interest in Value.

But observers say any further moves by BP into the oil sands would likely anger environmentalists and some BP shareholders who strongly oppose the oil sands business.

Fair Pensions, an activist British investor group, has tabled a resolution for BP’s annual meeting in April questioning the financial rationale for the oil giant’s role in oil sands development and the “unthinkable” environmental consequences.

However, BP met earlier in February with several institutional investors to make its case for a presence in the oil sands, claiming the new generation of steam-extraction methods is far less destructive than open-pit mining of the bitumen resource.

Value has refused to say what, if any negotiations are taking place.






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