Cenovus keeps rolling along

Oil sands major Cenovus Energy has started production at an expansion of its trail-blazing Foster Creek thermal recovery operation in northeastern Alberta’s Cold Lake region. The addition, labeled Phase E, is targeting 5,000 barrels per day by the end of 2014, building to 30,000 bpd over the next 12 to 18 months, the company said, adding it expects two additional phases will be completed in 2015 and 2016, each designed to yield 30,000 bpd.

A Cenovus spokesman said the company believes very strongly in the economics of Foster Creek, which uses steam-assisted gravity drainage technology, confident it can achieve long-term returns of greater than 20 percent a year.

He said Cenovus has access to an “incredible” resource and is making steady gains in the use of SAGD, which involves the injection of steam to melt bitumen deposits and enable them to flow to the surface.

The spokesman said SAGD is a benefit to the environment by reducing the use of water and natural gas in the extraction process, while also shrinking the surface footprint compared with open pit bitumen mining.

Foster Creek is the first commercial SAGD project in Canada, starting commercial output in 2001 and is the largest of its kind in the oil sands, with ConocoPhillips holding a 50 percent stake. Cenovus expects its next three phases can be completed at capital costs of C$35,000-C$38,000 per incremental barrel of production, which the company insists is better than the industry average even though design changes inflated those costs from the original goal of C$28,000-C$32,000.

The hike in capital costs stemmed partly from design changes that Cenovus said were aimed at improving reliability and efficiency, as well as incorporating some more stringent Alberta government regulatory standards.

When all eight phases are in full production, Foster Creek should have total production of 210,000 bpd, Cenovus said.

- Gary Park